Fastow's wife, 7 others target of Enron charges

After filing at least one sealed indictment Wednesday evening, prosecutors are expected this morning to announce charges against seven former Enron employees and Lea Fastow, the wife of the company's former chief financial officer.

All but one are expected to surrender to federal authorities this morning and will likely be paraded into the courthouse in handcuffs.

The former executives to be named today are expected to be Ken Rice and Joe Hirko, co-chief executive officers of Enron Broadband Services; Kevin Hannon, chief operating officer of EBS; F. Scott Yeager and Rex Shelby, EBS executives; Ben Glisan, Enron treasurer; Dan Boyle, vice president; and Fastow, who is married to former CFO Andrew Fastow and was a one-time assistant treasurer of Enron.

In an agreement with prosecutors, Shelby is not expected to turn himself in today because of a family emergency.

U.S. Magistrate Marcia Crone received a sealed indictment or indictments Wednesday from the foreman of the Enron grand jury and Enron Task Force prosecutor Andrew Weissmann, who is handling the case against Andrew Fastow. The judge excluded reporters from the hearing.

Andrew Fastow, indicted on 78 counts in October, was scheduled to be reindicted with others, probably Glisan and Boyle. The government is expected to try them together before U.S. District Judge Kenneth Hoyt.

Sources said Lea Fastow has also been charged or indicted, probably on a tax count and she could be tried separately from her husband. Defense lawyers are expected to criticize the charge as an attempt to strong-arm her husband to turn against his bosses, Jeffrey Skilling and Ken Lay.

On Tuesday, prosecutors filed a sealed indictment against five former Enron Broadband employees. Sources have previously indicated the charges would probably center on statements made at a meeting with stock analysts in 2000 and could include insider trading, stock fraud and money laundering.

The government may seek to try Broadband-related defendants with two other Broadband executives indicted earlier this year, Kevin Howard and Michael Krautz. That case would be tried by U.S. District Judge Vanessa Gilmore.

After trying one last time this week to persuade prosecutors not to charge their clients, defense attorneys have been sorting out the financial terms of bail that may run in the millions of dollars.

The government is expected to try to seize and seek forfeiture of the defendants' property, including cash, investments, and cars.

The charges filed under seal Wednesday likely relate to Enron's 1999 deal with Merrill Lynch to sell a portion of three floating power plants in Nigeria as well as a partnership called LJM that Andrew Fastow formed to do business with Enron.

Most of the Broadband charges will likely focus on the allegation that executives pumped up the business to outsiders then dumped their own shares when the stock price rose.

During the January 2000 meeting with analysts, Broadband executives made claims about the capabilities of Enron's fiber-optic data network that prosecutors contend were known to be false.

Proving it may be tough. In the late 1990s, dozens of technology companies were making grand claims about their products and services.

And just as the government could bring witnesses to testify about the shortcomings of Enron's technology, defense attorneys could call technology experts to testify about its strengths.

The transcripts of the meetings with analysts that prosecutors have focused on also have examples of Enron employees making conservative statements about the business, as well as bold. For example, they repeatedly talk about how it will be many years before the business became profitable, and at least once they noted that some of the software is still in development.

The most controversial defendant is likely to be Lea Fastow, 41, a member of the Weingarten family, which founded a supermarket chain that dominated the Houston grocery business for decades before being sold to a competitor in 1980.

Like her husband, Lea Fastow has a degree from Northwestern University's Kellogg School of Management. She worked at Continental Bank in Chicago and joined Enron in 1990. She left in 1997 after rising to assistant treasurer. She also helped Enron acquire a stunning art collection during its heyday.

In charges that drew a guilty plea from Andrew Fastow's former Enron assistant, Michael Kopper, prosecutors pointedly said that Lea Fastow had received $54,000 for administering one of the partnerships. Also, her name is on some of the accounts frozen by court order pending the outcome of the federal inquiry.

Before this week, 11 people and accounting firm Arthur Andersen had been criminally charged in Enron-related matters.

Project Braveheart was a sham from its inception: the transaction had no economic substance and was created solely for the purpose of generating income.

The Commission's Complaint alleges that defendants Howard and Krautz carried out the scheme by forming a purported joint venture, assigning the agreement to the joint venture, and selling an interest in the joint venture to a third party financial institution. The entity enlisted by defendants Howard and Krautz to form the joint venture was a partner in name only and was never intended to participate in the joint venture. The equity stake of this joint venture partner was not at risk because Enron guaranteed the entity a short-term take-out at a specified rate of return. The financial institution to which Enron sold a portion of its interest in the joint venture also did not have equity at risk as required, having been guaranteed against loss by Enron. As a result of Project Braveheart, Enron overstated its reported net income for the year 2000 by $53 million and for first quarter 2001 by $58 million.

Better known as the "Clinton economy" that Hillary, and her fellow democrats, keeps telling us was WONDERFUL. GAG!

Lea Fastow, 40, an MBA herself, can hardly claim to lack financial savvy. She worked at a Chicago bank with her husband before they came to Enron in 1990. She left Enron as an assistant treasurer in 1997. Lea Fastow later served as head of Enron's "art committee" which was given $20 million to spend on adorning the company buildings.

While the $54,000 Lea Fastow received from the Enron partnership is chump change compared to the tens of millions of dollars pocketed by her husband, it may offer federal prosecutors a way to pressure Fastow to plead. Such a plea agreement would spare hard-pressed prosecutors the task of actually figuring out Enron's complex financial schemes and explaining them to a jury.

