The wife of Enron Corp.’s former chief financial officer and six former executives of the fallen company’s defunct broadband unit surrendered to federal authorities early Thursday to face criminal charges involving the failed energy trading giant.
Lea Fastow, 41, wife of Andrew Fastow, was named in an indictment charging her with six counts, including money laundering conspiracy, filing false tax returns and conspiracy to commit wire fraud.
In addition, her husband was charged Thursday with 31 more counts, meaning he now faces at least 109 charges related to Enron’s collapse in 2001.
Also, more charges were filed against two other former Enron officials who were indicted in March.
“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 Corporation,” Deputy Attorney General Larry Thompson, who heads the Justice Department’s Corporate Fraud Task Force, said in Washington.
Prosecutors contend Enron Broadband Services never generated any revenue and was abandoned by Enron shortly before the company filed for bankruptcy in December 2001.
Besides the Fastows, named are former Enron Broadband Services chairman and co-chief executive Kenneth Rice, former president and co-chief executive Joseph Hirko, former chief operating officer Kevin Hannon, and former senior vice presidents Scott Yeager and Rex Shelby. They are charged with securities fraud, wire fraud, and money laundering.
Two other previously indicted executives, Kevin Howard and Michael Krautz, were named in new counts.
The indictments allege Rice, Hirko, Hannon, Yeager and Shelby sold large amounts of Enron stock while they knew the broadband unit was failing, bringing themselves some $186 million in profits. The government is seeking forfeiture of more than $100 million of those profits.
The new Fastow indictment also brings charges of securities fraud, insider trading, falsification of accounting records and tax fraud against two other Enron executives, former treasurer Ben Glisan and former finance executive Dan Boyle.
Mrs. Fastow is charged with conspiring to reap profits from Enron wind farms in a partnership known as RADR and, along with her husband, failing to report income to the Internal Revenue Service.
Lea Fastow and six of the former executives were taken to federal court in handcuffs after surrendering to authorities in Houston just after daybreak.
Rice, Hirko, Hannon and Yeager all entered innocent pleas in an appearance before U.S. Magistrate Marcia Crone. Bond for Rice and Hirko was set at $3 million each. Bond for Hannon and Yeager was set at $1 million. All were in the process of posting bond late Thursday morning.
Lea Fastow, Boyle and Glisan were scheduled to appear before Crone later in the day.
Fastow walked into the Internal Revenue Service office in Houston accompanied by her lawyer, Nanci Clarence. Her husband and his lawyer drove the women to the federal office, where Fastow hugged his wife, then drove away. He and his attorney later joined them at the courthouse.
At the same time, Rice, Hirko, Hannon, Boyle, Glisan and Yeaeger surrendered at an FBI office in Houston.
Enron’s broadband venture, touted to analysts in 2000 as the company’s next big moneymaker, fizzled in 2001 and laid off hundreds of workers about six months before the parent company went bankrupt.
Lea Fastow was paid $54,000 to administer one of the partnerships at the center of the Justice Department’s investigation into Enron’s 2001 collapse.
She and her husband, who was charged Oct. 31 with 78 counts of fraud, conspiracy, money laundering and obstruction of justice, met in college, got married, and worked at a Chicago bank before joining Enron in 1990. She was assistant treasurer when she left the company in 1997.
Names of the Fastows and and their family foundation are on several bank accounts frozen by federal prosecutors before he was indicted initially as part of their investigation into ill-gotten gains from partnerships that lined their pockets while helping Enron hide debt and inflate profits.
Andrew Fastow is free on $5 million bond. A status hearing in his case is scheduled for May 19.
The Houston Chronicle, citing unidentified sources, reported Lea Fastow could be tried separately from her husband.
Shelby did not appear in court because of a family emergency Thursday but was expected to turn himself in later.
On Wednesday, Crone received the charges from the foreman of the Enron grand jury and Enron Task Force prosecutor Andrew Weissmann, who is handling the case against Andrew Fastow. Crone excluded reporters from the hearing.
The six men who surrendered at an FBI office in Houston early Thursday all arrived separately.
Boyle, accompanied by an attorney, drove up in a silver Porsche.
“Prosecuting this guy is like prosecuting the piano player in a whorehouse,” Boyle’s lawyer, Bill Rosch, said.
Rice came by pickup truck with two lawyers. Hirko was accompanied by three men. Yeager walked in alone, carrying a cup of coffee. Glisan had three attorneys and Hannon had one.
Rice, known at Enron for his love of fast, expensive cars, quit the company months before it went bankrupt in 2001 after selling $1.2 million shares of company stock for more than $76 million. He served as CEO of Enron’s trading unit, then called Enron Capital and Trade, from June 1996-June 1999 when he took the helm of the heavily touted broadband unit that never earned the millions in profits Enron claimed it did.
Hirko was chairman and CEO of Enron Broadband before Rice. He left Enron in 2000 and is alleged to have sold 473,837 shares for $35.1 million from June 1996 to November 2001.
Hannon, 42, operating officer at Enron Broadband, quit Enron in August 2001. Previously he was president of Enron’s trading and commodities business. He is named in lawsuits that allege he profited from the sale of millions of dollars worth of stock.
Glisan became Enron treasurer in March 2000 and earned $1 million in May 2000 on a March 2000 $5,826 investment in Fastow’s Southampton Place partnership. He was fired from Enron in November 2001 and prosecutors have frozen $916,137 in a bank account in his name.
The two other former broadband executives, Howard and Krautz, were indicted March 26 for allegedly using accounting tricks to generate $111 million in fake earnings from the unit’s failed Internet movie-on-demand service.
Prosecutors allege the men secretly promised investors they would make money off the highly publicized deal with Dallas-based Blockbuster Inc., and concealed those pledges from Enron’s accountant, Arthur Andersen LLP.
Howard and Krautz have pleaded innocent and are free on $500,000 bond. Each is charged with 18 counts of securities fraud, wire fraud, conspiracy and lying to the FBI.
Enron’s stock rose sharply after executives, including former Enron CEO Jeffrey Skilling, talked up the venture. Shares reached a high of $90 in August 2000, and Enron was No. 7 on the Fortune 500 that year.
Skilling has not been charged with any crime, and he has consistently said he did nothing improper at Enron. He quit the company in August 2001, more than three months before the company failed, citing personal reasons.