Fastow told jurors that Lay knew of impending problems with the company but did not disclose them publicly.

Fastow says he sounded the alarm to Ken Lay in late summer of 2001 that Enron had grossly overvalued its assets.

Analysts figured Enron had about five billion dollars worth of international assets. In reality, Fastow and others inside the company said those Enron assets were really only worth about a billion dollars.

After Jeff Skilling suddenly left the company in July 2001, Fastow said he met with Lay to reinforce his support and warn him of the problems.

"I said to him 'Even if were smart and do not make a mistake and make five billion dollars a year it will take us that long to work our way out of problems," Fastow testified.

But, Fastow continued, "We do not have a good record of not making mistakes."

When asked about the reaction Lay had to this news, Fastow said little of this came as a surprise to his boss.

Some company assets were so badly overvalued, Fastow said, he suggested Lay make major moves.

"I suggested we needed to look at any and all alternatives including selling the pipeline, merging the company, selling the company, giving up control of the company," said Fastow.

The 44-year-old former CFO suggested Enron find an impartial bank to help work its way out these problems.

"We have to open up the kimono," Fastow said. "We have to show them the skeletons in the closet. We have to show them what our assets are really worth. That is the only way you can truly value the company to work out a merger, split up or something."

But as the news appeared to look worse and worse for the company, prosecutors said Lay did little to warn the public and investors of the massive internal problems.

In an Aug. 24 interview Fastow read in court, Lay was quoted as saying "There are absolutely no problems having to do with Jeff’s departure. The company is probably in the best shape it has ever been in. There are no surprises."

Fastow rebuked it. "I think most of the statements in there are false," he said.

"What Mr. Lay was saying is what the company was saying," Fastow admitted. "I was trying to keep up the deception as well. It was a lie."