Enron's Fastow Gets 6 Years

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By Carrie Johnson
Washington Post Staff Writer
Wednesday, September 27, 2006

HOUSTON, Sept. 26 -- Andrew S. Fastow, the finance chief who helped Enron Corp. mislead investors at the same time he stole millions of dollars from the company, was sentenced Tuesday to six years in prison by a judge who said Fastow deserved mercy because of "exceptional" government cooperation and the toll on his family.

U.S. District Judge Kenneth M. Hoyt significantly discounted the 10-year prison term spelled out in Fastow's plea deal with the Justice Department two years ago. The judge said that Fastow, 44, had been "the subject of great persecution," including threats and religious slurs, as the primary scapegoat for an accounting fraud that cost thousands of employees of the Houston energy company their jobs and retirement savings.

Disclosures nearly five years ago about Fastow's questionable business partnerships foreshadowed not only Enron's bankruptcy but also a string of corporate fraud cases across the country. Federal prosecutors said Tuesday that the Enron debacle remained the largest such investigation in history and that Fastow's help unlocked the case, giving them a priceless window onto the 50th floor of the company's gleaming office tower.

The judge acknowledged Fastow's efforts to repair the harm he has done. Fastow's wife, Lea, who sometimes nodded along with the judge's remarks, already served nearly a year in prison after pleading guilty to underreporting the couple's income. Criminal charges against Lea Fastow helped pressure her husband to cooperate with investigators.

"Seldom does a man's public fall cause an equally public fall for his wife," the judge said.

Rejecting a request that Fastow remain free until next month to assist shareholders pursuing a lawsuit against banks that are accused of helping Enron conceal its debt, Hoyt nonetheless allowed the couple a few moments to embrace before a U.S. marshal cuffed Fastow's hands behind his back. Until the Bureau of Prisons decides where Fastow will serve his term for the two conspiracy counts, he will spend his days in Houston's high-security federal detention center, the same place his wife served the bulk of her sentence.

Clad in a gray suit, white shirt and dark tie, a withered, snowy-haired Fastow showed none of the blinding confidence he wore with pride in the years before Enron collapsed. During the 1990s, Fastow reaped awards and collected tens of millions of dollars in salary and bonuses for engineering the company's unflagging revenue growth.

But the past five years have taken a personal and physical toll. Struggling to keep his composure, Fastow walked slowly into the 11th-floor courtroom crowded with more than two dozen friends and relatives, including his parents, in-laws and brother, who sat in the front row. The judge recommended that Fastow be placed in a residential drug treatment program administered by prison officials, to help wean him from the undisclosed substances he used to mask his anxiety.

In the most emotional moment of the proceeding, Fastow broke down as he apologized to employees and shareholders, including one who told the judge he bought Enron stock as a "no-brainer" investment. Fastow pivoted to speak directly to Brian Durbin, an engineer whose wife worked at Enron and who lost money when the company filed for bankruptcy protection in December 2001: "To Mr. Durbin especially, and to all the victims, I apologize to you. I wish I could undo what I did at Enron, but I can't."

Earlier, Durbin expressed anger and condemned the company's leaders for engaging in an "elaborate scam, if not outright theft."

"When theft and fraud occur from within the company, what chance does an investor have?" Durbin asked.

Hoyt said he received letters from about a dozen others who wrote about the loss of their jobs or insurance policies, difficulties in supporting their children, and "the bankruptcy of spirit that has entered their lives." One unidentified former employee wrote that he is working three part-time jobs to replace his tattered retirement savings account. "I'm not guilty of anything, but my sentence will be longer than Fastow's," the former employee wrote.

The substantial reduction in Fastow's sentence underscores the importance of insiders, who can help prosecutors unravel complex business cases. Fastow was sentenced the same day WorldCom Inc. founder Bernard J. Ebbers reported to a Louisiana prison to serve a 25-year sentence. With time off for good behavior and the successful completion of the drug rehabilitation program, Fastow could cut more than a year from his sentence.

Assistant U.S. Attorney John C. Hueston said Tuesday that without 1,000 hours of briefings and "unflappable, remarkably consistent" testimony by Fastow, the government never would have been able to convict former Enron chief executives Jeffrey K. Skilling and Kenneth L. Lay in a fraud trial that ended earlier this year.

Lay, whose lawyer, Michael W. Ramsey, scowled at Fastow from a seat in the jury box Tuesday, died of heart disease in July. Skilling faces decades in prison when he is sentenced Oct. 23.

The Fastows -- who have two sons, ages 8 and 11 -- and their relatives have already forfeited nearly $30 million to the government, and their lawyer, John W. Keker, said the couple "will be living in a barrel if these civil cases continue." Fastow on Tuesday pledged to help shareholder lawyers recover even more money from companies that he says helped Enron manipulate its financial reports. In recent weeks, Fastow has spent hundreds of hours guiding them through the company's byzantine business partnerships.

"Man cannot earn mercy," the judge said, reading from prepared remarks. "It comes to a man who is shipwrecked, whose back has been broken . . . who finds himself in a conspiracy of circumstances."

Rabbi Shaul Osadchey, who married the Fastows and who appeared at the courthouse with them Tuesday, told reporters that he had spoken to Fastow a day earlier. "I think he felt he was ready to be sentenced, that he was ready to move on and see an end to this."


© 2006 The Washington Post Company

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