Fastow May Be Called to Testify for Defense
Former Enron Corp. finance chief Andrew S. Fastow isn’t a defendant or a prosecution witness in the first criminal trial to emerge from the energy company’s crash, but he could be called to testify for the defense -- possibly as a hostile witness.
Attorneys for four former Merrill Lynch & Co. executives and two former mid-level Enron executives could call Fastow -- a cooperating government witness -- in the conspiracy and fraud trial regarding an alleged sham sale of several barges to the brokerage in 1999, which enters its third week today in Houston.
Prosecutors say Enron desperately needed the barge deal to book a critical $12-million pretax fourth-quarter profit, but Merrill Lynch came through only after Fastow orally promised the brokerage that its $7-million investment in three electricity-producing barges would be bought out within six months.
A partnership Fastow created to help Enron hide debt and inflate profit -- LJM2 -- came through in June 2000, buying Merrill Lynch’s interest at a premium for $7.5 million.
The defendants contend that Enron was never obligated to buy back or find another buyer for the barges.
Prosecutors informed defense attorneys in June -- days before the trial was originally scheduled to begin -- that Fastow told investigators he wasn’t explicit about a buyback, having not used the words “promise” or “guarantee.”
Because Fastow is a cooperating witness after pleading guilty in January to two counts of conspiracy, defense attorneys want U.S. District Judge Ewing Werlein to declare him a hostile witness so that they can question him more aggressively than usually allowed.
“We need to know before we make a decision” to summon him to testify, Ira Lee Sorkin, who represents former Merrill executive Robert Furst, told the judge last week. Werlein didn’t rule, noting he didn’t know Fastow would be hostile.
Fastow isn’t on the prosecution’s witness list in the barge case. But the government told defense attorneys he would be available to them for the trial.
