The Justice Department expanded its prosecution of Enron Corp. on Thursday, filing dozens of new charges against the failed energy giant’s onetime financial wizard Andrew Fastow while also indicting his wife and top executives of the company’s Internet division.
Fastow, Enron’s former chief financial officer and chief architect of the complex accounting schemes that led to the company’s sudden collapse, now faces 109 criminal counts on charges ranging from tax and securities fraud to money laundering and insider trading. Fastow’s wife, Lea, former assistant treasurer at Enron, was charged in a six-count indictment alleging conspiracy to commit wire fraud, money-laundering conspiracy and tax evasion.
Andrew Fastow drove his wife to the Houston office of the Internal Revenue Service early Thursday morning, and the couple embraced before she turned herself in to waiting federal authorities. She emerged a short time later in handcuffs on her way to court. Andrew and Lea Fastow have pleaded innocent.
Nineteen people have now been charged in connection with the unraveling of Enron, the once high-flying Wall Street darling that filed for bankruptcy in December 2001 amid charges of accounting tricks and inflated profits. The company’s shares plummeted, wiping out millions of dollars in pensions for employees.
The Enron debacle was the first of a wave of corporate scandals at top companies and helped cool the then-hot stock market.
“Today’s indictments are a significant milestone in our determined efforts to expose and punish the vast array of criminal conduct related to the collapse of Enron,” Deputy Attorney General Larry Thompson said at a news conference Thursday in Washington.
Fastow was charged in a 78-count indictment in October. The superseding indictment Thursday adds 31 additional counts and also charges Enron’s ex-corporate treasurer Ben Glisan and finance executive Dan Boyle with securities fraud and insider trading.
The 218-count indictment handed down by a grand jury in Houston broadens the government’s probe to target Enron’s Internet division, Enron Broadband Services.
The indictment alleges that executives at the broadband division painted it as a runaway success through press releases and other statements when it never even got beyond the development stage or generated any significant revenue. Enron abandoned the venture in mid-2001.
Once promoted as the company’s next hot property, the division had set out to break ground by doing such things as selling first-run movies over the Internet.
The former executives of the broadband division charged Thursday with insider trading and wire and securities fraud are Chairman Kenneth Rice, President Joseph Hirko, Chief Operating Officer Kevin Hannon and senior vice presidents Scott Yeager and Rex Shelby.
The Securities and Exchange Commission also charged the five on Thursday with securities fraud and reaping more than $150 million in illegal profits.
Linda Thomsen, the SEC’s deputy director of enforcement, called the broadband division’s boasts of success “a fairy tale.”
The charges against Lea Fastow allege that in 1997 she conspired with her husband to reap profits from Enron’s wind farms while allowing Enron to fraudulently receive government benefits. They also received kickbacks from an Enron shell company and filed false income tax returns, the indictment charges.
One person who has not yet been charged is Enron’s former Chief Executive Officer Kenneth Lay, a close friend and supporter of President Bush.
Thompson said Thursday that the criminal probe of the company’s multibillion-dollar collapse was continuing.
In its heyday Enron’s political action committee and Lay donated large sums of money to lawmakers in Washington. In a sign of how widespread their influence was, Attorney General John Ashcroft has recused himself from the investigation, having accepted Enron-related contributions as a U.S. Senator.