[JURIST] Former Enron [JURIST news archive] Chief Financial Officer Andrew Fastow [JURIST news archive] took the stand for the prosecution against his former bosses Enron founder Kenneth Lay [Houston Chronicle profile] and former CEO Jeff Skilling [Houston Chronicle profile] Tuesday. Fastow testified that both Lay and Skilling were aware of the creation of two partnerships in 1999 designed to keep the failing firm's liabilities off the books. Fastow said that Skilling encouraged him to create as much revenue from the partnerships as possible, earnings that were later swapped with the parent company to conceal financial losses.

Both Lay and Skilling have been charged with fraud and conspiracy [indictment, PDF; DOJ Enron trial materials], and contend that they were duped by Fastow [JURIST report] who initiated the fraudulent behavior to increase his personal gain. Fastow pleaded guilty [plea agreement, PDF] to two counts of conspiracy in 2004 for his involvement in the scandal. AP has more. The Houston Chronicle has local coverage.

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