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Fastow Affidavits Said to Help Trial of Lay, Skilling, Causey in January

Former Enron Corp. CFO Andrew Fastow claimed in court affidavits unsealed last week that cash payments made to him and his family by one of his former top lieutenants "were paid to us voluntarily and out of friendship, and therefore, were not taxable income." The affidavits, taken months before he and his wife pleaded guilty to various crimes, may help Enron founder Kenneth Lay, former CEO Jeffrey Skilling and former Chief Accountant Richard Causey as they prepare to go to trial next month, a defense lawyer said.

Lawyers for the trio facing trial in January requested Fastow's affidavits be unsealed, and U.S. District Judge David Hittner in Houston complied, releasing one on Wednesday, the other on Thursday. The papers relate to a case against Fastow's wife Lea Fastow, and he made the affidavits in 2003, as part of an effort to persuade the court to postpone his wife's trial until after his had concluded. Hittner refused, and the documents were sealed.. At the time of the affidavits, Lea Fastow was facing six felony counts for conspiracy and tax crimes for endorsing cash checks from Michael Kopper, an executive who worked for her husband. Some of the checks from Kopper were made out to the Fastows, and others were made out to the Fastow's two young sons. The income was not reported on the Fastow's joint tax returns.

According to one document, Fastow said he was planning to testify at his wife's trial. The other affidavit indicates Andrew Fastow believed the payments by Kopper were voluntary and not taxable. Kopper, the first Enron official to be charged in the Enron case, pleaded guilty to conspiracy charges in 2002 (see NGI, Sept. 2, 2002).

However, several months after completing the affidavits, Fastow pleaded guilty to conspiracy to commit wire fraud and conspiracy to commit securities fraud, and Lea Fastow pleaded guilty to one count of filing a false tax return (see NGI, Jan. 19, 2004). She was released from federal prison in July.

Lay's lead attorney Mike Ramsey called the unsealed affidavits a "treasure," and said they would provide "rich fodder for cross-examination." Lay, who was serving as chairman and CEO when Enron declared bankruptcy in late 2001, has publicly blamed the company's failure on his former CFO's schemes, and has said Fastow betrayed his trust. Attorney Ramsey said Fastow's lies on the affidavits were "not a big surprise..." The affidavits, he said, "are a matter of being able to demonstrate that in specific detail to a jury."

Prosecutors declined to comment on the case, which is scheduled to go to trial Jan. 17. Lay, Skilling and Causey have pleaded innocent; Lay faces seven counts for fraud and conspiracy, while Skilling and Causey each face more than 20 counts, including fraud and conspiracy. Andrew Fastow is expected to be one of the prosecution's star witnesses.

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