Andrew Fastow, the former Enron chief financial officer at the centre of the investigation into the company’s collapse, is expected to turn himself in to federal authorities on Wednesday and be charged with fraud for his role in the scandal.
Lawyers familiar with the case said Mr Fastow had arranged to surrender to the Federal Bureau of Investigation office in Houston. He is then expected to face a criminal complaint, rather than an indictment, charging him with multiple counts of looting the company and setting up partnerships that led to Enron’s collapse.
The New York Times reported yesterday that Mr Fastow might face charges that he secured an agreement with others at Enron that one of the key partnerships he set up, called LJM2, would never lose money. If true, the accusation could greatly expand the Justice Department’s inquiry into the company, particularly regarding Jeffrey Skilling, the company’s former chief executive.
Sherron Watkins, the Enron whistleblower, wrote in her then-anonymous letter to Kenneth Lay, the former chief executive, that several Enron employees were told by Mr Fastow there was a “handshake agreement” with Mr Skilling that “LJM will never lose money”.
Michael Kopper, the Fastow protÃ©gÃ© who has already pleaded guilty to his role in running many of the partnerships, may have given the Justice Department information on the agreement. A spokesman for Mr Skilling did not return calls seeking comment.
The Justice Department’s decision to file a criminal complaint against Mr Fastow rather than seek an indictment, a practice that has become common in recent corporate crime investigations, keeps open the possibility that prosecutors could seek to reach a settlement deal with Mr Fastow.
Up until now, government investigators have had difficulties gathering any evidence of wrongdoing by Mr Skilling, who claimed in testimony before congressional committees he knew nothing of Mr Fastow’s questionable dealings at the partnerships.
It is uncertain whether Mr Kopper’s co-operation has brought prosecutors any closer to Mr Lay, who said he did not know who Mr Kopper was until the scandal became public.
Prosecutors have in recent months asked Mr Lay’s lawyers and accountants about his stock sales, indicating they have shifted their investigation into possible insider trading rather than Mr Lay’s role in the accounting fraud that brought the company down.
Mr Fastow is expected to be charged with looting Enron and its investors through a partnership called Southampton, and with accepting kickbacks from Mr Kopper, who was running a separate partnership called Chewco.
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