Posted on: Monday, April 12, 2004
Case in limbo for Enron executive's wife
By Kristen Hays
Associated Press
HOUSTON — Among those accused of fueling Enron Corp.'s doom, Lea Fastow isn't a prominent figure.
After all, she didn't create any of the shaky accounting schemes that crashed when they could no longer prop up the scandal-choked company's appearance of success. And she appeared to be headed for one of the shortest sentences of those charged.
But the focus shifted to the wife of former Enron Corp. finance chief Andrew Fastow last week after a federal judge rejected her plea deal calling for five months in prison and five months of home confinement on a single tax charge for not reporting income. Now the question is, will she really go to trial?
Jury selection was scheduled for June 2 after Lea Fastow withdrew her public admission of guilt in helping hide thousands of dollars in ill-gotten gains from the schemes her husband masterminded. The trial would pit her against the same prosecutors relying on Andrew Fastow's cooperation in pending cases against former Enron CEO Jeffrey Skilling and former top accountant Richard Causey.
"They have to try a case against the wife of their chief cooperator," said Mark S. Arisohn, a white-collar defense attorney in New York. "If I were the prosecutors, I'd find a way to drop the case against her."
That's an option for the Justice Department. Prosecutors also could drop the current six felony counts of conspiracy and filing false tax forms and charge Lea Fastow with a misdemeanor, which would limit U.S. District Judge David Hittner to a sentence of no more than a year in prison, said Christopher Bebel, a former federal prosecutor now in private practice in Houston. Hittner said he wanted to consider the full sentencing range of 10 to 16 months and not be locked into the split 10-month sentence under the plea agreement.
The Justice Department declined to comment beyond saying prosecutors were preparing for trial.
Lea Fastow's lead lawyer, Mike DeGeurin, declined to comment on his plans.
Andrew Fastow was indicted on 78 counts of fraud, money laundering and other charges in October 2002. The Justice Department added 28 more counts, including insider trading and filing false tax forms, six months later, the same time the six-count indictment against his wife was unsealed. Her lawyers said at the time that she was charged solely to pressure her husband into capitulating to prosecutors.
They both pleaded guilty Jan. 14 — he to two counts of conspiracy, she to one count of filing a false tax form. He admitted masterminding schemes to manipulate Enron's finances while enriching himself at the company's expense. His deal requires that he cooperate and eventually serve the maximum 10-year sentence on the conspiracy counts.
Hittner, the judge, accepted Lea Fastow's plea, but held off on considering the plea agreement until federal probation authorities conducted a pre-sentence investigation and recommended a sentence. They recommended 10 to 16 months.
Her lawyers said a five-month stint in prison was crucial to prevent the Fastows' sentences from overlapping, so that one parent would always be home with their sons, ages 4 and 8.
However, a trial has yet to be scheduled for Skilling and Causey, and preparations are expected to last well into next year — which means Andrew Fastow won't report to prison any time soon.
The plea agreement in Lea Fastow's deal was written under a federal provision that, if approved, binds the judge to bless the sentence proposed by the prosecution and defense. Hittner balked, and rejected the deal Wednesday.
Lea Fastow now faces trial on all six original charges and several years in prison if convicted — more time than proposed, but far less than the maximum of 37 years. Hittner moved the trial from Houston to Brownsville in far South Texas to ensure the ability to choose an impartial jury.
Prosecutors say Andrew Fastow can't back out of his deal. But if they move forward against his wife, his willingness to cooperate could erode.
They can prosecute him on the remaining 96 counts if displeased with his help, but then they would lose a key — if not critical — witness in the Skilling and Causey cases.
Causey and Fastow were peers at Enron, but Skilling and founder and former chairman Kenneth Lay were its most public faces. Lay remains under investigation and maintains his innocence of any wrongdoing.
"They can't let Lea Fastow jeopardize the prospects of victory in the Skilling case," said Bebel, the former federal prosecutor. "The Skilling case is far more important than the case against Mrs. Fastow, and the government will have to explore all available options to ensure Andrew Fastow's continuing cooperation."