The unfinished River Oaks mansion built by former Enron executive Andrew Fastow sold for $3.9 million to another energy company chief financial officer.

The 11,493-square-foot home was on the market for about $4.3 million.

Federal prosecutors claim Fastow built the home with laundered money, according to court documents, so the proceeds will be turned over to the U.S. Marshals Service until a judge rules on whether it was looted from Enron Corp.

The home is one of five properties included as equity for a bond that let Fastow go free. Prosecutors also froze $14 million in Fastow family bank accounts.

The three-story house has six fireplaces, Italian blue flagstone flooring, a state-of-the art security system, museum-quality lighting for artwork, a large outdoor pool with whirlpool, a screened summer house and an oversized three-car garage with living space above.

Former Enron Executive Boyle Surrenders

Thu May 1, 2003 08:24 AM ET

By C. Bryson Hull

HOUSTON (Reuters) - The first of eight former Enron Corp. executives expected to face the newest criminal charges in a sprawling probe of the bankrupt energy company surrendered to federal authorities on Thursday.

Dan Boyle, a former vice president of finance, turned himself in at the Houston FBI office. Boyle, dressed in a gray pin-striped suit, arrived in his lawyer before 6 a.m. and did not speak to reporters.

"Prosecuting this guy is like prosecuting the piano player in a whorehouse," Bill Rosch, Boyle's attorney, said after arriving with his client in a convertible Porsche.

Sources close to the case have said three Enron finance executives, including Lea Fastow, the wife of indicted former chief financial officer Andrew Fastow, were expected to be charged on Thursday.

Pile Of Enron Indictments Handed Down

HOUSTON, May 1, 2003

(CBS) Enron's former chief financial officer is facing 31 new charges in connection with the company's collapse. CBS News Radio reports a new indictment unsealed in Houston brings to more than 100 the number of charges against Andrew Fastow.

His wife and six former Enron execs have all surrendered to the IRS in Houston. Lea Fastow faces six counts, including money laundering conspiracy and filing false tax returns.

Mrs. Fastow, a former Enron assistant treasurer, walked into the Internal Revenue Service office in Houston early Thursday and surrendered. Her husband dropped her off.

Seven former executives with an Internet division called Enron Broadband Services also were charged in the new indictments. They are accused of orchestrating a scheme to mislead investors through a series of false statements that portrayed the venture as successful.

In fact, prosecutors contend, EBS never generated any revenue and was abandoned by Enron shortly before the company filed for bankruptcy in December 2001.

"Today's indictments are a significant milestone in our unabated efforts to expose and punish the vast array of criminal conduct related to the collapse of Enron Corporation," said Deputy Attorney General Larry Thompson, who heads the Justice Department's Corporate Fraud Task Force.

Houston-based Enron was formed in 1985 by a merger of two natural gas pipeline companies. Through the 1990s, Enron transformed itself into a massive energy-trading house that collapsed in 2001 in a whirlwind of revelations of hidden debt, inflated profits and accounting tricks.

Those named in the broadband services indictment are former EBS 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, and money laundering.

Two other EBS executives, Kevin Howard and Michael Krautz, had been charged previously and are named in new counts in Thursday's indictments.

The indictments allege that Rice, Hirko, Hannon, Yeager and Shelby sold large amounts of Enron stock while they knew EBS was failing, bringing themselves some $186 million in profits. The government is seeking forfeiture of more than $100 million of those profits.

The new Fastow indictment also brings charges of securities fraud, insider trading, falsification of accounting records and tax fraud against two other Enron executives, former treasurer Ben Glisan and former finance executive Dan Boyle.

Mrs. Fastow is charged with conspiring to reap profits from Enron wind farms in a partnership known as RADR and, along with her husband, failing to report income to the Internal Revenue Service.

The Fastows worked at a Chicago bank before joining Enron in 1990. She was assistant treasurer when she left the company in 1997.

Names of the Fastows and their family foundation are on several bank accounts frozen by federal prosecutors before Fastow was indicted Oct. 31.

Andrew Fastow is free on $5 million bond. A status hearing in his case is scheduled for May 19.

US charges 8 more in Enron, including ex-CFO's wife

Reuters, 05.01.03, 11:09 AM ET

WASHINGTON, May 1 (Reuters) - The U.S. Justice Department on Thursday announced new charges against former Enron Chief Financial Officer Andrew Fastow and for the first time accused his wife and seven other ex-Enron officials of fraud and other criminal violations in connection with the company's collapse.

A grand jury in Houston, Texas returned a 109-count superseding indictment charging Fastow, who was originally indicted in October on 78 counts, with fraud, insider trading and falsification of Enron's accounting records. The indictment also named former Enron corporate Treasurer Ben Glisan and former finance executive Dan Boyle.

The grand jury also returned a six-count indictment charging Fastow's wife, former Enron Assistant Treasurer Lea Fastow, with conspiracy to commit wire fraud, money laundering conspiracy and filing false tax returns.

In a 218-count superseding indictment, the grand jury expanded charges relating to Enron's failed Internet division, Enron Broadband Services. The new indictment charges five more former employees of the unit, together with two previously indicted former executives for various fraud and money laundering violations.

My first reaction was, this is great news. On reflection, I'd prefer to say this is necessary news -- necessary to preserve and protect our capitalist system. However, the Justice must complete its task and ensure that anyone convicted bear the maximum sentence as befits the ruin these people have caused innocent Enron employees and stockholders.

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