Andrew Fastow, left, former CFO of Enron Corp., and his attorney, John Keker, arrive at FBI headquarters Oct. 2 in Houston. A criminal complaint charges that Fastow and others created a scheme to defraud Enron and its shareholders, making the company look more profitable than it was. (AP photo / October 2, 2002) |
HOUSTON—
Andrew S. Fastow, the Enron Corp. executive who masterminded the financial schemes that brought down the company, was charged Wednesday with inflating the energy giantÂ’s profits and siphoning off millions for himself, his family and friends.The former chief financial officer is the biggest Enron figure targeted by the U.S. Justice Department so far.
Prosecutors may use him to build a case against other insiders, including former Enron chief executive Jeffrey Skilling and former chairman Kenneth Lay.
Fastow, 40, surrendered to the FBI and was led away in handcuffs. He was charged with mail fraud, money laundering and conspiracy.
Under a deal with his lawyers, prosecutors recommended his release on $5 million bond.
Prosecutors said Fastow executed "clandestine transactions" through a web of off-the-books partnerships to hide $1 billion in Enron debt.
"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 said in Washington.
The government described a conspiracy that lasted from 1997 to mid-2001. But except for Michael J. Kopper, a once-trusted Fastow aide who has pleaded guilty to conspiracy, the governmentÂ’s criminal complaint does not identify other participants.
FastowÂ’s attorney, John Keker, said his client was just following orders.
"Enron hired Andy to arrange off-balance sheet financing," Keker said outside the courthouse. "EnronÂ’s board of directors, its CEO and its chairman directed and praised his work. Accountants and lawyers reviewed and approved his work.
"He never believed he was committing any crime," Keker said.
The maximum penalties for the charges against Fastow include 20 years in prison for money laundering, 10 years for securities fraud and five years each on the mail fraud and conspiracy charges.
EnronÂ’s collapse last year was the first among several corporate scandals to rattle investorsÂ’ confidence and the stock market.
Millions of investors lost money, and thousands of current and former Enron employees lost most of their retirement savings.
The Securities and Exchange Commission has filed related civil charges against Fastow, accusing him of defrauding investors and violating securities laws. The SEC is seeking unspecified penalties.
Fastow, who invoked the Fifth Amendment and refused to testify before Congress early this year, reaped an estimated $30 million from the byzantine web of partnerships he set up, prosecutors said.
The government says Fastow used the partnerships to enrich himself and others. The transactions became known within Enron as "Friends of Enron" deals because the supposedly independent investors in the partnerships actually were friends or relatives of Enron executives.
According to prosecutors, FastowÂ’s family foundation pocketed $4.5 million in one transaction.
The Justice Department moved to freeze $11 million of FastowÂ’s assets. EnronÂ’s creditors, meanwhile, plan to sue Fastow and nine other former Enron officers, directors and employees for fraud and other alleged misdeeds.
After EnronÂ’s collapse, its auditor, Arthur Andersen, was found guilty of obstructing justice for destroying documents related to its audit of the company. David Duncan, AndersenÂ’s senior auditor on the Enron account, pleaded guilty to obstruction and is awaiting sentencing.
Congress held its own inquiry and ultimately passed the most sweeping changes in corporate accountability since the Depression.
The measure created stiff penalties and jail terms for company fraud and tightened oversight of the accounting industry.
Associated Press writer Marcy Gordon in Washington contributed to this report.
