Enron’s Ex-CFO Masterminded Schemes. Enron Corp.’s former chief financial officer, Andrew Fastow, who allegedly masterminded schemes to hide $1 billion in debt while reaping $30 million in shadowy profits for himself, yesterday became the highest-ranking Enron executive to face charges in the collapse of the energy-trading giant.
Led in handcuffs by FBI agents from the bureau’s Houston offices to a court appearance, Fastow was released on a $5 million bail after facing criminal complaints charging him with securities, mail, and wire fraud, conspiracy, and money laundering that could send him to prison for 40 years.
Federal prosectors are expected to press Fastow for information that would help them to indict former Enron chairman Kenneth Lay and chief executive Jeffrey Skilling.
”Fastow and his coconspirators systematically and thoroughly corrupted the business of one of the largest corporations in the world,” deputy US attorney general Larry Thompson said in Washington. ”We aim to put the bad guys in prison and take away their money. We will continue to use all legal weapons at our disposal to combat corporate fraud.”
The federal charges outline a complex conspiracy that allegedly ran from 1997 through the middle of last year. It was said to include ”clandestine transactions” with Enron-created partnerships to hide $1 billion in debt and bolster Enron’s earnings, stock, and credit rating.
Fastow and others allegedly took a generous cut from the partnership payments.
In some cases, Enron directors approved the deals based on ”false representations” by Fastow and other top Enron executives, prosecutors charged.
Lay and Skilling were the company’s top two officials at the time that most of the partnerships were approved. Fastow himself reaped $30 million from the partnership deals, including $4.5 million steered to a ”purported” family charitable foundation, prosecutors said.
The Justice Department said it is seeking to freeze $21 million worth of Fastow’s assets and seize $14 million in ”ill-gotten gains” that would be returned to Enron’s shareholders and creditors.
Prosecutors have 30 days to get a grand jury to turn the complaint into a formal indictment. Assistant US Attorney Andrew Weissman told reporters outside the courthouse that, if found guilty, Fastow could be sentenced to 140 years for the various crimes.
Fastow’s attorney, John Keker, spoke to reporters outside the courthouse yesterday.
”Enron hired Andy to arrange off-balance sheet financing,” he said. ”Enron’s board of directors, its CEO, and its chairman directed and praised his work. Accountants and lawyers reviewed and approved his work. He never believed he was committing any crime.”
Enron spokesman Mark Palmer said the company will ”continue to cooperate with all the investigations into the past.”
After restating $586 million in profits late last year, Enron filed for bankruptcy protection in December, triggering a series of events that left 5,500 employees out of work, their retirement plans worthless, and creditors seeking $50 billion.
Originally a natural gas pipeline company, Houston-based Enron grew into the seventh-largest company in the United States, with annual revenues of over $100 billion, by aggressively pushing into energy trading, telecommunications, and complex trading in financial instruments.
Fastow was freed on a $5 million bond that would be backed by $3 million in cash and five properties, including his home in Houston and a vacation retreat in Galveston, Texas. Fastow, a 1983 Tufts University graduate, has put up for sale for $4.2 million an 8,700-square-foot home he was building in Houston’s exclusive River Oaks section.
”If Andy Fastow does not want to become the Enron record-holder for the longest jail term, he will need to provide meaningful and substantial cooperation for a case against Skilling,” said Jacob Frenkel, a former Securities and Exchange Commission enforcement lawyer.
Several elements in the criminal complaint had emerged in late April, after Michael Kopper, a former close associate of Fastow at Enron, pleaded guilty to fraud charges. Fastow, who has become a witness for the government, gave evidence implicating Fastow in several alleged fraud and kickback schemes.
Among the Justice Department’s allegations:
Fastow pressured Merrill Lynch into financing Enron’s $28 million purchase of three barge-mounted electric generators docked off Nigeria through making an interest-free loan to Merrill, leading Enron to count $12 million in improper earnings. Merrill Lynch had no comment.
Fastow arranged for his wife, Lea, and his two small children to get yearly secret payments of $10,000 each in connection with a 1997 California wind farm development deal. Lea Fastow also received $54,000 for ”administrative work” she did for an Enron venture called Chewco, according to the Securities and Exchange Commission.
Another off-the-books Enron venture called LJM1, named for Lea Fastow and the two Fastow children, fraudulently received $4.5 million for ”a purported charitable foundation in the name of Fastow’s family.”
Fastow and others secretly invested in a partnership named Southampton and perpetrated a multimillion-dollar fraud on Enron and National Westminster Bank in Great Britain.
Need Legal Help Regarding Enron’s Ex-CFO?
The personal injury attorneys at Parker Waichman LLP offer free, no-obligation case evaluations. For more information, fill out our online contact form or call 1-800-YOURLAWYER (1-800-968-7529).
New York | Brooklyn | Queens | Long Island | New Jersey | Florida
Call us at: 1-800-YOURLAWYER (800-968-7529) | Schedule your free consultation
