A former Enron Corp. executive testified Monday that ex-CFO Andrew Fastow helped set up a bogus transaction with Merrill Lynch to sell and then buy back some power generating barges to inflate Enron’s 1999 earnings.

Michael Kopper, who pleaded guilty to money laundering in 2002, testified for the prosecution in a Houston courtroom against two former Enron executives and four Merrill bankers. The six, whose trial began last week, are accused 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 Daily GPI, Sept. 22; June 25). 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 has pleaded guilty to wire fraud and securities fraud and also is cooperating with the Enron Task Force in exchange for a 10-year prison sentence. Fastow, who remains free on bond, is not expected to testify in this trial.

“Andy said this would really help the Enron Africa group meet its goals,” Kopper testified 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.

Fastow has pleaded guilty to wire and securities fraud and is cooperating with prosecutors in exchange for a 10-year sentence which he has not yet begun to serve. 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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