Andrew Fastow, the financial wizard dubbed “Fast Andy” for his off-the-books finagling that led Enron Corp. into bankruptcy and disgrace, was charged Wednesday with fraud, money laundering and conspiracy.
The highest-ranking former Enron executive to be charged in the collapse of the energy giant, Fastow was alleged to have created paper partnerships to misrepresent the profitability of Enron and, thus, cheat shareholders.
The government says his illegal deals brought more than $30 million to himself and his family.
Fastow, 40, surrendered to the FBI Wednesday morning and was led away in handcuffs. Taken later before a magistrate for a bond hearing, Fastow was not required to enter a plea. However, his attorney said his client will contest the charges.
“The truth is simple. Enron hired Andy to arrange off-balance-sheet financing,” John Keker said. “Enron’s board of directors, its CEO and its chairman directed and praised his work. Accountants and lawyers reviewed and approved his work.”
Released on $5 million bond, Fastow faces a maximum penalty of 140 years in prison and forfeiture of tens of millions of dollars in assets if convicted of all charges.
“I have so waited for this day,” said Diana Peters, a laid-off Enron worker who came to see Fastow in court. “He needs to go to jail.”
Prosecutors hope that the former financial officer could help build cases against former Enron CEOs Kenneth Lay and Jeffrey Skilling. They said Fastow is not now cooperating.
In Washington, federal officials said the charges against Fastow are part of a crackdown on corporate malfeasance that has shaken financial markets and cost thousands of Americans their jobs.
“Our strategy is really straightforward. We aim to put the bad guys in prison and take away their money,” said Deputy Attorney General Larry Thompson.
“Our Enron investigation is not over,” promised Linda Thomsen, deputy enforcement director for the Securities and Exchange Commission. “We will continue to work closely with the Enron Task Force to bring to justice other responsible parties, and to get the full story of the Enron collapse to the public.”
During the past year, Enron has become the poster child of corporate chicanery and executive greed.
“Fastow and his co-conspirators systematically and thoroughly corrupted the business of one of the largest corporations in the world,” Thompson said.
In a federal complaint, Fastow is charged with creating “special-purpose entities,” supposedly independent companies that in reality were only accounting devices used to inflate Enron’s assets and hide its liabilities.
Fastow’s “clandestine transactions” and off-the-books deals hid $1 billion in Enron debt, prosecutors said.
The transactions were known as “Friends of Enron” deals because many investors were friends or relatives of Enron executives, prosecutors said. Fastow’s family foundation earned $4.5 million in one transaction, the prosecutors said.
Fastow also is charged with personally enriching himself, sometimes at the expense of Enron. In one deal, Fastow created a “gifting program” in which a series of $10,000 “gifts” were given to Fastow, his wife and their two children, according to prosecutors. These “gifts” totaled $125,000.
On Wednesday, the Justice Department froze $11 million of Fastow’s assets.
As part of his $5 million bond, Fastow also gave up the deeds to his home, the house he built for his parents, a house under construction that is up for sale for $4.3 million, his Galveston, Texas, beach house and woodland he owns in Vermont.
Fastow and his wife, Lea, were forced to surrender their passports. Fastow’s travel is restricted to Texas and California.
“The Enron shareholders and the American public have a right to see justice done in this case,” said Andrew Weissmann, head of the federal Enron Task Force. “Today we have taken a giant step toward that goal.”