Enron Prosecutions Intensify

Former Broadband Executives Are Charged, as Is Fastow's Wife

The Justice Department escalated its prosecution of Enron Corp. executives yesterday, accusing former leaders of the company's failed Internet broadband division of exaggerating its prospects to Wall Street analysts to push up the company's stock, booking $111 million in fraudulent earnings and enriching themselves in the process.

Eight former Enron executives were indicted yesterday, including Lea W. Fastow, wife of the company's already-indicted former chief financial officer, Andrew S. Fastow. She was charged with money laundering and filing false tax returns, and was taken into the courthouse in Houston in handcuffs.

The actions continue the Justice Department's methodical efforts in investigating the collapse of Enron, considered the signature case of corporate wrongdoing exposed by the bursting of the stock market bubble.

Initial federal charges against Andrew Fastow and others centered on secret financial deals that they allegedly used to steal from the company and its shareholders. The broadband indictment raises the ante, contending that one of Enron's crucial new business ventures in 2000 and 2001 had been a "sham from its inception" and that the executives charged, along with unnamed "others," made repeated false statements to improve the unit's prospects.

The grand jury charged Kenneth D. Rice and Joseph Hirko, both former co-chief executives of the broadband unit, and Kevin P. Hannon, its former chief operating officer, with securities fraud. Also charged were former broadband vice presidents Scott Yeager and Rex T. Shelby. The government contends that the five men sold more than $185 million in Enron stock while hyping the prospects of the broadband division.

Prosecutors are moving to seize about $36 million in property and bank accounts from the defendants they charged yesterday. They want Rice, for example, to forfeit a platinum, sapphire and diamond necklace with 16 diamonds and 226 sapphires and a matching bracelet; and three sports cars -- two Ferraris and a Shelby.

Enron invested more than $1 billion in the Internet venture, and former Enron chief executive Jeffrey K. Skilling and founder and former chairman Kenneth L. Lay called broadband Enron's next big hit. Skilling predicted to Wall Street analysts at a January 2001 investment conference that the broadband unit's growth would eventually prompt a 50 percent increase in Enron's stock price.

It is not clear whether the government will try to hold Skilling and Lay accountable for the alleged wrongdoing in the broadband division. Andrew Weissmann, deputy director of the Enron task force, said outside the courthouse in Houston yesterday, "There were many people at Enron and other institutions . . . who were responsible for reducing the seventh-largest corporation in America to rubble." The investigation is continuing, he added, with the task force "diligently sifting through that rubble, piece by piece, scheme by scheme, lie by lie."

"Rice was right under Skilling," said Houston lawyer and former prosecutor Philip H. Hilder, who represented Enron whistle-blower Sherron Watkins and other former Enron employees. Skilling "would appear to be the next stop if in fact the evidence is there."

No charges have been brought against Skilling or Lay. Lawyers for both men have said they are innocent of any wrongdoing, and Skilling testified before Congress that the broadband venture succumbed to the industry-wide demise of dot-com ventures.