Judge Agrees to Accept Plea Deal for Ex-Enron Figure's Wife
The New York Times
January 8, 2004
By KENNETH N. GILPIN
A federal judge in Houston agreed this afternoon to accept
a plea from the wife of Andrew S. Fastow, the former chief financial officer of Enron,
in a move that could lead to Mr. Fastow's pleading guilty to fraud charges in Enron's collapse.
Judge David Hittner's decision is expected to unlock what could have
been a legal logjam, and pave the way for federal prosecutors to not only
reach a plea agreement with Mr. Fastow, but also to indict and arraign
Richard A. Causey, Enron's former chief accountant.
Mr. Fastow's wife, Lea, has until Friday to enter the guilty plea,
and there is still a chance that she could back down. Bloomberg News reported
this afternoon that Mrs. Fastow's lawyers raised questions about a plea
after the judge said he would sign off on it only if he had the discretion to
impose a tougher sentence later.
Mrs. Fastow had been scheduled to go on trial Feb. 10.
She faced six criminal counts. Under the terms of the plea, she would admit to one count of
filing a false tax return and agree to serve five months in jail.
Mrs. Fastow had come close to negotiating a plea agreement
with prosecutors late last fall. But out of concern for their two children, she and her
husband were fearful of serving concurrent prison terms.
Without Mrs. Fastow's plea agreement, it seemed unlikely that Mr. Fastow, whose trial is
scheduled to start in April, would have agreed to making a deal with prosecutors.
It was unclear when Mr. Fastow, who faces nearly 100 criminal charges,
would enter his plea agreement.
Plea negotiations had hit a stumbling block on Wednesday,
when Judge Hittner rejected the initial deal that prosecutors had struck with Lea
Fastow because it left him with no ability to increase the sentence
above an agreed-upon term of five months.
Earlier today, Judge Hittner acted as though Mrs. Fastow's trial
was going to proceed. At a hearing this morning, the judge handed out a 36-page
question survey to 250 prospective jurors to help determine if they
are suitable to sit as jurors in Mrs. Fastow's case. The juror questionnaire is
aimed at gauging attitudes about Enron, taxes, the Fastows and other matters.
The deal with Mr. Fastow - which would result in a prison sentence
of at least 10 years, according to people involved in the case, hinged in part
on a resolution of the criminal case against his wife.
Mr. Fastow - who was charged with using off-the-books partnerships
to enrich himself and disguise Enron's financial troubles - has been a
central figure in virtually every criminal case brought in the
investigation, even those in which he was not a defendant.
Those other cases are almost sure to feature Mr. Fastow as
a primary government witness, including one against executives
from Merrill Lynch & Company who were charged with aiding
Enron in illegally puffing up its reported profits through
a bogus sale of an electrical barge.
The plea by Mr. Fastow and the expected charges against
Mr. Causey take prosecutors to the upper reaches of Enron's management, involving
executives who were in frequent contact with the company's
two former chief executives, Jeffrey K. Skilling and Kenneth L. Lay.
Former Enron executives and others involved in the investigation
said that prosecutors had pressed defendants and potential defendants -
including Mr. Fastow and Mr. Causey - to provide information
implicating either Mr. Skilling or Mr. Lay in criminal activity. As part of his
cooperation with the government, Mr. Fastow was said to have
already provided information about Mr. Skilling, whom he worked with for almost a
decade, but there was no indication yesterday whether those details
would merit or sustain criminal charges.
The plea negotiations have been driven by Mr. Fastow, who was indicted
more than a year ago on 98 counts of fraud and conspiracy, a person close
to the case said. The deal entails certain perils for Mr. Fastow,
including the possibility of serving additional time if the government concluded he
failed to cooperate fully in its investigation, people involved in the case said.
Indeed, these people said that Mr. Keker, Mr. Fastow's lawyer, was
"heartsick" about the stringent terms of the deal.
The inquiry into possible wrongdoing at Enron has been enormously
complex, often because the issues involved came down to questions of whether
investigators were examining bad business decisions or a knowing effort
to commit crime. The case against Mr. Fastow has always been the most
significant in that regard because the accusations involved much more clear-cut criminal activity.
As a result, Mr. Fastow - who was implicated in wrongdoing by a onetime
friend and subordinate, Michael Kopper - has long been viewed as an
avenue for prosecutors into the final stages of the Enron investigation.
Given the strength of the case against Mr. Fastow and his wife, prosecutors
had more leverage over him than over any other senior Enron executive.
In the end, he was viewed as the man most likely to succumb to pressure
to reveal everything he saw in the company's executive suites.
The criminal charges against Mr. Fastow, which included fraud,
money laundering and conspiracy, portray Enron as a company where fraud and
deceit were the workaday mechanisms used to hide the fact that
the corporation was secretly spinning out of control. Ultimately, Mr. Fastow is
depicted in the charges as a facilitator who manipulated
accounting and financial techniques to allow Enron to disguise
its many business failings
while enriching himself at the company's expense.
As portrayed in his indictment, Mr. Fastow entered into
two kinds of illegal conspiracies: schemes in which he defrauded the marketplace by
disguising Enron's true financial performance and schemes in which
he defrauded Enron itself by siphoning money into his own pockets. The
crimes were vast and complex, with the proceeds from one illegal
transaction at times being used to help finance the next.
The government charged that he backdated documents
to manipulate the company's financial statements and drained millions of dollars that
rightfully belonged to Enron and a bank that invested with it.
To obtain illicit kickbacks, the charges said, Mr. Fastow instructed a colleague to
write $10,000 checks to his wife and children, an amount deliberately
chosen to avoid incurring federal gift taxes. Some of those transactions
played the central role in the indictment against Lea Fastow.
The original criminal complaint specifically cited the company's
chief accounting officer - who, while not identified, was Mr. Causey - as entering
into an illegal agreement with Mr. Fastow. Under that agreement,
the company agreed to shield a partnership controlled by Mr. Fastow from losses
in its dealings with Enron, the complaint said. Such a deal would
allow Enron to sell poorly performing assets to Mr. Fastow's partnership and
report earnings from that transaction, even though the company
continued to bear the risk of any losses.
Kurt Eichenwald contributed to this report.
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