Prosecutors with the Department of Justice ‘s Enron Task Force filed an indictment Thursday charging former Enron Corp. Chief Financial Officer Andrew Fastow with fraud and other criminal charges.
U.S. attorneys had filed a criminal complaint against Mr. Fastow on Oct. 2, alleging securities fraud, wire fraud and money laundering. Prosecutors said Mr. Fastow set up and ran off-balance-sheet entities that he used to hide Enron debt and losses while enriching himself.
A collapse of investor confidence triggered by disclosures of hidden debt and losses led Enron in December to file what was then the largest-ever Chapter 11 bankruptcy. The company’s collapse cost investors billions and thousands of employees their jobs, and kicked off a wave of accounting scandals that has shaken confidence in U.S. corporations.
Mr. Fastow’s lawyer said when the complaint was filed that the former CFO never did anything he thought was a crime, that senior executives at the energy company guided and encouraged Mr. Fastow’s efforts to set up off-balance-sheet financing, and the company’s lawyers and accountants reviewed and approved the former CFO’s work.
Prosecutors had 30 days from the complaint in which to secure an indictment from a grand jury.
Mr. Fastow will face arraignment on the charges Nov. 6.
Prosecutors added an obstruction of justice charge against Mr. Fastow, a charge not included in the original complaint.
The indictment spans 78 counts, including wire fraud, money laundering, conspiracy, aiding and abetting and the obstruction charge.
The indictment alleges that Mr. Fastow corruptly persuaded fellow Enron executive Michael Kopper to withhold, alter, destroy and conceal objects from official proceedings, namely laptop and desktop computers and the information within.
Mr. Kopper agreed last month to testify for the government, pleading guilty to fraud and conspiracy charges.
Andrew Weissmann, deputy director of the Enron Task Force, alluded that the indictment would add to the possible sentence Mr. Fastow faces if convicted, but didn’t have exact figures. “When you look at the indictment, it’s a very different form and format from the criminal complaint,” he noted in a very brief statement to reporters.
Mr. Weissmann also alluded that the added charges and detail could prompt Mr. Fastow to cooperate with government investigators. “Do the math,” he said. “He’s facing significant jail time.”
Mr. Fastow’s attorney, John W. Keker, issued a statement denying his client’s guilt to the allegations. “These charges are full of sound and fury, but the truth about Enron has yet to be told,” said Mr. Keker. “When that truth is told to a jury of 12 honest Americans, Andy Fastow will be set free.”
Thursday’s indictment details at great length payments, faxes, e-mails and other transactions dealing with special-purpose entities, including RADR, Southampton and Chewco. The documents also details the sale of power-generating barges off the Nigerian shore to a Fastow-controlled entity when Enron was unable to sell the failed business venture to any other third party.
Prosecutors allege Mr. Fastow made false representations to Enron’s board of directors, used LJM and other offshore entities to manipulate the energy company’s financial statements and manipulated Enron’s books through hedging transactions and backdating.
The indictment refers to “schemes to defraud Enron and its shareholders,” with the purpose of making Enron appear more successful, manipulate the company’s stock price, circumvent federal regulations and personally enrich Mr. Fastow and others. The schemes, the indictment said, were also to give “the illusion of business skill and success on the part of Fastow and other Enron senior management.”