The Justice Department charged former Enron Corp.’s former chief financial officer with securities, wire and mail fraud, money laundering and conspiracy related to his role in the company’s collapse.
Andrew Fastow, 40 years old, had arrived at the Federal Bureau of Investigation’s headquarters in Houston Wednesday morning in anticipation of a federal-court appearance on charges related to partnerships credited with fueling Enron’s swift descent into bankruptcy last year.
Mr. Fastow, wearing a charcoal gray suit and red tie, had been accompanied by his attorney, John Keker. After Mr. Fastow turned himself in, Mr. Keker quickly left.
Mr. Fastow spent about 30 minutes inside the FBI office before two agents led him out in handcuffs. He was placed in the back of Ford sedan, which was believed to be headed for the courthouse in downtown Houston.
Mr. Fastow’s spokesman, Gordon Andrew, declined comment. Mr. Keker’s office referred calls to Mr. Andrew.
Mr. Fastow accused of devising the company’s complex web of off-the-books partnerships used to hide some $1 billion in debt from shareholders and federal regulators. He is the most prominent company figure targeted so far by the Justice Department.
Having brought quick criminal charges against alleged corporate wrongdoers at WorldCom Inc. (MCWEQ) and Adelphia Communications Inc. (ADLAE), the Justice Department had been under enormous pressure to bring criminal cases against executives who ran Enron prior to the energy-trading company’s bankruptcy filing in December. Charges against Mr. Fastow, the company’s finance chief while it moved debt off its books into limited partnerships, thereby pumping up earnings should go a long way toward relieving that.
The Justice Department’s Enron Task Force first signaled in June that it had gathered sufficient evidence to bring criminal charges against Mr. Fastow. That month, federal prosecutors filed a criminal wire-fraud complaint against three British former employees of National Westminster Bank PLC, identifying Mr. Fastow as a central figure in the case. The Justice Department also identified Mr. Fastow as an unindicted co-conspirator in the cooperation agreement it entered in August with Mr. Fastow’s former right-hand man, former Enron Managing Director Michael Kopper.
Mr. Kopper pleaded guilty to two felony counts of conspiracy to commit wire fraud and conspiracy to commit money laundering as part of the agreement, under which he faces as much as 15 years in prison. His plea deal described a criminal conspiracy from 1997 through July 2001, in which Mr. Kopper, Mr. Fastow and others used a series of Enron-related partnerships to help disguise the extent of the company’s debt and losses, as well as to obtain millions of dollars in company funds for themselves and others.
The preference of government officials has been to bring all potential criminal charges against Mr. Fastow in one fell swoop, rather than charging him with a narrow range of crimes relating to alleged self-dealing, and then broadening the charges later, people close to the investigation say. So while prosecutors easily could have charged Mr. Fastow months ago, the decision was made not to bring any formal actions against him until the government’s investigation into his conduct had progressed further.
Once federal prosecutors file a criminal complaint, they generally must secure an indictment within 30 days of the defendant’s first court appearance or risk having the case dismissed and then being forced to start the process over again.
Mr. Fastow, who invoked the Fifth Amendment and refused to testify before Congress early this year, reaped an estimated $30 million from the Enron partnerships. He emerged as a central figure in the Enron scandal after the Houston-based company collapsed into bankruptcy last December.
Enron’s stunning downfall, bringing the retirement savings of employees with it and wiping out the investments of pension funds and individuals nationwide, became the first in a series of big corporate accounting scandals that rattled investors’ confidence and the stock market.
Charges against Mr. Fastow could end up pressuring other potential defendants to come forward in hopes of striking favorable plea agreements. Details in the criminal complaint against the three British bankers, for example, prompted Mr. Kopper to approach prosecutors about a plea deal.
Two of Mr. Fastow’s former immediate superiors, former Enron Chairman Kenneth Lay and former Enron Chief Executive Officer Jeffrey Skilling, have said they weren’t aware of Enron’s financial frailty or the nature of the partnerships Mr. Fastow engineered. While Mr. Lay has opted not to speak publicly in his own defense, Mr. Skilling has testified twice before Congress that he was unaware of any wrongdoing at Enron.
While publicly silent, Mr. Fastow has maintained through his spokesman that he acted with the full knowledge of Enron’s top executives, its directors and its longtime auditor, Arthur Andersen LLP. Andersen, one of the nation’s biggest accounting firms, was convicted in June of obstruction of justice for shredding Enron audit documents.
The day after Mr. Kopper entered his plea, a federal judge froze more than $23 million in bank and brokerage accounts held by Mr. Fastow and his wife, his family foundation, his brother Peter, several former Enron employees and two holding companies. The Justice Department alleged that the accounts contain money from illegal Enron deals largely organized by Messrs. Fastow and Kopper.
The prosecutors also are going after Mr. Fastow’s newly built $2.6 million home in Houston’s wealthiest neighborhood, River Oaks, where Messrs. Skilling and Lay live.
The government also wants to freeze an additional $11 million of Fastow’s assets based on the allegations. The government is seeking a total forfeiture of $37 million from the illegal activity at Enron.
“Today’s complaint demonstrates the effectiveness of a swift, coordinated law-enforcement response to even the most sophisticated financial crimes,” said Deputy Attorney General Larry Thompson Tuesday. “Our strategy is straightforward. We aim to put the bad guys in prison and take away their money.”