Robert Fastow, Enron’s former CFO and acknowledged architect of the company’s financial house of cards, is going to jail … and he is not the only Fastow to see life behind bars. His wife, Lea (a former Enron assistant treasurer), also pleaded guilty to one count of filing a false tax return.
The Federal prosecutors are understandably pleased that they have managed to land the first big fish in the Enron scandal. The fact that the Fastows accepted the jail terms in exchange for plea bargains gives the prosecutors confidence that the two remaining big fish, former chairman Kenneth Lay and former chief executive Jeff Skilling, will soon be in the net.
“This is very significant to the Enron Task Force because whatever Andrew Fastow knows about what went on on the 50th floor, the Enron Task Force will now know as well,” said Leslie Caldwell, the head of the Justice Department unit investigating Enron’s downfall.
Caldwell’s views are shared by former federal prosecutor Robert Mintz.
“Unquestionably, this is the breakthrough that the government has been pursuing. There is nobody besides Fastow who can make this case for the government and that’s why they have been pursuing him for so long and so aggressively,” said Mintz.
“What you can read into this plea is a belief on the part of the government that Andrew Fastow will shed light into the darkest corners of the Enron scandal and hand up to them at least Jeff Skilling and possibly Ken Lay. The chief financial officer is generally the most critical player in a financial scandal. He is essentially in the catbird seat and should know where the bodies are buried,” added Mintz.
Under the terms of the settlement, Fastow will serve a decade in prison with a further three years on probation. He has also been barred – for life – by the US Securities and Exchange Commission from ever working as an officer or director of a public company. His wife Lea should get a five-month prison term followed by five months of home detention but this is barring any irregularities that court appointed investigators should find. If any glitches appear in her record, she could be imprisoned for 16 months.
And to make sure that he behaves himself, Fastow could still face the remaining 96 counts that will apply if the prosecutors determine that Fastow has not been a very, very good boy. And, lately, America’s newest corporate jailbird is singing a tune that the prosecutors consider music to their ears.
In a press conference used to announce the success of the plea government, Fastow said, “I and other members of Enron senior management fraudulently manipulated Enron’s publicly reported financial results. I also engaged in schemes to enrich myself and others at the expense of Enron’s shareholders and in violation of my duty of honest services to those shareholders.”
For now, though, Fastow remains free on a US$5 million bond while he assists prosecutors. Both Andrew and his wife Lea will be sentenced later this year and have agreed to forfeit around US$29 million, which include property in Galveston and Vermont, and cash in brokerage accounts, to resolve Justice Department and Securities and Exchange Commission charges.
