'Boy Wonder' Tells of Enron Manipulations

HOUSTON – A top former executive at Enron Corp. said Thursday that he worried whether it was proper for off-the-books financial structures backed by company stock to serve as insurance against losses, but the endorsement of then-Chief Financial Officer Andrew Fastow convinced him to go along with the plan.

The structures, known as Raptors, were "a plot of money we used to manipulate our income statement," David Delainey said in his third and final day of testimony at the fraud and conspiracy trial of former Enron Chief Executive Jeffrey Skilling and founder Kenneth Lay.

"I was definitely concerned about the Enron stock part of it," said Delainey, who headed the highly profitable Enron wholesale trading unit, Enron North America, before shifting in 2001 to run the struggling retail business segment, Enron Energy Services. "I certainly relied on what I heard from Mr. Fastow at the time."

Over his three days on the stand as a witness for federal prosecutors, Delainey provided the most damaging testimony in the trial ending its fifth week Thursday. He described the inner workings of Enron as a criminal conspiracy and fraud in which he participated, particularly with Skilling, along with other top company executives.

Delainey testified earlier that he first learned of the Raptors in 2000 and that their architect, then-Enron Treasurer Ben Glisan, offered the structures as a way for Enron North America to avoid booking losses from poor investments.

But Delainey said he found it "odd" because the structures' use of Enron stock for capital meant the company was using its own shares in a way that could influence its income statement.

He said he asked Skilling about it.

"He said it had been approved," Delainey said. "I relied completely on the presentation by Mr. Fastow in a board (of directors) meeting and the affirmation by Mr. Skilling."

He also said he decided to discuss it with Skilling to put himself at ease. Skilling lawyer Daniel Petrocelli, looking incredulous, questioned why he needed comfort if he was admittedly involved in massive fraud.

"I just wanted to understand if the senior management team was aware of it, that's all," Delainey said.

Allegations against Skilling include that he knew the Raptors were wrongly treated as independent of Enron and that they were used to avoid public disclosure of decreases in asset values.

Glisan pleaded guilty in September 2003 to conspiracy in part for developing the Raptors to help manipulate Enron's books. He is serving a five-year prison sentence and is slated to testify against Lay and Skilling.

Fastow is slated to testify next week in a much anticipated confrontation with his former bosses. He pleaded guilty in January 2004 to two counts of conspiracy, admitting to orchestrating schemes to manipulate Enron's reported earnings while skimming millions of dollars for himself on the side. He has already agreed to serve the maximum 10-year sentence for the crimes, with potentially a year and a half off for good behavior.

Fastow's appearance would mark his first public statements about his admitted crimes at Enron and could counter the argument from Lay and Sklling that they did nothing wrong and there was no fraud. Fastow is also the first government witness who is not testifying in the hopes of receiving more lenient punishment, a reason the defense has used to undermine the testimony of his predecessors.

Lay lawyer Michael Ramsey grilled Delainey about lying to the FBI in their early conversations with him in hopes of avoiding criminal charges. He pleaded guilty in October 2003 to insider trading and is testifying as part of a plea agreement in hopes of getting a lenient punishment.

"I'm very, very ... it was a terrible ... I wish it," he said, stumbling for words. "There were a lot of things I think I did well (at Enron) and a lot of things I'm not proud of and I wish I could take them back, and I wish they hadn't gone bankrupt and people didn't get hurt. It's a big tragedy."

Many of the jurors came to the courtroom Thursday dressed in Western garb, particularly the men, who wore cowboy shirts. The world's largest rodeo, The Houston Livestock Show & Rodeo, began its three-week run this week.

Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces seven counts of fraud and conspiracy. If convicted, both could serve decades in prison. Only Skilling faces allegations of improper stock sales.