Feds file 31 more charges against former Enron CFO

WASHINGTON -- Former Enron Corp. chief financial officer Andrew Fastow faces 31 more charges, and his wife and nine other former executives were indicted today on a host of fraud, insider trading and other counts.

Fastow now faces 109 charges related to the 2001 collapse of the Houston-based energy trading giant, according to new indictments unsealed in Houston. His wife, Lea Fastow, is charged with six counts, including money laundering conspiracy, filing false tax returns and conspiracy to commit wire fraud.

Lea Fastow, a former Enron assistant treasurer, walked into the Internal Revenue Service office in Houston today and surrendered.

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 2001.

The indictments allege five of the former EBS executives sold large amounts of Enron stock while they knew the division was failing, bringing themselves some $186 million in profits. The government is seeking forfeiture of more than $100 million of those profits.

"Today's indictments are a significant milestone in our determined efforts to expose and punish the vast array of criminal conduct related to the collapse of Enron Corporation," said Deputy Attorney General Larry Thompson.

The indictments bring to 19 the number of individuals charged in the Enron case, with six of those already entering guilty pleas. Thompson said the probe was far from over.

"The indictments today do not end, by any means, our investigation," he said.

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.

The bankruptcy cost thousands of jobs and wiped out hundreds of millions of dollars in employees' pension investments.

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.

Rice, known at Enron for his love of fast, expensive cars, quit the company months before it went bankrupt, 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 to June 1999. He then took the helm of the heavily touted broadband unit, which 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, 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.

Prosecutors said all those charged Thursday had agreed to turn themselves in and would be released on bond.

In a related action, the Securities and Exchange Commission filed suit against the five former broadband executives, charging them with civil fraud and insider trading that netted them more than $150 million in unlawful profits. In the lawsuit filed in federal court in Houston, the SEC wants the five men to have to pay back that money as well as unspecified fines.

The SEC previously had charged two other EBS executives, Kevin Howard and Michael Krautz, with falsifying records and quarterly reports for a sham transaction.

Howard and Krautz also are named in new counts in Thursday's indictments. They had been charged previously for allegedly using accounting tricks to generate $111 million in fake earnings from EBS's failed Internet movie-on-demand service.

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.

Copyright C 2003 Deseret News Publishing Co.
Provided by ProQuest Information and Learning Company. All rights Reserved.