The former chief financial officer of Enron Corp. voluntarily surrendered to FBI agents on Wednesday as prosecutors were expected to file charges related to his role in the company’s collapse.
Andrew S. Fastow, 40, arrived at the FBI’s headquarters in Houston Wednesday morning in anticipation of an initial federal court appearance on charges related to partnerships credited with fueling Enron’s swift descent into bankruptcy last year.
Fastow, wearing a charcoal gray suit and red tie, showed up at Houston’s FBI headquarters accompanied by his attorney, John Keker. After Fastow turned himself in, Keker quickly left in the black Volvo Fastow arrived in.
The government is bringing criminal charges against Fastow, who is said to have devised the company’s complex web of off-the-books partnerships used to hide some $1 billion in debt from shareholders and federal regulators. The partnerships also inflated profits and earned him tens of millions of dollars either upfront or in kickbacks.
Fastow is the highest-level executive at Enron so far to surrender to authorities.
In August, a once-trusted Fastow aide, Michael Kopper, pleaded guilty to money laundering and conspiracy to commit wire fraud.
Kopper said in federal court in Houston that it was Fastow who provided loans for investments, received kickbacks or negotiated deals that benefited the partnerships rather than the big energy-trading company, now bankrupt.
A law enforcement source, speaking Tuesday only on condition of anonymity, said prosecutors were bringing criminal charges against Fastow as early as Wednesday. The source did not specify the nature of the anticipated charges or whether they would take the form of a grand jury indictment or a Justice Department criminal complaint that would present some of the government’s evidence against him.
The expected action against Fastow raises the question of what he might say about former Enron chief executive Jeffrey Skilling and former chairman Kenneth Lay if Fastow began cooperating with the government.
If the goal is to get a defendant to cooperate, a criminal complaint is simpler and gives the defendant time to negotiate, said Thomas Ajamie, a securities lawyer in Houston. An indictment, on the other hand, may be viewed as more severe and defendants may abandon efforts to negotiate.
“A complaint is damaging, but traditionally it allows more opportunities for the parties to discuss the allegations and see if there’s room to negotiate,” Ajamie said.
Fastow’s spokesman, Gordon Andrew, declined comment. The office of Keker, his attorney, referred calls to Andrew.
Fastow has remained silent since the company revealed a massive third-quarter loss and a $1.2 billion writedown of shareholder equity nearly a year ago caused by some of his partnerships backed by sinking Enron stock. Fastow was forced out of Enron a week after those revelations, ending his 11-year career there.
Fastow, who invoked the Fifth Amendment and refused to testify before Congress early this year, reaped an estimated $30 million from the partnerships. He emerged as a central figure in the Enron scandal after the Houston-based company, with ties to President Bush and members of his administration, collapsed into bankruptcy last December.
Enron’s stunning downfall, bringing the retirement savings of employees with it and wiping out the investments of pension funds and individuals nationwide, became the first in a series of big corporate accounting scandals that rattled investors’ confidence and the stock market.
While publicly silent, Fastow has maintained through his spokesman that he acted with the full knowledge of Enron’s top executives, its directors and its longtime auditor, Arthur Andersen LLP.
Andersen, one of the nation’s biggest accounting firms, was convicted in June of obstruction of justice for shredding of Enron audit documents.
The day after Kopper entered his plea, a federal judge froze more than $23 million in bank and brokerage accounts held by Fastow and his wife, Lea, his family foundation, his brother Peter, several former Enron employees and two holding companies. The Justice Department alleged that the accounts contain money from illegal Enron deals largely organized by Fastow and Kopper.
The prosecutors also are going after Fastow’s newly built $2.6 million home in Houston’s wealthiest neighborhood, River Oaks, where Skilling and Lay live.