Feeling 'Slap in the Face' After Fastow's Sentence
Tuesday, October 3, 2006
When a federal judge took four years off the prison sentence of former Enron Corp. finance chief Andrew S. Fastow last week, he surprised legal analysts, angered onetime employees and sparked anew a debate about just punishment for white-collar criminals.
In a much-heralded 2004 plea deal, Fastow admitted to a pair of conspiracy charges that carried a maximum penalty of 10 years. He also agreed not to seek a reduction in his prison term. But one week ago, U.S. District Judge Kenneth M. Hoyt granted some mercy to the architect of the era's biggest accounting fraud and sent him to prison for just six years.
That means Fastow, who improperly took more than $45 million from the coffers of the Houston energy-trading company, could spend closer to 3 1/2 years in prison if he gets credit for completing a drug-treatment program and for good behavior.
The reduction, former Enron worker Rod Jordan said yesterday, "was a slap in the face to employees."
No former employees appeared at last week's sentencing, with most preferring to wait until former chief executive Jeffrey K. Skilling is sentenced on fraud charges Oct. 23. "A lot of them decided to skip Fastow because they thought it was a done deal," Jordan said, referring to the 10-year term.
Fastow served as one of the government's most important witnesses in the trial of Skilling and Enron founder Kenneth L. Lay, who were convicted in May. Prosecutors in that case told the jury that Fastow had "locked in" a 10-year prison sentence as part of a plea bargain with the Justice Department's Enron Task Force.
But Fastow's lawyer, John W. Keker, implored the judge last week to send Fastow away for five years because of his repentance, his cooperation with prosecutors and shareholders, and the toll on his family. Keker pointed out that Fastow's wife, Lea, spent nearly a year in prison after pleading guilty to underreporting the couple's income.
At the hearing, prosecutors did not object to the proposed reduced sentence. But they had previously filed a document agreeing with a probation department report that would have exposed Fastow to a sentence longer than 10 years.
Daniel M. Petrocelli, a lawyer for Skilling, called Fastow's reduced sentence "disturbing" in an e-mail. During the trial, Petrocelli regularly attacked government witnesses for misrepresenting the sentence reductions they would receive for cooperating with prosecutors. Legal analysts said yesterday that the contention could become a ground for Skilling's expected appeal.
"What is disturbing is that in the trial against Mr. Skilling, Fastow and the prosecutors represented to the jury that Fastow would serve a minimum of 10 years," Petrocelli wrote. "Now, with the trial over, they come into court and argue for a substantially lesser sentence."
Legal analysts said the proceeding, and the debate it provoked, underscore the power that federal judges enjoy. Since Fastow's plea deal was struck in 2004, a U.S. Supreme Court decision made sentencing guidelines advisory, rather than mandatory, for judges. That gave the judge more leeway to give Fastow less time.
However, judicial discretion can cut both ways. A few former Enron workers who agreed to help prosecutors have been sentenced to a wide range of prison terms: from probation to six years behind bars. The Fastow case is drawing the most heated commentary because a week earlier, the same judge who sentenced Fastow was far more stern with former Enron executive David W. Delainey.
Delainey, a Canadian citizen who voluntarily agreed to travel to the United States several times, pleaded guilty to a single insider-trading charge and began cooperating with prosecutors even before his October 2003 deal. Delainey's lawyers had asked for probation, but instead Hoyt reduced his possible sentence by only three months, ordered him to serve 2 1/2 years in prison and warned that he could have faced far more serious charges for his conduct at Enron. The disparity in treatment fueled anger from John Dowd, a Washington lawyer who defended Delainey.
"The message from the court was clear," Dowd said. "If you square your account with the law early, accept the consequences, fully cooperate for three years and receive the enthusiastic support of the government at sentencing: Tough luck; you get a cut of three months. If you fight the truth and get others involved in crime, and receive no support from the government, then you receive the mercy of the court and get a cut of four years off what you agreed to."
Within the next few weeks, former Enron investor relations official Paula H. Rieker, who pleaded guilty to a single insider-trading charge, and former accounting chief Richard A. Causey, who pleaded guilty to securities fraud, will be sentenced by other federal judges in Houston. Causey, who did not reap the same personal gains from Enron that Fastow did, faces the possibility of a longer sentence.
Philip Hilder, a Houston defense lawyer who represented several witnesses in the Enron investigation, said he was "surprised" by the leniency toward Fastow. But, Hilder added, Hoyt appeared to have considered Fastow's circumstances.
"He really has transformed himself from somebody who was vilified to someone who seemed almost sympathetic on the stand and who genuinely accepted responsibility for his actions," Hilder said. "I wish more judges would view defendants as individuals."