In its broadest legal assault on Enron to date, Justice Department prosecutors are expected to file criminal charges against as many as 11 former Enron employees today in federal court in Houston, sources close to the case say.
The charges are expected to fall into two categories: against former executives from Enron’s Broadband unit, two of whom have already been indicted; and a superseding indictment against former Enron chief financial officer Andrew Fastow, who was accused last fall of enriching himself at the expense of Enron and its shareholders.
Among the eight new names likely to be included in today’s charges: Ken Rice, former head of Enron Broadband; Ben Glisan, Enron’s former treasurer; and Lea Fastow, wife of Andrew Fastow. Calls to attorneys representing each of the two men were not returned Wednesday, and a Fastow spokesman declined to comment.
The new charges would represent an evolution in the Enron Task Force’s investigation of financial fraud at the company that once proclaimed itself the seventh largest in the USA.
Up until now, prosecutors have zeroed in on specific incidents of alleged misconduct. With Enron Broadband, the Justice Department would, for the first time, claim the existence of a conspiracy on the part of Enron’s management to deceive the investing public.
According to papers filed in a March indictment, Enron Broadband managers touted the division’s earnings potential in 2000 by making ”false” claims.
Enron entered into a joint venture with Blockbuster that year that promised to supply movies to consumers through Enron’s broadband network. Even though the venture generated almost no money and Blockbuster pulled out in March 2001, Enron claimed that the deal generated $111 million in revenue over a six-month period.
”Broadband seems to be the low-hanging fruit,” says Houston attorney Thomas Ajamie, who has been following the case. ”To report such a large amount of revenue from an operation that never got going seems to be an abuse of the accounting process.”
By adding new charges against Fastow’s wife and Glisan, prosecutors are also continuing to investigate the network of Fastow-controlled special purpose entities through which the Fastow family and others made millions of dollars.
”It’s akin to a military operation,” says Houston attorney Philip Hilder of the Justice Department’s approach. ”The overall objective is to prosecute wrongdoing, but there are many trails to get there.”