The proposed sentence for Lea Fastow, rejected by U.S. District Judge David Hittner, was part of a larger plea deal involving her husband's criminal case.
"Based upon my consideration and full reading of the presentencing report, the court declines to voluntarily limit its role in the sentencing process," said Hittner, who wanted a sentence of between 10 and 16 months.
He gave Lea Fastow the option of withdrawing the agreement and after briefly consulting with her lawyer, Mike DeGeurin, she did.
"We do not want to go forward," DeGeurin told the judge.
Hittner then immediately set trial for June 2 in Brownsville.
Lea Fastow, a former assistant treasurer at Enron, pleaded guilty in January to filing a false tax form. Andrew Fastow pleaded guilty to two counts of conspiracy and admitted orchestrating schemes to make Enron appear financially healthy while enriching himself. She acknowledged helping him hide ill-gotten income from the government, including endorsing and depositing checks made out to their 4- and 8-year-old sons.
Both DeGeurin and prosecutors asked to make statements before Hittner made his decision but the judge cut them off.
"Don't get to the point, Judge, where you must prove something here," DeGeurin said.
"I'm not proving anything here," Hittner snapped back.
Prosecutor Linda Lacewell told Hittner her research had showed he must give a reason for denying an agreement.
"You say I have to give additional reasons? Show me? Give me your cases right now," Hittner told her.
Lacewell said she didn't have the cases with her because she never before had a judge reject a plea.
After setting the date for jury selection, Hittner adjourned and left the bench.
Based on presentencing guidelines, Lea Fastow could face 15 to 21 months in prison if convicted.
The Fastows' cooperation is considered critical to the federal task force that is investigating the multibillion dollar collapse of the energy company, reports Rob Milford of CBS radio affiliate KPRC.
The original indictment included six counts that had been reduced to one as part of the plea. Now that plea is rejected, it again is a six-count indictment — four counts of filing false tax returns and two counts of conspiracy, with one conspiracy to commit wire fraud and the other money laundering conspiracy.
"I am going to have to go back to the drawing board and think about this," DeGeurin told reporters outside the federal courthouse. "I am a bit embarrassed for everyone who was there who witness this...
"My personal feelings don't matter. I think that due process was in jeopardy by not allowing the thoughts of counsel to be expressed. He articulated that his reasoning was that he did not want to be bound by an agreement. The agreement to plead guilty and resolve all of these matters at once included an agreed sentence. It resolved a lot of matters. We had the opportunity under that agreement that if the judge does not accept it, we start over.
"I don't know what is going to happen," DeGeurin added.
Federal prosecutors have said that her husband's plea agreement would not be affected by any change in Lea Fastow's case, but it's believed Andrew's cooperation was predicated on her plea deal.
Andrew Fastow's attorneys, John Keker in San Francisco and David Gerger in Houston, did not immediately return phone messages left Wednesday by The Associated Press. Fastow spokesman Gordon Andrew also did not have an immediate response.
Prosecutors had supported the split sentence agreement, and Lea Fastow's lawyers did not ask that she receive less than five months in prison. Prosecutors noted in a court filing last week that nearly 60 percent of tax offenders received split sentences or probation in fiscal 2001.
Prosecutors say that Lea Fastow played an "integral role" in securing her husband's guilty plea and cooperation more than a year after he was indicted. The Fastows also relinquished nearly $24 million in cash and property to the government.
Andrew Fastow was indicted on 78 counts of fraud, money laundering and other charges in 2002. Prosecutors added another 20 counts, including tax crimes and insider trading, when a separate indictment charging his wife with two counts of conspiracy and four counts of filing false tax forms was unsealed in May.
The Fastows pleaded guilty before she was scheduled to go to trial on Feb. 10. His trial had been scheduled for April 20. His April 19 sentencing has been postponed to Oct. 25.