Enron Ex-CFO Charged With Fraud, ConspiracyOct 3, 2002 | Dallas Morning News Federal charges unsealed yesterday against former Enron Chief Financial Officer Andrew Fastow hinted strongly that prosecutors investigating the company's collapse may be closing in on other executives, including former Chairman Kenneth Lay.
Prosecutors made public a criminal complaint against Fastow, 40, who looked tanned but grim as he surrendered to the FBI and was taken in handcuffs to appear before U.S. Magistrate Marcia Crone. By agreement, he was released on $5 million bond to await trial.
The 35-page document accuses Fastow of securities fraud, mail fraud, wire fraud, money laundering, conspiracy and aiding and abetting others in illegal off-balance-sheet transactions that led to the energy trading giant's collapse last year.
Other participants in alleged schemes to hide Enron's debt and losses and inflate its stock were identified only by title, but the titles included chief executive officer, a position held by Lay at the times cited, plus chief accounting officer, chief risk officer and treasurer.
Filing a criminal complaint before seeking a formal indictment is "unorthodox" but puts pressure on others, said Philip Hilder, a former federal prosecutor now representing Enron whistleblower Sharon Watkins.
"I think this is a vehicle in which prosecutors can showcase what they believe the allegations are against Fastow and turn on the heat on Fastow and, more importantly, others who may be named as co-defendants in the upcoming indictment," he said.
"This is a way of trying to get them to come in the door and perhaps cut a deal and cooperate," Hilder said.
At the times in question, the chief accounting officer was Rick Causey, the chief risk officer was Rick Buy and the treasurer was Ben Glissan. The CEO position was held by Jeffrey Skilling for a few months before Enron collapsed. All have left the company and none has been charged.
Prosecutors refused to confirm identities of future targets but made clear that they are not finished. "We aim to put the bad guys in prison and take away their money," Deputy Attorney General Larry Thompson said at a Washington news conference.
The charges against Fastow, who allegedly reaped more than $30 million in personal wealth from his Enron dealings, carry possible penalties of 140 years in prison and millions of dollars in fines, prosecutors said. Prosecutors have 30 days to attain an indictment. No trial date has been set.
Fastow's lawyer, John Keker, said he plans to prove that Fastow did only what he was hired to do, that his work was approved by his superiors, including the board, and that "at no time did he do anything that he believed was a crime."
Keker blasted Fastow's accusers. "Over the past year, a number of former colleagues of Andy Fastow's have whispered false rumors, have denied their responsibility ... and at times have outright lied," Keker said.
"The place we're going to confront that gossip and those lies is in court — not the press," Keker said, declining to answer questions.
In meeting the agreed $5 million bond, Fastow posted $3 million in an investment account and five pieces of real estate, his home, his parents' home, the new house he's building, a house in Galveston, Texas, and a house in Vermont — as security.
Fastow's release was delayed a few hours because Crone insisted that his parents and his wife, Lea, come to court to sign surety agreements in her presence.
Fastow also agreed to prosecutors freezing $11 million in another investment account, and he and his wife gave up their passports.
Prosecutor Andrew Weissmann said freezing the $11 million was imposed on Fastow in order to set aside as much money as possible for injured Enron shareholders. The amount brings to $37 million the total alleged ill-gotten gains so far frozen in the Enron case, officials said.
Fastow is the sixth person charged in the Enron inquiry. David Duncan, a former partner at Enron's former auditor, Arthur Andersen, pleaded guilty last April to obstructing justice. In June, Andersen, the company, was convicted of obstructing the investigation.
In August, former Fastow deputy Michael Kopper pleaded guilty to conspiracy to commit wire fraud and money laundering and agreed to cooperate with prosecutors and forfeit $12 million.
In September, a grand jury indicted three bankers formerly employed by National Westminster Bank for alleged wire fraud as part of an Enron-related scheme.
The charges described a pattern of criminal activity previously outlined, but included interesting details about some of the underperforming assets that Enron allegedly sought to hide through sham sales to off-balance-sheet entities.
One was a power plant in Cuiaba, Brazil, in which an Enron subsidiary had 65 percent ownership. The project was $120 million over budget and Enron needed to reduce its ownership share to keep it off the books.
Another deal involved power plants on barges off the coast of Nigeria. A failed effort to sell them led to an alleged sham sale to an unnamed "financial institution." Fastow allegedly had secretly promised the institution that Enron would make up any losses it suffered.