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Fastow Nears Plea Deal In Enron Scheme

Jan 9, 2004 | Washington Times

Former Enron Corp. executives Kenneth L. Lay and Jeffrey Skilling came into the cross hairs yesterday as federal prosecutors moved to seal a breakthrough plea bargain with Enron's former chief financial officer and mastermind of the complex financial schemes that caused the energy giant's downfall.

In a drama playing out in a Houston courtroom, the Justice Department's Enron task force was close to obtaining what it has sought for nearly two years since the revelation of fraud sent Enron plummeting into bankruptcy: a deal giving the wife of Enron financial chief Andrew Fastow a light jail sentence in exchange for his testimony about any role his bosses played in Enron's financial crimes.

Mr. Lay and Mr. Skilling both proclaimed their innocence in nationally televised testimony before Congress in 2002 after the Enron case touched off governmentwide investigations and an unprecedented string of corporate scandals that led to the most significant reforms in securities law since the 1930s.

Since that time, many corporate chieftains have been indicted, pleaded guilty and gone to jail for committing financial crimes, while the Enron executives remained unscathed. Mr. Fastow, who was indicted last year on 98 counts of fraud and conspiracy, has maintained that his bosses approved of his work.

Enron whistleblower Sherron Watkins, who once worked with Mr. Fastow, said his testimony and knowledge of Enron's inner workings would enable the government to crack the case open.

"Andy's almost like the assassin who can now tell the government what his orders were or were not," she said on ABC's "Good Morning America." "Sometimes I liken Jeff Skilling to a Mafia boss who used particular words. He never said, 'Go whack Joey.' He said, 'Go take care of Joey.' And now that there have been corporate problems, he tries to say that, 'I just meant, send Joey on vacation.' "

Leslie Caldwell, head of the Enron task force, stressed how vital the case is to the Justice Department in urging U.S. District Court Judge David Hittner to accept a plea-bargain arrangement giving Lea Fastow a five-month sentence to settle charges of tax evasion related to the Enron schemes.

"A global resolution" of the cases against Mr. and Mrs. Fastow is "of significant magnitude to the government," she said.

The judge approved the deal, but on condition he have the discretion to impose a stiffer sentence later. He said he had "preliminary concerns" and wanted a presentencing investigation to determine whether the sentence was appropriate before finalizing it.

Mrs. Fastow's attorney, Mike DeGeurin, said the judge's conditions may break the deal because the five-month sentence was designed to ensure Mrs. Fastow is free to tend to her two children while Mr. Fastow faces trial and a possible 10-year jail sentence for his reputed crimes.

"There are agreements in several different places that are all contingent upon each other," he said. "Timing is vitally important. The whole thing unravels without this." Mrs. Fastow has until noon today to decide whether to accept the judge's conditions or proceed to trial Feb. 10.

As part of the global settlement, Mr. Fastow is prepared to agree to pay about $20 million to settle a parallel civil suit by the Securities and Exchange Commission, said sources familiar with the case. Also, prosecutors were prepared to drop conspiracy charges against Mrs. Fastow for participating in some of her husband's deals.

"It certainly sounds like she was facing several years in jail," said former prosecutor Kirby Behre, a partner at the Washington law firm Paul, Hastings, Janofsky & Walker. "For the two of them, this is akin to going out on Christmas Eve looking for the hottest toy on the market, and finding it at half off."

The agreement also is linked to potential charges against former Chief Accounting Officer Richard Causey. Mr. Fastow's cooperation was expected to lead to charges against Mr. Causey. But the cooperation agreement with Mr. Fastow as well as the case against Mr. Causey hinges on finalizing the deal with Mrs. Fastow.

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