Former Enron Corp. CFO Andrew Fastow could be called as a witness for the defense this week in a trial against four former Merrill Lynch employees and two former Enron executives. An ex-Enron executive testified last week that Fastow helped set up a bogus transaction with Merrill to “sell” and then “buy” back some power generating barges to artificially inflate Enron’s 1999 earnings.

Court is recessed until Monday, but last Thursday, defense lawyers asked U.S. District Judge Ewing Werlein in Houston to declare Fastow a hostile witness. If the declaration is approved, which would allow more aggressive questioning, Fastow could be called as a witness for the defense. Fastow is not on the prosecution’s witness list in the trial, but the government has said he will be available to testify for the defense if he is called.

The trial, which began two weeks ago, accuses the six defendants of arranging a deal in 1999 for Merrill to “buy” three power generating barges moored off the Nigeria coast and then “sell” them back to Enron within six months (see NGI, Sept. 22, 2003). The prosecution alleges that the transaction was booked as a $12 million sale by Enron, which was “bought” back in an off-the-books partnership run by Fastow known as LJM2.

Fastow pleaded guilty to wire fraud and securities fraud and is cooperating with the Enron Task Force in exchange for a 10-year prison sentence. Fastow remains free on bond.

Michael Kopper, who pleaded guilty to money laundering in 2002, testified last week for the prosecution. “Andy said this would really help the Enron Africa group meet its goals,” Kopper said of Fastow. He said that Fastow told him he would “look like a hero” to Jeffrey Skilling, who was then president of the company.

Skilling, who was named CEO in January 2001 only to resign eight months later, is also under indictment. Former Enron chairman Kenneth Lay, ex-chief accounting officer Richard Causey and Skilling all face multiple charges in a separate case related to Enron’s demise.

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