Skilling's Global Galactic problem
Analysis: An eleventh-hour tussle over a crucial document provides a glimpse into last-minute strategizing in the Enron trial.
NEW YORK (FORTUNE) - An eleventh-hour tussle over a crucial document is providing tantalizing glimpses into last-minute strategizing by prosecutors and defense lawyers as they prepare for the start of next week's criminal trial of former Enron CEOs Jeff Skilling and Ken Lay.
The importance of the document is suggested by its tongue-in-cheek name: the Global Galactic Agreement. Andrew Fastow, the former Enron CFO who pled guilty in January 2004, has long been expected to testify that he and Enron's then accounting chief, Richard Causey, drew up the Global Galactic sometime between July and September 2000.
It purports to set down the terms of a series of secret, illegal, side-deals entered into between Enron and certain partnerships run by Fastow, and it appears to be initialed by both Fastow and Causey. (The document's name apparently derives from Fastow's fondness for Star Wars movies; he named several of his partnerships after characters from the series.)
The Global Galactic has always been a focus of attention because the conduct it describes is so clearly illegal. While Enron's outside accountants at Arthur Andersen approved many of Enron's other arguably deceptive accounting maneuvers, allowing Enron's top officials to argue that they believed those to be proper, the side-deals listed in the Global Galactic were kept secret from Arthur Andersen. In the Global Galactic, for instance, Enron commits to buying back certain assets from Fastow's partnerships within months after selling them, suggesting that the sales were shams from the get-go, intended only to inflate Enron's quarterly earning figures.
Even after Causey pled guilty on December 28, dropping out of the trial, the government reiterated its intention to introduce the document, suggesting that it hopes to tar Skilling and, perhaps, even Lay with it in some way. (Lay was farther removed from Enron's daily operations at that time than Skilling, however.) Many have speculated, for instance, that Causey might now testify for the government that Skilling knew about the Global Galactic -- a development potentially devastating to Skilling's defense.
Subsequent events, however, are casting doubt on that theory, however. To begin with, the government did not list Causey as a witness when it issued its latest revised witness list on January 6 -- though it could still add him.
Then last week, Skilling and Lay's attorneys, Daniel Petrocelli of Los Angeles and Mike Ramsey of Houston, asked the judge to let them have a forensic expert examine the Global Galactic, apparently in an effort to show that it has been forged or altered in some way.
"We have reason to believe the document is not what it purports to be," they wrote in a second motion on January 23, which asks, as an alternative, that the document be kept out of evidence altogether. The government opposed both motions, arguing that such the defense could have requested such an inspection months ago, and should not be allowed one on the eve of trial. U.S. District Judge Sim Lake of Houston denied both requests Wednesday.
Nevertheless, that the motion to inspect was made at all suggests that Petrocelli and Ramsey do not expect Causey to testify or, if he does, do not expect him to even acknowledge the authenticity of the Global Galactic -- let alone implicate Skilling. One might draw that inference because if both Fastow and Causey were to testify that they drew up and agreed to the Global Galactic, expert testimony questioning its authenticity would be all but pointless.
Still, defense attempts to challenge the genuineness of the Global Galactic seem puzzling, if not quixotic. The government maintains that there is much independent evidence corroborating the Global Galactic's existence, including allusions to it in the notebooks of at least two other Enron officials who have already pled guilty: former treasurer Ben Glisan, Jr. (who is also slated to testify for the government) and Fastow associate Michael Kopper.
The defense want their expert to examine those documents, too, as well as the records for the safe deposit box where the Global Galactic was found. The notion that all of these documents have been falsified begins to sound a little far-fetched.
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