Saturday, September 30, 2006

Day Pass Sought, so Fastow Can Testify

The Toronto Star, Tara Perkins, 30 September 2006

The University of California has asked that former Enron Corp. executive Andrew Fastow be allowed to leave prison for nine hours a day for 17 days in October so he can testify in a class-action lawsuit against numerous financial institutions, including the Royal Bank of Canada and Toronto Dominion Bank.

Fastow, the mastermind behind the financial schemes that sank Enron, was sentenced to six years in prison earlier this week.

His deposition testimony "will serve the public's interest," the regents of the University of California said in documents filed with a Houston court this week.

"The testimony of Enron's former CFO, who was the principal contact for the company's banks in structuring, designing and executing transactions that were done solely to manipulate reported financial statements, is crucial evidence that should be taken" before the court can decide a number of issues in the civil case, the documents said.

The university asks that Fastow be temporarily released from jail in Houston, between the hours of 8 a.m. and 5 p.m. His lawyers have agreed to his appearance, and to accompany him during those hours, the court documents state.

"Mr. Fastow will be questioned by as many as 10 financial institutions on a huge number of documents he has never seen before," the court documents say.

The university is the lead plaintiff in a suit billed as "the largest securities case in history" in the court documents.

It represents about 1.6 million people who lost money on Enron shares.

The university's board of regents says it lost more than $144 million (U.S.) on Enron shares.

Defendants in the suit include some of the world's biggest financial institutions, some individuals and Canada's RBC and TD banks.

CIBC reached a settlement in the case last year.

Spokespersons for RBC and TD would not comment yesterday, though the banks have denied wrongdoing, saying that they proceeded in good faith in relying on disclosures from Enron and were ultimately deceived by the Houston-based energy trader.

Fastow appeared to implicate numerous banks involved in the suit in a declaration he made before being sentenced. His comments focused on Merrill Lynch, Crédit Suisse First Boston, the Royal Bank of Scotland and Barclays.

Fastow said he had worked with RBC to structure off-balance sheet transactions for Enron, and "based on my conversations with RBC bankers, I believe they understood that certain structured finance transactions would have had a material impact on Enron's financial reporting."

He noted that RBC was viewed as a second-tier lender to Enron, but he saw Canada's biggest bank as a tier-one lender after the fall of 2000, when three British bankers, the so-called NatWest Three, joined the bank.

Fastow called TD simply "a tier-two bank with which I dealt," adding he was aware TD did six "pre-pay" transactions for Enron between 1998 and 2001.

The University of California has subpoenaed the three to give depositions in the suit.

That deposition was postponed, a spokesman for the case said earlier this week.

The three British bankers — Gary Mulgrew, Giles Darby and David Bermingham — once worked for Greenwich NatWest, but were hired in 2000 and stayed for a brief time at RBC, where they allegedly helped boost the bank's standing with Enron.

The United States extradited the men in July on wire fraud charges related to dealings with Enron while they were at NatWest.