HOUSTON (FORTUNE) - So Andy Fastow is a greedy, lying thief -- and a cad, to boot. After a day of scathing cross-examination, Skilling lawyer Dan Petrocelli hasn't really revealed much about the former Enron CFO that we didn't already know.

But he's clearly far from finished.

The defense is trying to chip away at Andrew Fastow's story of corruption.

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Petrocelli's interrogation began in mid-morning Wednesday, and has focused intensely on rubbing Fastow's nose in the sheer ugliness of his behavior. And to be sure, it was plenty ugly.

Fastow, who has accepted a ten-year prison term in a plea-bargain deal with the government, not only admits to playing a critical role in the cooking of Enron's books, but also admits stealing millions from the company behind everyone's back, through shady private partnership deals. And that -- the stealing part -- is where Petrocelli has been focusing his attention.

As Fastow had acknowledged during his testimony for the government, he enlisted his own family in his crimes, as the recipients of tens of thousands of dollars in kickbacks disguised as personal "gifts" from an Enron collaborator -- including checks written out to the Fastows' two young sons.

The government's investigation of Andy Fastow led to criminal charges against his wife, who handled the books for one of the dirty partnerships. A pawn in the government's efforts to pressure her husband, Lea Fastow eventually pled guilty to filing a false tax return and served almost a year in a federal prison.

In court, the former Enron CFO -- the defense's prime target for months -- has been a surprisingly effective witness for the government, wrapping up his direct testimony on Wednesday morning by implicating Ken Lay in fresh ways, just as he had presented powerful new evidence against Skilling the day before.

Fastow recounted how, while Lay publicly offered broad reassurances about Enron's financial health and prospects, he was privately involved in a series of meetings that made clear the company faced dire problems.

Fastow testified, for example, that he met with Lay on August 15, two days after Skilling resigned and he reassumed the role of CEO, to warn him that Enron faced a "day of reckoning."

Fastow said he had prepared a list of ten big problems confronting the company -- including broadband, EES, and deeply troubled international projects -- representing $5-7 billion in undisclosed, "embedded losses" that would "eventually come home to roost."

Fastow recalled telling Lay: "Even if we're smart and don't make a mistake for the next five years and earn a billion dollars a year, it's going to take us that long to work our way out of these problems."

In response, Fastow said he proposed a "massive" restructuring of Enron and convinced Lay to let him hire Goldman Sachs to explore a "dramatic solution," such as a sale of Enron's prized pipelines or even the entire company.

He testified that he had told Lay he was recommending Goldman Sachs because it wasn't an Enron lender, and he feared that if Enron revealed all of its problems to one of its major banks, "that bank would immediately stop lending to us, the other banks would see that they stopped lending to us, and it would shut down the business."

Lay knew other problems were brewing too, Fastow said. There were mushrooming troubles with the Raptors, the hedging vehicles concealing hundreds of millions in Enron losses. And by mid-August, he'd received the first of a string of internal reports suggesting that the company was far short of hitting its quarterly earnings targets.

Yet Lay continued to make public statements insisting that all was going well, and profits were on track. On August 20, he told Business Week: "There is no other shoe to fall" and "the company is probably in the strongest and best shape that it has ever been."

Fastow recalled going on a road trip with Lay and Greg Whalley, soon to be named Enron's president, where Whalley, after a dinner meeting with equity analysts in New York, abruptly decided to return to Houston, blowing off a meetings scheduled with investors in Boston the next day.

Fastow says that when he asked Whalley why he was leaving, he responded: "If I met with investors, if I [went] to Boston, I'd have to lie too much."

According to Fastow, Lay also presided over an offsite executive meeting in early September, where Whalley responded to a forecast of a $500 million shortfall in earnings with the assurance "Don't worry about it. I'll cover it with reserves."

"Did anyone object to that in the meeting?" asked prosecutor John Hueston, about the latest example of Enron's proclivity to use reserves to make its numbers.

"No," responded Fastow. "That seemed to end that topic for discussion."

Finally, Fastow described how Lay, rejecting a recommendation by company accountants, insisted on characterizing an investment loss as "nonrecurring," when earlier gains in the investment had been treated as recurring profits; allowed the company to falsely affirm its intention to make fresh investments in the water business, just to avoid declaring a $600 million goodwill loss; and had ample information to know he had made more than $30 million from his LJM partnerships.

Handed over to Petrocelli, Fastow visibly braced for the coming onslaught, at first refusing to even make eye contact with the defense lawyer, who stood just a few feet away from him. Petrocelli rushed to focus on Fastow's common crimes, more easily understood by the jury, with all its nefarious elements: secret meetings in the Cayman Islands; destruction of evidence; and millions in "booty," as Petrocelli called it.

