Pile Of Enron Indictments Handed Down
HOUSTON, May 1, 2003
(CBS) Federal prosecutors, broadening their probe into the collapse of energy trading giant Enron Corp., slapped former chief financial officer Andrew Fastow with 31 more charges Thursday while indicting his wife and nine other former executives on multiple counts of fraud, insider trading and other charges.
Lea Fastow, 41, and six ex-Enron officials surrendered to federal authorities in Houston just after daybreak, then were taken in handcuffs to court. A seventh executive was to turn himself in later. Andrew Fastow and two others named Thursday had been charged in an earlier indictment.
Fastow's wife is a former assistant treasurer at Enron, which imploded into bankruptcy in late 2001, costing thousands of people their jobs and erasing the savings of thousands more who invested in its high-flying stock that quickly plunged to become worthless amid a Byzantine series of questionable financial transactions.
Prosecutors filed a superseding indictment that expanded the 78-count indictment against Andrew Fastow Oct. 31 to 109 counts to include charges of securities fraud, insider trading, falsification of accounting records and tax fraud. It also names former Enron treasurer Ben Glisan Jr. and former finance executive Dan Boyle.
A second indictment, listing 218 counts, expanded charges already filed against former Enron Broadband Services executives Kevin Howard and Michael Krautz to include that unit's chairman and co-chief executive Kenneth Rice, former president and co-chief executive Joseph Hirko, former chief operating officer Kevin Hannon, and former senior vice presidents Scott Yeager and Rex Shelby. They are charged with securities fraud, wire fraud, money laundering, insider trading, keeping false books and records, submitting false tax forms, obstruction of justice and conspiracy.
The indictments allege Rice, Hirko, Hannon, Yeager and Shelby sold large amounts of Enron stock while they knew the broadband unit was failing, bringing themselves some $186 million in profits. The government is seeking forfeiture of more than $100 million of those profits.
Prosecutors contend Enron Broadband Services never generated any revenue and was abandoned by Enron shortly before the company filed for bankruptcy in December 2001.
The charge against Lea Fastow individually includes six counts alleging conspiracy to commit wire fraud, money laundering, aiding and abetting and filing false tax returns.
"There are many people at Enron and other institutions, including Merrill Lynch, who are responsible for reducing the seventh-largest corporation in America to rubble," Enron Task Force prosecutor Andrew Weissmann said.
Federal attorneys were picking through that rubble "piece by piece, scheme by scheme and lie by lie," he added.
Securities regulators have charged four former senior Merrill Lynch executives, who dispute the allegations, with helping Enron inflate profit and mislead investors with two complex transactions. The Securities and Exchange Commission also has approved a settlement in which Merrill will pay $80 million to resolve the case while neither admitting nor denying any wrongdoing.
In court Thursday, Rice, Hirko, Hannon, Boyle, Glison, Yeager and Lea Fastow all entered innocent pleas before U.S. Magistrate Marcia Crone. Bond for Rice and Hirko was set at $3 million each. Bond for Hannon and Yeager was set at $1 million, while bond for Gilson and Lea Fastow was set at $500,000 and bond for Boyle was set at $250,000.
All were posting bond.
Shelby had a family emergency and was being allowed to surrender later.
"Lea Fastow is innocent," her lawyer, Nanci Clarence, told reporters. "Mrs. Fastow has done nothing wrong, and she had nothing to do with the fall of Enron. Mrs. Fastow is being charged in order to put pressure on her husband of 18 years, Andy Fastow.
"These tactics are unfair and unjust."
Fastow was accompanied by Clarence as she walked into an Internal Revenue Service office in Houston. Andrew Fastow and his lawyer had driven the women to the office where Fastow hugged his wife, then left for the federal courthouse at the other side of downtown Houston to rejoin her later.
Andrew Fastow is free on $5 million bond. A status hearing in his case is scheduled for May 19.
The six others who surrendered Thursday showed up individually at an FBI office before they were taken by federal authorities to the courthouse.
Boyle, accompanied by an attorney, drove up in a silver Porsche.
"Prosecuting this guy is like prosecuting the piano player in a whorehouse," his lawyer, Bill Rosch, said.
Rice came by pickup truck with two lawyers. Hirko was accompanied by three men. Yeager walked in alone, carrying a cup of coffee. Glisan had three attorneys and Hannon had one.
Rice, known at Enron for his love of fast, expensive cars, quit the company months before it went bankrupt in 2001 after selling $1.2 million shares of company stock for more than $76 million. He served as CEO of Enron's trading unit, then called Enron Capital and Trade, from June 1996-June 1999 when he took the helm of the heavily touted broadband unit that never earned the millions in profits Enron claimed it did.
"Mr. Rice has entered pleas of not guilty without hesistation," Bill Dolan, Rice's lawyer, said. "We have very little to say at this point. We are looking at the indictment."
Hirko was chairman and CEO of Enron Broadband before Rice. He left Enron in 2000 and is alleged to have sold 473,837 shares for $35.1 million from June 1996 to November 2001.
Hannon, operating officer at Enron Broadband, quit Enron in August 2001. Previously he was president of Enron's trading and commodities business. He is named in lawsuits alleging he profited from the sale of millions of dollars worth of stock.
Glisan became Enron treasurer in March 2000 and earned $1 million in May 2000 two months after a $5,826 investment in Fastow's Southampton Place partnership. He was fired from Enron in November 2001 and prosecutors have frozen $916,137 in a bank account in his name.
Howard and Krautz were indicted March 26 for allegedly using accounting tricks to generate $111 million in fake earnings from the unit's failed Internet movie-on-demand service.
Prosecutors allege the men secretly promised investors they would make money off the highly publicized deal with Dallas-based Blockbuster Inc., and concealed those pledges from Enron's accountant, Arthur Andersen LLP.
Enron's stock rose sharply after executives, including former Enron CEO Jeffrey Skilling, promoted the venture. Shares reached a high of $90 in August 2000, and Enron was No. 7 on the Fortune 500 that year.
Skilling has not been charged with any crime, and he consistently has said he did nothing improper at Enron. He quit the company in August 2001, more than three months before the company failed, citing personal reasons.
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