HOUSTON – Enron Corp. (search) former Chief Financial Officer Andy Fastow (search) helped cook up a bogus deal with Merrill Lynch to sell and buy back Nigerian power barges to inflate Enron's earnings and make himself look good to his bosses, a former top Fastow aide said Monday.
Michael Kopper (search), a one-time Fastow lieutenant, was the first former Enron executive to testify in court in the nearly three years since the former power trading giant collapsed into bankruptcy in a huge financial scandal in 2001.
On trial are two former mid-level Enron executives and four Merrill Lynch (MER) bankers accused of arranging in 1999 for Merrill to buy the three barges with an oral guarantele and $12 million profit by Enron when it was really nothing more than a loan.
Kopper, who has pleaded guilty to money laundering and wire fraud in 2002 and agreed to cooperate with the government while awaiting sentencing, said Fastow pushed the deal because of its boost to the books.
"Andy said this would really help the Enron Africa group meet its goals," he said.
The barges were "sold" to Merrill Lynch, then bought back by an off-the-books partnership set up by Fastow and known as LJM2 with a guaranteed profit for Merrill, Kopper explained.
By having LJM2 purchase the barges, Enron would not have to show the purchase price on its own books, which would make then-Enron chief operating officer Jeffrey Skilling (search) happy, he said.
"If LJM2 could do this, he (Fastow) would look like a hero to Jeff Skilling," Kopper testified. Skilling was later named chief executive officer.
Disclosure of Enron's use of off-the-books partnerships to stash billions of dollars in debt and falsely pump up profits triggered the company's plunge into bankruptcy in December 2001.
The defendants in this case are former Enron finance director Dan Boyle, former accountant Sheila Kahanek and former Merrill bankers Daniel Bayly, Robert Furst, William Fuhs and James Brown.
The six face conspiracy and wire fraud charges, and Brown and Boyle are charged with lying about the transaction.
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.
Prosecutors are not expected to call him as a witness in this case.
Former Enron chairman Ken Lay (search), the company's former chief accounting officer Richard Causey and Skilling are all facing multiple charges in a separate case related to the company's downfall.