Fastow

Fastow the crook is testifying this week at the Enron trial. As expected, he's absolutely blasting Skilling with nary a word about Lay.

And, more important to this trial, he had gotten so many assurances from then-Chief Executive Officer Skilling that he would lose no money in the ventures, that there was rarely a reason to say no, Fastow testified.

``Get me as much of that juice as you can,'' Skilling had instructed him, according to Fastow. Skilling wanted more partnerships with more money to buy more of Enron's bad assets ``so we could report the numbers we wanted to report.''

Fastow said he didn't worry that Skilling wouldn't fulfill his promises that these investments would be essentially risk- free for the partnerships.

`A Valuable Tool'

``If Mr. Skilling didn't honor his guarantee, it would shut off the LJM valve,'' Fastow testified in reference to the partnerships he named with his wife's and sons' initials.

And that valve ``was a very valuable tool for Enron to make its numbers,'' Fastow said.

``I knew Enron wasn't going to leave LJM out in the cold, because we were going to do more deals,'' he testified.

Need to park an embarrassing investment some place where it won't hurt the company's reported earnings? Say, a poorly conceived power plant in Brazil? In Poland? A Fastow partnership was the answer.

Would it require a little back-dating here or there? No problem, Fastow said. In fact, at least one in-house summary of a deal states that one of the benefits to Enron was the partnership's willingness to back-date a document.

Would some true, arms-length buyer for a troubled asset insist on taking the time for due diligence before making a deal needed to close in a hurry? Why bother when there's a Fastow partnership willing to do it without all that time-consuming paperwork?

Skilling was directing Fastow to get everything off the books so they could report the numbers they wanted to report. By the time Lay was in charge, after Skilling "retired", the assets were hidden in the partnerships with Fastow being one of the few who understood how the LJM partnerships worked. Fastow also had an interest in not allowing Lay to know what was going on with the partnerships because he was making $8m in fees managing the LJMs.

If you're of the mind that a CEO should understand everything about his company's financial statements, then it would be hard to make an argument that Lay is innocent. However, if you are going to make CEO's understand everything about the financials, you're going to get CEO's with no vision, only accounting knowledge. Lay and Skilling each had a vision. Unfortunately for Enron, instead of accepting that the vision wasn't working, Skilling decided to hide it by employing Fastow to actively work the numbers so it showed his vision was working. I don't see how Skilling is going to escape a conviction.