The former CFO of Enron Corp, Andrew Fastow, has testified in the criminal trial of former Enron executives Jeffrey Skilling and Kenneth Lay. Fastow has already admitted to stealing millions of dollars from the company.
His testimony included discussion of the illegal deals between Enron and the two partnerships Fastow ran and partly owned, LJM1 and LJM2. These deals guaranteed profits to the partnerships in exchange for helping Enron manipulate earnings. This, he said, was done with the approval of Skilling.
Fastow testified that he came up with the idea for the partnerships in 1999, and planned to use them to help Enron manage earnings. Additionally, Fastow was guaranteed hundred of thousands of dollars annually from the partnerships, plus a share of partnership profits.
He also testified that Skilling told him “give me all the juice you can” from the partnerships.
The partnerships did deals that Enron would not or could not do. One example involved LJM buying an interest in a troubled power-plant project in Brazil. Enron booked income from the sale and met earnings targets for the quarter.
LJM was guaranteed not to lose money on the deal, and two years later Enron repurchased the interest at a profit to LJM.
Because the number of such deals was growing, Fastow created a list of the transactions. He called this the “global galactic” agreement. Fastow claims that Skilling approved of everything on the list.