The government widened its investigation into Enron Corp., adding 31 charges against ex-Chief Financial Officer Andrew Fastow and accusing his wife, former Enron Treasurer Ben Glisan and eight other former executives of taking part in a fraud that destroyed Enron.
The indictments bring the total to 19 in the government’s probe of one of the biggest corporate scandals in U.S. history, one that wiped out $68 billion in the energy trader’s market value. Chief executives Kenneth Lay and Jeffrey Skilling haven’t been charged.
“Today’s indictments are a significant milestone in our unabated efforts to expose and punish the vast array of criminal conduct related to the collapse of Enron,” Deputy Attorney General Larry Thompson said. The investigation continues, he told a press conference.
Fastow’s wife, Lea Weingarten Fastow, who also worked at Enron as it rose to become the seventh-biggest in the United States, was accused of fraud, taking part in a money-laundering conspiracy and filing false tax returns.
Her husband, who was indicted in October and has pleaded innocent, was again named in the latest indictments that charge him with masterminding the accounting fraud that cost investors billions of dollars. Fastow, 41, the highest-ranking Enron executive to be charged, was accused of 109 counts in the new indictment, up from 78 previous charges.
His lawyers have said he was acting on orders from Lay, Skilling and Enron’s board.
Lea Fastow, also 41, heir to a Houston grocery store and real estate fortune, was accused of conspiring with her husband to enrich their family by defrauding Enron and avoiding income taxes on their ill-gotten gains.
The charges against her are without merit, her lawyers said. They are “a transparent effort to put pressure” on Andrew Fastow, said one of the attorneys, Andrew Jefferson.
Lea Fastow and Glisan were freed on $500,000 bond after pleading not guilty to all charges. Lea Fastow’s bond was posted by her brother-in-law, Peter Fastow, an Annapolis, Md., lawyer, and her trial was set to begin July 8.
She surrendered at Internal Revenue Service offices in Houston early Thursday morning, and was taken in handcuffs to federal court. After the hearing, she was met outside the courthouse by her husband. After embracing, they drove away in a white minivan without commenting.
Also charged are Kenneth Rice and Joseph Hirko, former chief executives of Enron Broadband Services; former Enron finance executive Dan Boyle, Kevin Hannon, Rex Shelby and Scott Yeager. Two others, Kevin Howard and Michael Krautz, were re-indicted.
All of the defendants except Shelby have surrendered. Shelby and prosecutors agreed that he will turn himself in next week.
The U.S. Securities and Exchange Commission also filed a lawsuit against Rice, Hirko and other former Enron Broadband executives, accusing them of fraud and reaping more than $150 million in unlawful profits.
Rice’s and Hirko’s bonds were set at $3 million apiece, and Hannon’s and Yeager’s at $1 million. Glisan’s bond was set at $500,000 and Boyle’s was $250,000.
Bill Dolan, an attorney for Rice, said that “everyone should keep in mind that citizens accused are presumed to be innocent despite all the of the circus atmosphere.”
Hannon’s attorneys issued a statement that said their client is innocent and has cooperated with the investigation. He has been treated unfairly by the Enron investigators, they said. Likewise, Yeager’s attorney said his client is innocent and “a victim in this matter.”
Hirko was dismissed from a civil complaint against the company earlier this week. U.S. District Judge Melinda Harmon said Hirko was not head of the broadband unit when the alleged fraud took place.
The suit, filed in federal court in Houston, said seven former executives engaged in a scheme to drive up Enron’s shares by using fraudulent accounting methods so they could sell stock for more than $154 million. The government is trying to confiscate more than $100 million of the profits.
The Justice Department’s Enron task force moved to seize Andrew Fastow’s assets in August, after former executive Michael J. Kopper pleaded guilty to fraud and money-laundering and implicated Fastow.
The government said at the time that it wanted to seize $23 million from bank accounts held by Fastow, his brother and other Enron employees. The Securities and Exchange Commission has also said it would try to force Fastow to surrender his “ill-gotten gains,” including his salary.
Fastow was described by prosecutors as having enriched himself at the company’s expense through securities fraud, mail and wire fraud and money laundering. He faces decades behind bars if convicted, prosecutors said.
Federal prosecutors had said in February that they were seeking a new indictment against Fastow.
Prosecutors say Lea Fastow disguised tens of thousands of dollars in profits from an investment in an Enron partnership as tax-exempt gifts and interest on a loan.
The Fastows failed to report $67,224 in “kickbacks” they received from the so-called Chewco partnership and arranged for checks to be made out to their children, which Lea Fastow endorsed, the indictment said.
In March, Enron said it will reorganize around three North American pipelines to help pay creditors owed more than $50 billion. The company owes bondholders more than $10 billion.
Houston-based Enron sought bankruptcy protection after restating $586 million in profits and revealing a network of off-book partnerships used to hide debt and inflate its reported financial performance.