Enron Criminal Charges In The Works

Prosecutors are expected to file criminal charges against Andrew Fastow, the alleged mastermind of the financial schemes that toppled Enron Corp.

Those charges, according to a source, could be filed as early as today.

Fastow, who was Enron's chief financial officer, is said to have devised the company's complex web of off-the-books partnerships used to hide some $1 billion in debt from shareholders and federal regulators. He is the most prominent company figure targeted so far by the Justice Department.

In August, a once-trusted Fastow aide, Michael Kopper, pleaded guilty to money laundering and conspiracy to commit wire fraud.

Kopper said in federal court in Houston that it was Fastow who provided loans for investments, received kickbacks or negotiated deals that benefited the partnerships rather than the big energy-trading company, now bankrupt.

A law enforcement source who says the criminal charges against Fastow are in the works did not specify the nature of the anticipated charges or whether they would take the form of a grand jury indictment or a Justice Department criminal complaint that would present some of the government's evidence against him.

If the goal is to get a defendant to cooperate, a criminal complaint is simpler and gives the defendant time to negotiate, said Thomas Ajamie, a securities lawyer in Houston. An indictment, on the other hand, may be viewed as more severe and defendants may abandon efforts to negotiate.

"A complaint is damaging, but traditionally it allows more opportunities for the parties to discuss the allegations and see if there's room to negotiate," Ajamie said.

Fastow's spokesman, Gordon Andrew, declined comment. The office of his attorney, John Keker, referred calls to Andrew.

Fastow, who invoked the Fifth Amendment and refused to testify before Congress early this year, reaped an estimated $30 million from the partnerships. He emerged as a central figure in the Enron scandal after the Houston-based company collapsed into bankruptcy last December.

Enron's stunning downfall, bringing the retirement savings of employees with it and wiping out the investments of pension funds and individuals nationwide, became the first in a series of big corporate accounting scandals that rattled investors' confidence and the stock market.

In his plea, Kopper admitted to creating partnerships designed to enrich himself, Fastow and others at Enron at the expense of the company and its shareholders.

Kopper's admissions focused on three partnership schemes that prosecutors allege Fastow designed to look like legitimate business deals. Kopper said friends, selected Enron employees and members of Fastow's family used loans from Fastow or Kopper to invest in the partnerships to make them appear independent of Enron.

Enron's board of directors approved the partnerships as well as a waiver from conflict-of-interest rules for Fastow.

The expected action against Fastow raises the question of what he might say about former Enron chief executive Jeffrey Skilling and former chairman Kenneth Lay if Fastow began cooperating with the government.

While publicly silent, Fastow has maintained through his spokesman that he acted with the full knowledge of Enron's top executives, its directors and its longtime auditor, Arthur Andersen LLP.

Andersen, one of the nation's biggest accounting firms, was convicted in June of obstruction of justice for shredding of Enron audit documents.

Former Enron insiders say it was Fastow's aggressive and inventive approach to structuring deals that appealed to Skilling.

Kopper said that he funneled some money from the partnerships back to Fastow and his family in addition to paying the investors.

The day after Kopper entered his plea, a federal judge froze more than $23 million in bank and brokerage accounts held by Fastow and his wife, Lea, his family foundation, his brother Peter, several former Enron employees and two holding companies. The Justice Department alleged that the accounts contain money from illegal Enron deals largely organized by Fastow and Kopper.

The prosecutors also are going after Fastow's newly built $2.6 million home in Houston's wealthiest neighborhood, River Oaks, where Skilling and Lay live.