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Fastow links Skilling to losses at Enron
Updated: 2006-03-08 09:38

"Because it would attract attention, and if dissected, people would see what the purpose of the partnership was, which was to mask potentially hundreds of millions of dollars of losses," Fastow testified.

The partnerships were lucrative for Fastow. He was guaranteed a $500,000 annual fee when the first one was set up in 1999 and was also promised 2 percent of the invested capital in the vehicles. Fastow said he raised almost $400 million for LJM2.

Fastow said such partnerships commonly give the general partner 2 percent of the invested capital and the additional half a million dollars per year was an extra boost.

Enron's board, which included Skilling and Lay, approved his pay for the deals. Fastow said Skilling told the board that Fastow invested $1 million of his own, and "He should get profits because he's got skin in the game."

The ex-CFO testified that directors also approved his role in the partnerships and waived Enron's code of conduct, which barred officers from participating in ventures that posed a conflict of interest.

Fastow described several deals in which LJM2 saved Enron from losses.

He said Skilling urged him to have one of the partnerships buy a minority stake in a troubled Brazilian power plant owned by Enron to help meet earnings targets. Fastow balked.

"I told him it was a piece of (expletive), and no one would buy it," Fastow recalled. He said he relented in part because he stood to make money personally on the deal and Skilling assured him he would lose no money.

He said he believed Skilling's verbal assurance, which wasn't written anywhere.

"The way we were using LJM was to help Enron prop up its numbers. I knew Enron would not want to leave LJM out in the cold because Enron would want to do more deals," he said.

During Fastow's testimony, Lay and Skilling occasionally took notes but showed little reaction.

Fastow is among 16 ex-Enron executives who have pleaded guilty to crimes. The defense claims such witnesses confessed to crimes they didn't commit under pressure from the Justice Department's Enron Task Force.

Federal prosecutors can recommend lenient punishments for such cooperators more than enough incentive, the defense claims, for them to tell the government what it wants to hear.

Fastow is unique in that he agreed up front to serve a decade in prison. His only hope of serving less time will be to behave well in prison, possibly reducing his term by 18 months. But the government has the option to prosecute Fastow on 96 other criminal counts originally brought against him if they deem his cooperation unsatisfactory.

Fastow also acknowledged committing crimes in order to manipulate Enron earnings and enrich himself.

He originally pleaded not guilty but changed the plea, he said, because "I thought it was in the best interest of my family not to go to trial, to take responsibility for my actions and to try to move forward in my life."

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