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Plea Deal Helps Build Enron Case

Aug 24, 2002 | AP

The plea agreement with a key Enron Corp. official gives prosecutors an insider who promises to help them unravel the role the company's former financial officer may have played in its collapse.

Experts believe building any criminal case against other top executives, including former chief executive Jeffrey K. Skilling and former chairman Kenneth Lay, will be immensely more difficult for the Justice Department.

These executives personally attested to Enron financial documents that contained serious accounting errors, which could represent securities violations, experts said. But experts said it will be difficult, even impossible, to implicate Skilling or Lay in the types of wire fraud or money laundering crimes that Michael J. Kopper admitted to last week.

Enron's internal investigation found that Skilling was "almost entirely uninvolved in the (oversight) process, notwithstanding representations made to the board that he had undertaken a significant role." Others said Lay was even more well known for his hands-off approach to the day-to-day operations at Enron.

When Skilling testified this year at congressional oversight hearings, he said: "I was not aware of any inappropriate financing arrangements designed to conceal liabilities or overstate earnings."

Kopper, once a trusted aide to chief financial officer Andrew S. Fastow, was at the crux of at least three partnerships — known as Radar, Chewco and Southampton — that conducted complicated business deals with the company.

The partnerships were portrayed to investors and federal regulators as outside entities but secretly had too-close ties to Enron. Prosecutors in court papers tied Kopper's roles in those deals closely to Fastow and said Kopper distributed profits to Fastow, Fastow's wife and other family members. Fastow named another controversial partnership at Enron after his wife and two young children.

"This applies enormous pressure," said Robert A. Mintz, a former federal prosecutor. "The plea by Kopper will no doubt hasten the government's ability to move more quickly against Fastow and possibly against Lay and Skilling."

Fastow has not been charged or indicted. A spokesman, Gordon Andrew, declined comment. He said last week that Fastow would "respond at the appropriate time and in the appropriate forum." Fastow's lawyer, David Boies, was in Africa until the end of August and could not be contacted.

"There's no question that Michael Kopper locks down the government's case against Andy Fastow," said Jacob Frenkel, a former federal prosecutor and enforcement official at the Securities and Exchange Commission. "Based on Kopper's pleadings, Fastow's hands are as dirty as anyone's."

Based largely on information already turned over by Kopper, the government used an unusually aggressive tactic most frequently employed against drug kingpins: It sought to seize $22.1 million in bank accounts that prosecutors alleged contained money from illegal Enron deals largely organized by Kopper and Fastow.

The amount included nearly $12.8 million held by Fastow, his family or his family's foundation, plus $9.3 million more from other former Enron workers. In addition, Fastow's new, $2.6 million, five-bedroom home under construction in Houston also could be seized.

Kopper agreed to surrender $12 million more, and he faces up to 15 years in prison.

A U.S. magistrate in Texas froze some financial accounts of Fastow's family, in sealed rulings, amid indications that his brother, Peter Fastow, tried to move millions of dollars out of one of the accounts.

Scrutiny by prosecutors of Fastow's brother and family — his wife was paid $54,000 as an administrative assistant to Kopper — probably will compel Fastow to reach a plea agreement with prosecutors, experts said.

"I would not be at all surprised to see Andy Fastow signing on the dotted line fairly soon to join Team USA," Frenkel said. "When Fastow looks around his house and looks at family pictures ... he has constant reminders of the serious consequence to others close to him if he decides to say 'I did nothing wrong'."

The outlines of such a guilty plea by Fastow could be conditioned on whether he can implicate Skilling and Lay.

"The government will not hesitate to strike a cooperating deal with Fastow if he can carry them further up the chain," Mintz said. "Once the government has built a compelling case against Fastow, there will be pressure brought on him to provide information against Skilling and Lay, if he has that."

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