HOUSTON (AP) – A lawyer for former Enron Chief Executive Jeffrey Skilling launched a scathing attack Wednesday on a pivotal prosecution witness, suggesting he is a masterful liar whose insatiable greed landed his own wife in prison.

Lawyer Daniel Petrocelli began an intense cross-examination of Andrew Fastow, former chief financial officer of Enron, who had implicated Skilling in financial arrangements that masked Enron debt and boosted its bottom line to impress Wall Street.

“You must be consumed with an insatiable greed _ is that fair to say?” Petrocelli scolded Fastow.

“I believe I was extremely greedy, and that I lost my moral compass, and I’ve done terrible things that I very much regret,” answered Fastow, who has pleaded guilty to conspiracy and agreed to serve up to 10 years in prison.

Fastow testified earlier Wednesday that former Enron CEO Kenneth Lay was well aware of the company’s crumbling finances in 2001, when he gave a glowing assessment of Enron to the media and to its own employees.

Fastow told jurors about a meeting on Aug. 20, 2001, in which Lay and other top executives heard about a “hole in the earnings” _ projections that Enron would fall far short of Wall Street expectations for the quarter.

Days later, in an interview with BusinessWeek, Lay said Enron had no accounting problems and declared, “The company is probably in the strongest and best shape that it has ever been in.”

Asked by a federal prosecutor about the Lay interview, Fastow said: “I think most of the statements in there are false.”

Enron had a wide range of problems at the time, including huge upcoming write-offs, accounting errors and the deterioration of financial structures Enron was using to mask weak assets, Fastow said.

Fastow said he also met with Lay in September 2001 to discuss detailed questions raised by The Wall Street Journal about Enron’s off-balance-sheet deals and money Fastow was making off financial partnerships with Enron.

He said Lay decided to issue a brief statement backing the partnerships rather than answer detailed questions.

Fastow also said Lay gave employees misleading information when he said in an online chat on Sept. 26, 2001, that the company was fundamentally sound, with a strong balance sheet.

But the cross-examination provided perhaps the most dramatic moments yet in the six-week-old federal fraud trial of Skilling and Lay.

Skilling lawyer Petrocelli reminded Fastow of his testimony that he had deceived his own wife, Lea, and even indirectly involved his children in some kickback schemes that made him millions of dollars.

Lea Fastow served a year in prison for signing a tax return that failed to classify as income the kickback money Fastow had received.

At one point Wednesday, when Petrocelli told Fastow he planned to ask him “a lot of questions,” Fastow deadpanned: “Yeah, I can see that by the binders.”

Soon after, Petrocelli said: “We’re talking about the fact that your wife, because of your conduct, spent one year doing hard time. And you think that’s funny?”

“No sir, it is not funny at all,” Fastow answered in a halting voice.

When Petrocelli suggested Fastow was “a master at telling one person one thing and another person another thing,” Fastow insisted he was in court to tell the truth, despite his past lies at Enron.

The exchange between the two became so heated within minutes after it began that U.S. District Judge Sim Lake stepped in to instruct them to stop interrupting each other.

On Tuesday, Fastow fought back tears as he told jurors about his guilty plea and yearlong prison term for his wife. He pleaded guilty to two counts of conspiracy in January 2004 at her urging, more than a year after he was originally indicted on a total of 98 charges.

He said he misled his wife when he told her the kickbacks were gifts. Fastow stared at the floor as the checks of those ill-gotten gains, written to his wife and sons as well as himself, were displayed for jurors on a massive screen.

“I did this,” he said, fighting to compose himself. “I led her to believe that.”

Fastow also told jurors about partnerships he said he set up with Skilling’s blessing to manipulate earnings _ prompting his boss to ask that Fastow “get me as much of that juice as you can” _ to buy Enron assets that had lost significant value and wipe millions in debt from the books.

Fastow said the LJM partnerships bought Enron’s risky investments or poor assets to let the company record income and rid itself of debt.

“We were doing this to inflate our earnings, and I don’t think we wanted to show people what we were doing,” Fastow said.

Fastow said the LJMs were legal and did many legal deals, but “certain things I did as general partner of LJM were illegal.”

LJM1 was created in 1999 to head off potential losses from Enron’s investment in an Internet startup. It couldn’t finance other deals because it had only $15 million in potential losses, so Fastow said he talked to Skilling about LJM2 _ a bigger vehicle with at least $200 million. LJM2 ultimately raised about twice that.

Yet in mid-October 2001 Enron disclosed hundreds of millions of dollars in third-quarter losses and slashed shareholder equity by $1.2 billion. Six weeks later, the company dissolved into bankruptcy proceedings.

Skilling, who was CEO for six months until resigning in August 2001, faces 31 counts of fraud, conspiracy, insider trading and lying to auditors. Lay, who resumed the CEO role after Skilling’s abrupt departure, faces seven counts of fraud and conspiracy.