February 10, 2006|By BLOOMBERG NEWS
HOUSTON -- The judge presiding over the fraud trial of former Enron Corp. top executives Kenneth L. Lay and Jeffrey K. Skilling stopped a bid by Lay's lawyer yesterday to shift the focus of the trial onto the misdeeds of an Enron subordinate.
U.S. District Judge Simeon T. Lake III sustained prosecutors' objections to questions by Michael Ramsey, Lay's lead defense lawyer, about off-book partnerships created by former finance chief Andrew S. Fastow to do Enron-related deals. Fastow has pleaded guilty to a fraud charge stemming from Enron's collapse and is expected to testify for the prosecution.
Lake did allow Ramsey to cross-examine Mark E. Koenig, who ran Enron's investor communication unit, about whether Fastow's LJM partnerships caused concern among shareholders. Koenig testified for the sixth day in the trial of former chairman Lay and former chief executive officer Skilling.
"It was not something our competitors did," Koenig said about the off-book partnerships. "It was different, so we got questions about it."
Prosecutors contend that Lay, 63, and Skilling, 52, used the partnerships to help hide billions in Enron's debt and losses to pump up earnings. The government says the accounting fraud led to the collapse of what was once the seventh-largest U.S. company by sales.
Enron had more than $68 billion in stock market value before it filed for bankruptcy in December 2001, wiping out thousands of jobs and at least $1 billion in retirement funds almost overnight. Investors suing over the company's collapse claim accounting fraud led to at least $25 billion in losses.
Skilling's and Lay's defense lawyers argue the two men engaged in normal corporate practices and that neither conspired to mislead investors or Enron workers who sank millions in retirement funds into the company's stock.
Fastow created the LJM partnerships, named for his wife and sons, in 1999 to buy poorly performing assets from Enron or invest in the company's deals. He's alleged to have reaped at least $25 million in fees from the partnership's Enron-related deals while still serving as the company's chief financial officer.
Defense teams have painted Fastow as a "crook" who hid the fees he received from Enron-related deals from his bosses and the company's board.
