New Charges Are Expected in Enron Case (Fastow's wife an accessory, wire fraud, tax allegations)

After more than a year of investigations into the collapse of Enron, the government will announce today the most significant indictments yet, charging eight new defendants with participating in frauds at the company, people involved in the case said yesterday.

The indictments, which these people said would be unsealed this morning in Federal District Court in Houston, will name a raft of officers and their associates as participants in different fraud schemes. These defendants include a former treasurer, a former head of one of Enron's most prominent divisions and the wife of the former chief financial officer, who himself is already facing criminal charges.

The new charges, filed earlier this week under seal, will be included in what are known as superseding indictments, which effectively supplement other charges already filed by adding new accusations or new defendants. In this case, charges superseding two indictments will name the eight new defendants, in addition to three already charged, people involved in the case said.

The first set of charges involve assertions of illegal activities in the company's finance division, headed by Andrew S. Fastow, the former chief financial officer and the architect of the byzantine partnerships that contributed significantly to Enron's collapse. Mr. Fastow was indicted in October on charges that he used the partnerships to enrich himself illegally and manipulate the company's income statements.

People involved in the case said that the superseding indictment would name Mr. Fastow's wife, Lea Weingarten Fastow, a member of a prominent Houston family who is a former Enron employee. In documents filed in the case against Mr. Fastow, his wife appeared to have played a role permitting him to disguise illegal payments he received from an associate, Michael Kopper. Mr. Kopper has already pleaded guilty to fraud and is cooperating with the government. Ms. Fastow's charges were said to involve wire fraud and possible tax accusations. A spokesman for the Fastows declined to comment on the possible indictments.

Another executive who people involved in the case said would be named in the Fastow indictment is Ben Glisan, who was handpicked by Mr. Fastow in 2000 to take on the crucial role of treasurer. About that same time, the government says, Mr. Fastow provided Mr. Glisan with the opportunity to invest in a risk-free deal called Southampton, which enabled him to transform a few thousand dollars into a million dollars in a matter of weeks. Lawyers for Mr. Glisan did not return a phone call seeking comment.

The last official to be named in the Fastow indictment, people involved in the case said, is a midlevel executive who helped to structure the financing for what the government asserts was a bogus sale by Enron of a group of Nigerian barges that it owned. People involved in the case said that among the evidence that the government found compelling against the executive were two e-mail messages to him from Mr. Glisan.

The second set of charges expected to be unsealed today will supersede an indictment brought in March against two executives in the company's broadband division, which was formed in the final years before Enron's bankruptcy.

Among those expected to be indicted in the new charges are Kenneth Rice, head of the division known as Enron Broadband Services, which the company heralded at the time as its means of profiting from the high-speed Internet business. A special Enron grand jury handed up the sealed broadband indictment on Tuesday, a development reported yesterday by The Houston Chronicle.

People involved in the case said that the new charges center largely on what the government thinks was false information about the prospects and capabilities of the broadband unit. In particular, the charges are said to focus on positive statements some of the executives made at an analyst conference in January 2000, which the government has already attacked in an indictment against two broadband executives, Kevin Howard and Michael Krautz.

In that indictment, the government asserted that "many of the representations made about Enron's network and software at the Jan. 20, 2000, analyst conference were false."

All of the other broadband executives to be named in the indictments to be unsealed today — including Joseph Hirko, Kevin Hannon, Rex Shelby and Scott Yeager — each had different roles in representing the potential and abilities of the growing business. Many of these executives did not work at Enron long, having either joined the company in the late 1990's after its acquisition of their former employer, Portland General, or joined after subsequent high-technology acquisitions.

The new charges will also spell out further details of the transaction that was at the heart of the original charges against Mr. Howard and Mr. Krautz, people involved in the case said. That complex transaction, known as Braveheart, permitted Enron to convert a joint venture it had with Blockbuster to provide video-on-demand services into $111 million in earnings through a sale that the government asserts was bogus.

Lawyers for the various executives either declined to comment or could not be reached. Most of the defendants have agreed to surrender early today before being brought to the federal courthouse in Houston for arraignment, people involved in the case said.

The charges raise some interesting issues. For example, while Mr. Hirko will be charged criminally with fraud, a federal judge last week dismissed him from the civil case against Enron executives, effectively asserting that there was insufficient evidence that he played a role in fraud. Moreover, Richard Causey, the former chief accounting officer who was specifically identified by title in the original Fastow charge as participating in crimes, will not be charged today.