He quickly noted that Fastow's criminal behavior had led to his wife's year serving "hard time" -- and even involved his sons. "And, in fact, when you involved your two young children in criminal conduct, they were babies," Petrocelli noted. "....So for you to do such a thing, you must be consumed with insatiable greed."

"I believe I was extremely greedy, and that I had lost my moral compass, and I've done terrible things that I very much regret," Fastow responded.

But Petrocelli wasn't buying it. "Yesterday, you used a kinder, gentler word for your greed. I think you used the word 'opportunistic.' Do you recall that?

"Yes."

"But when we get right down to it, we are talking about greed, greed, greed -- greed for money. That is what drove you."

"I was greedy, yes," Fastow replied.

Known at Enron for having a nasty temper, Fastow remained measured and polite under Petrocelli's assault, even as it appeared the defense lawyer was trying to get him to blow his stack. He didn't hesitate, though, to spar with Petrocelli, as when Skilling's lawyer jabbed at him:

"Mr. Fastow, it appears that you're giving answers, quite frankly, that sound rehearsed to me."

"With all due respect," Fastow shot back, "your questions sound very rehearsed to me." This generated a laugh in the courtroom..

During the afternoon, the two men engaged in a running tug of war, where Fastow tried to talk about his deceits involving Enron's business -- and how the defendants had collaborated with him in those deceits -- while Petrocelli pulled him back to the subject of his common thievery. "Let's focus on your crimes," he demanded. "Your private crimes that nobody knew about."

Petrocelli worked his way through the deals where Fastow had secretly pocketed money, preparing a "bootie sheet" showing how much the CFO had made on each. When he was done going through the deals, Petrocelli asked Fastow how much Skilling got from them. After Fastow hesitantly acknowledged "As far as I know, zero," Petrocelli pressed him:

"Was it hard for you to say that?"

"Yes," Fastow replied.

"Was it hard for you to say that because you don't want the jury to think that Mr. Skilling is innocent?...You want the jury to believe that Mr. Skilling is consumed by greed as you are, right?'

"I didn't say that, sir. You did....My answer to that question is, I spent a lot of time up here already saying that I stole from Enron. I did steal from Enron. We stole from Enron. That was why it was difficult for me when you posed your question to answer directly."

And who was the 'we'?

"Myself and other members of senior management of Enron," Fastow replied. "....They stole in different ways....What I'm saying is when you misrepresent the nature of your company, when you artificially inflate earnings, when you improperly hide losses, when you do things like this to cause your stock price to go up so you can sell your stock to cause yourself to make earning targets that otherwise you'd be unable to make so you get high salaries and bonuses -- that is stealing... I stole one way, and I stole that way. All I'm saying is that we stole... We got large salaries. We got larger bonuses than we should, and we sold our stock and got millions of dollars that way."

"We know you stole," Petrocelli jumped in. "You stole a hundred different ways!"

"What I did was reprehensible," acknowledged Fastow. "And it's not easy to look at yourself and to recognize that about yourself and to admit it. And it took me a long time to do that. And some days -- some days it's still hard to do that. I've destroyed my life. All I could do is try to take what's left, ask forgiveness, and be the best person I can be."

Petrocelli noted one more example of Fastow's greed. In October 2001, after Fastow was fired amid revelations about his profits from the LJM partnerships, he wrote a letter to the company, demanding $9 million in severance under his recently renegotiated contact.

This request, Petrocelli noted, came despite Fastow's stated belief that, by then, Enron had slipped into "a death spiral."

This point, by the way, surely could not have pleased the Lay camp. Prosecutors have offered up at least two examples of Lay pulling millions out of Enron during its final desperate weeks -- so Lay's lawyers could not be happy to see Petrocelli characterize such a move as an example of shameless greed.

Finally, Petrocelli moved to the topic of side deals, attacking the case's smoking-gun document -- a photocopy of the 'Global Galactic' agreement Fastow had found in his safe deposit box. This handwritten agreement, initialed by Fastow and Enron chief accounting officer Rick Causey (with Skilling's approval, Fastow testified), memorialized a string of side deals giving Fastow's LJM2 a guaranteed return on assets it had bought from Enron.

As the day's proceedings came to a close, Petrocelli was busily suggesting the document was a fake -- a line of questioning he is sure to resume today.

Afterwards, one had to wonder a bit about the tricky navigation of the defense strategy. Petrocelli was painting Fastow as the ultimate dirtbag, but suggesting his improper behavior was limited to lining his pocket.

In other words, Petrocelli's argument was that Fastow had otherwise done nothing improper performing his business duties for Enron. That, of course, raised a question: If he was a sleazeball, he was Skilling's sleazeball -- hired, supported, and promoted by Skilling from the start. What reason was there to think he would operate ethically in his official duties at Enron?

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