Lying Fastow duped Enron bosses: defense

They made their points in a cross-examination that went to the heart of the defense case that former Chief Executives Ken Lay and Jeffrey Skilling believed Enron to be in good shape and collapsed into bankruptcy in 2001 only because of Fastow's double-dealings.

"You were very proficient at looking him (Lay) right straight in the face and telling you were loyal and he could count on you, but you knew in your heart you were stealing from the house," said Lay's lawyer Mike Ramsey. "You were successful in your lying and your deceit from 1997 all the way up to 2001, weren't you sir?"

"With regard to everything, I had all of those people fooled, yes sir," said Fastow.

Fastow, who was testifying for the fourth day in the now seven-week-long fraud and conspiracy trial for the two former Enron leaders, has accused them of deceiving shareholders about the true state of the crumbling energy firm.

As the architect of Enron's finances and a top executive who worked closely with Lay and Skilling, he is the government's key witness.

Enron, once the nation's seventh-largest company and a Wall Street favorite because of its booming earnings reports, filed for bankruptcy in December 2001 following disclosures it had used off-the-books deals to hide debt and inflate profits.

Fastow ran the side deals and has admitted looting them for millions of dollars. He pleaded guilty to two conspiracy counts and agreed to cooperate with prosecutors in exchange for a 10-year jail sentence he is expected to begin soon.

The Enron collapse cost employees and investors billions of dollars and led to reforms in corporate accounting.

The defense contends that Enron, despite a few financial problems, was a solid company done in only because disclosures of Fastow's misdeeds caused lenders, creditors and customers to panic.

Lay and Skilling face a combined 35 criminal charges, but have denied any wrongdoing.

Defense attorneys, as they have with previous witnesses, accused Fastow of lying in his testimony to help prosecutors get a conviction in the high profile case.

"Would you exaggerate to help your position with lawyers on the (Enron prosecution) task force?" Ramsey asked.

"No sir, I believe exaggeration would not be telling the truth. I'm trying to be truthful," Fastow said.

The upper ranks of Enron, including its board of directors, were so bamboozled by Fastow that even as his handling of the off-the-books deals was coming under press scrutiny, they offered their full support, Ramsey said, citing Fastow's notes from several phone conversations.