Enron's Fastow Faces Jail, Restitution
The former chief financial officer of Enron Corp. was charged Wednesday in connection with his role in the company's financial collapse.
The charges against Andrew S. Fastow, 40, include securities fraud, wire fraud, mail fraud, money laundering and conspiracy, reports CBS News Correspondent Stephanie Lambidakis.
The criminal complaint alleges Fastow and others devised a scheme to defraud Enron and its shareholders through off-the-books partnerships, which made the company look more profitable than it was.
"Fastow and his co-conspirators systematically and thoroughly corrupted the business of one of the largest corporations in the world," Deputy Attorney General Larry Thompson told a Washington news conference.
"I can tell you that we're going to get to the bottom of what happened at Enron and every single person who has engaged in criminal or any other inappropriate conduct will be brought to justice," Thompson added.
Fastow surrendered voluntarily the FBI's headquarters in Houston Wednesday morning.
Also Wednesday, the Securities and Exchange Commission filed a related civil lawsuit against Fastow alleging that he defrauded investors and violated securities laws. The SEC is seeking unspecified civil money penalties against Fastow and repayment of his allegedly ill-gotten gains.
Fastow, according to his chief lieutenant, and now chief accuser, Michael Kopper, was behind the secret partnerships that made insiders millions while leading Enron swiftly into bankruptcy. Kopper pled guilty in August.
Even before bringing charges, the Justice Department moved to seize millions of dollars of his money and property, a tactic usually employed against drug gangs.
"Our strategy is really straight-forward. We aim to put the bad guys in prison and take away their money," Thomnpson said.
"The penalties included 20 years for money laundering, securities fraud, which is alleged in the complaint is 10 years, wire fraud, mail fraud are each five years, conspiracy is five years, so depending on how many charges the grand jury eventually brings, you have to add those numbers together," said Michael Chertoff, head of the Justice Department's Criminal Division. It's a lot of time."
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.
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.
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 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.
"Today's complaint demonstrates the effectiveness of a swift, coordinated law enforcement response to even the most sophisticated financial crimes," said Thompson.