A federal judge in Houston has frozen millions of dollars in assets controlled by Andrew S. Fastow and his family, sources said yesterday, in the latest sign that prosecutors are closing in on Enron Corp.’s former chief financial officer.
The court order, signed Thursday night by U.S. Magistrate Judge Calvin Botley, remained under seal. Earlier in the week, the government signaled that it would attempt to seize nearly $20 million from Fastow and his relatives after a key Fastow aide, Michael J. Kopper, pleaded guilty to conspiracy and detailed Fastow’s alleged role in financial schemes related to Enron’s collapse.
Sources familiar with the matter said the government moved quickly to freeze Fastow assets after his brother, Peter Fastow, tried to move millions of dollars from one of the targeted assets.
A spokesman for the Fastow family, Gordon Andrew, declined to comment yesterday. Peter Fastow did not return telephone calls. Bryan Sierra, a Justice Department spokesman, also declined to comment.
Fastow is a central figure in the investigation of Enron’s collapse into bankruptcy last December. He designed several of the Houston energy trader’s off-balance-sheet partnerships, which concealed the company’s mounting debts and funneled millions of dollars to relatives and friends, according to court papers. Fastow, a protege of former Enron chief executive Jeffrey K. Skilling, left the company last fall after his role in the controversial partnerships was disclosed to Enron’s board of directors.
Among the assets the government has targeted are bank and brokerage accounts in the names of Fastow, his relatives and a charitable foundation they control. The list includes $500,000 from Peter Fastow’s account at stockbroker Charles Schwab & Co., as well as Andrew Fastow’s Houston home.
Prosecutors also indicated they may go after $3 million in assets belonging to former Enron employees who profited from investments in one of the company’s controversial business. Those assets include the Houston home of former Enron in-house lawyer Kristina Mordaunt and the 2000 Lexus sport-utility vehicle registered in her husband’s name.
Legal experts said the prosecutors’ move to freeze Fastow’s assets was not unusual given the information they had obtained about apparent efforts to remove funds from an account.
“The prudent thing to do is to go ahead and freeze them,” said Daniel K. Hedges, a criminal defense lawyer and former U.S. attorney for the Southern District of Texas. “In money-laundering and drug cases, the assets are frequently frozen even before people are indicted.”
The government still must win formal approval to seize the money, a move that could be contested by Fastow and members of his family. Legal experts said prosecutors must prove that the funds are the tainted proceeds of criminal activity.
“We will chase the money into the hands of whoever got it,” a Justice Department official said this week.
The plea agreement by Kopper, former managing director of Enron’s global finance unit, lays out the role Fastow played in three partnerships that employees of the energy-trading firm used to hide millions in debt and enrich insiders. Without naming Fastow directly, the 17-page court filing lists more than half a dozen instances in which “Enron’s CFO” acted to siphon off money to his friends and relatives.
For instance, in a partnership known as Southampton, Kopper and Fastow conspired with three British bankers to help them swindle their company, National Westminster Bank PLC, prosecutors said. The bankers, who were criminally charged by the Justice Department in June, cleared $7.3 million through the Southampton deal. Kopper took in $4.5 million from an investment of $25,000, and a “purported charitable foundation” in the name of Fastow’s family contributed $25,000 and received $4.5 million, prosecutors said.
Kopper and Fastow used another partnership, called Chewco, to funnel money to themselves and their friends, according to court filings. Fastow arranged for Kopper to net $400,000 as a “nuisance fee” for agreeing to changes in the deal in 1998. Kopper kicked back about $67,000 of that money to Fastow or his relatives, according to prosecutors. Fastow’s wife, Lea, was paid $54,000 for serving as an administrative assistant for Chewco, prosecutors said.
Defense lawyers not connected to the case said the court filings are damaging to Fastow and the mention of his wife could exert additional pressure on him to come to the negotiating table.
“It’s clear that Michael Kopper has given the government a map with arrows pointing straight at Fastow,” said Thomas Ajamie, a Houston lawyer.
Prosecutors will try to squeeze Fastow for information he may have about improprieties committed by his superiors — Skilling and former chairman Kenneth L. Lay — said lawyers familiar with the case. The two sides are not close to reaching a plea deal, according to people familiar with the investigation.
Philip H. Hilder, a former federal prosecutor and Houston defense lawyer, said he doubted the government would entertain a plea deal with Fastow before first indicting him.
“The government wants to make an example out of him,” said Hilder, who represents Sherron Watkins, an Enron vice president who last fall warned leaders of the Houston energy trader about potential accounting problems.
“This represents a piece of the jigsaw puzzle,” Hilder said. “There will be other pieces. We’re not there yet.”