........the superseding indictment would name Mr. Fastow's wife, Lea Weingarten Fastow, a member of a prominent Houston family who is a former Enron employee......... (she) appeared to have played a role permitting him to disguise illegal payments he received from an associate, Michael Kopper. Mr. Kopper has already pleaded guilty to fraud and is cooperating with the government. Ms. Fastow's charges were said to involve wire fraud and possible tax accusations. ......Another executive who people involved in the case said would be named in the Fastow indictment is Ben Glisan, who was handpicked by Mr. Fastow in 2000 to take on the crucial role of treasurer. About that same time, the government says, Mr. Fastow provided Mr. Glisan with the opportunity to invest in a risk-free deal called Southampton, which enabled him to transform a few thousand dollars into a million dollars in a matter of weeks. Lawyers for Mr. Glisan did not return a phone call seeking comment.

Finally nailed Fastow's hotshot wife's role in this. When is Fastow's brother gonna get nailed? His name appeared prominently in the Enron dirty dealings.

Lea Fastow and six of the former executives were taken to federal court in handcuffs after surrendering to authorities in Houston just after daybreak.

Rice, Hirko, Hannon and Yeager all entered innocent pleas in an appearance before U.S. Magistrate Marcia Crone. Bond for Rice and Hirko was set at $3 million each. Bond for Hannon and Yeager was set at $1 million. All were in the process of posting bond late Thursday morning.

Lea Fastow, Boyle and Glisan were scheduled to appear before Crone later in the day.

Fastow walked into the Internal Revenue Service office in Houston accompanied by her lawyer, Nanci Clarence. Her husband and his lawyer drove the women to the federal office, where Fastow hugged his wife, then drove away. He and his attorney later joined them at the courthouse.

At the same time, Rice, Hirko, Hannon, Boyle, Glisan and Yeaeger surrendered at an FBI office in Houston.

Enron's broadband venture, touted to analysts in 2000 as the company's next big moneymaker, fizzled in 2001 and laid off hundreds of workers about six months before the parent company went bankrupt.

Lea Fastow was paid $54,000 to administer one of the partnerships at the center of the Justice Department's investigation into Enron's 2001 collapse.

She and her husband, who was charged Oct. 31 with 78 counts of fraud, conspiracy, money laundering and obstruction of justice, met in college, got married, and 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 and their family foundation are on several bank accounts frozen by federal prosecutors before he was indicted initially as part of their investigation into ill-gotten gains from partnerships that lined their pockets while helping Enron hide debt and inflate profits.

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

The Houston Chronicle, citing unidentified sources, reported Lea Fastow could be tried separately from her husband.

Shelby did not appear in court because of a family emergency Thursday but was expected to turn himself in later.

On Wednesday, Crone received the charges from the foreman of the Enron grand jury and Enron Task Force prosecutor Andrew Weissmann, who is handling the case against Andrew Fastow. Crone excluded reporters from the hearing.

The six men who surrendered at an FBI office in Houston early Thursday all arrived separately.

Boyle, accompanied by an attorney, drove up in a silver Porsche.

"Prosecuting this guy is like prosecuting the piano player in a whorehouse," Boyle's lawyer, Bill Rosch, said.

Rice came by pickup truck with two lawyers. Hirko was accompanied by three men. Yeager walked in alone, carrying a cup of coffee. Glisan had three attorneys and Hannon had one.

Rice, known at Enron for his love of fast, expensive cars, quit the company months before it went bankrupt in 2001 after selling $1.2 million shares of company stock for more than $76 million. He served as CEO of Enron's trading unit, then called Enron Capital and Trade, from June 1996-June 1999 when he took the helm of the heavily touted broadband unit that never earned the millions in profits Enron claimed it did.

Hirko was chairman and CEO of Enron Broadband before Rice. He left Enron in 2000 and is alleged to have sold 473,837 shares for $35.1 million from June 1996 to November 2001.

Hannon, 42, operating officer at Enron Broadband, quit Enron in August 2001. Previously he was president of Enron's trading and commodities business. He is named in lawsuits that allege he profited from the sale of millions of dollars worth of stock.

Glisan became Enron treasurer in March 2000 and earned $1 million in May 2000 on a March 2000 $5,826 investment in Fastow's Southampton Place partnership. He was fired from Enron in November 2001 and prosecutors have frozen $916,137 in a bank account in his name.

The two other former broadband executives, Howard and Krautz, were indicted March 26 for allegedly using accounting tricks to generate $111 million in fake earnings from the unit's failed Internet movie-on-demand service.

Prosecutors allege the men secretly promised investors they would make money off the highly publicized deal with Dallas-based Blockbuster Inc., and concealed those pledges from Enron's accountant, Arthur Andersen LLP.

Howard and Krautz have pleaded innocent and are free on $500,000 bond. Each is charged with 18 counts of securities fraud, wire fraud, conspiracy and lying to the FBI.

Enron's stock rose sharply after executives, including former Enron CEO Jeffrey Skilling, talked up the venture. Shares reached a high of $90 in August 2000, and Enron was No. 7 on the Fortune 500 that year.

Skilling has not been charged with any crime, and he has consistently said he did nothing improper at Enron. He quit the company in August 2001, more than three months before the company failed, citing personal reasons.

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