- The Washington Times - Tuesday, May 6, 2003


   The Justice Department yesterday stepped up pressure on former Enron Corp. Chief Financial Officer Andrew Fastow, charging him and his wife with dozens of additional counts of fraud and tax evasion.
   Seven other top Enron executives also were charged with fraud and insider trading in a scheme to pump up the company’s stock price by touting services of the company’s broadband division, which never went online or produced significant revenue.
   The charges that officers of the broadband division made millions of dollars illicitly by cashing in stock options while they schemed to send Enron’s stock price soaring brings the yearlong Enron case to the doors of the executive suite. The broadband project was a favorite of former Enron Chief Executive Officer Jeffrey Skilling.
   The indictment cites a Jan. 20, 2000, meeting with Wall Street analysts at which Mr. Skilling presided and took the lead in hyping the potential of the broadband services to add value for customers and investors. The stock jumped from $54 to $72 shortly after that meeting, the indictment says.
   “These charges bring us closer to a full accounting for the wide range of Enron-related crimes,” said Deputy Attorney General Larry Thompson, who described the criminal conduct at Enron as “vast”— encompassing more than the 19 people charged and half-dozen guilty pleas the department has obtained so far.
   “We have uncovered a systematic situation of fraud and corruption among a large number of executives at that company.”
   In all the government charged 11 former Enron executives yesterday.
   Lea Weingarten Fastow, a former Enron assistant treasurer, was accused of helping her husband set up a fraudulent wind-power financing scheme nicknamed Radar, then failing to report the income they secretly earned on their tax returns.
   The 41-year-old mother of two turned herself in to the Internal Revenue Service in Houston yesterday morning after getting a hug from her husband. She was led away in handcuffs to U.S. District Court to face the charges.
   Mrs. Fastow’s attorneys accused the department of using her as a pawn to put pressure on Mr. Fastow to cooperate in going after his bosses, Mr. Skilling and former Enron Chairman Kenneth Lay. Mr. Fastow has vowed to fight all 109 charges against him and prove his innocence in court.
   “Mrs. Fastow has done nothing wrong,” attorney Nanci Clarence said. “She had nothing to do with the fall of Enron.”
   Mrs. Fastow and six other defendants were released yesterday after surrendering to authorities in Houston and posting millions of dollars in bond.
   The superseding indictment against Mr. Fastow contains major new features, including charges that Merrill Lynch & Co. assisted in hiding the company’s debt from investors, as well as two new defendants who were key Fastow deputies — former Treasurer Ben F. Glisan and former Vice President Dan Boyle.
   The two deputy finance officers were involved in the complex Nigerian barge and Southampton financing ventures Mr. Fastow is said to have used to hide Enron’s debt and create the appearance of profitability on paper.
    Without admitting wrongdoing, Merrill Lynch paid $80 million in February to settle Securities and Exchange Commission charges over its part in the Nigerian barge deal.
   The 218-count superseding indictment involving fraud in Enron’s broadband division was widened to implicate the two former chief executives of the division, Ken Rice and Joe Hirko, and other top officers of the division in a massive securities-fraud scheme.
   The seven broadband executives were charged with lying to investors through a series of press releases and meetings with analysts, while reaping nearly $186 million of illegal profits through insider trading of Enron stock.
   Mr. Fastow also was charged for the first time with insider trading in connection with his sale of 234,000 shares of Enron stock for $18 million.
   The Justice Department and the SEC, which filed separate civil charges against the Enron executives for the same offenses, are seeking to recover much of the ill-gotten profits and return them to investors. Justice is seeking to seize more than $100 million in assets.
   “This is not a simple case of fraud. Eleven individuals in positions of trust and responsibility made millions as investors lost billions,” said FBI Director Robert Mueller.
   “They engaged in deliberate fraud to conceal the company’s poor performance, and to enhance their personal prestige and wealth … They issued false press releases and back-dated documents. In effect they built a company of smoke and mirrors.”
   Enron grew to be the country’s seventh-largest corporation on promises of big profits from its expanding empires in energy and technology. Its stock reached a high of $90 in August 2000 but then plummeted as the company fell toward bankruptcy in December 2001.
   “At a point when Enron’s touted groundbreaking broadband technology was little more than a concept — and its business model was not commercially viable — these defendants played important roles in perpetuating the fairy tale that Enron was capable of spinning straw — or more appropriately, fiber — into gold,” said Linda Chatman Thomsen, the SEC’s deputy director of enforcement.
   Most of the defendants pleaded not guilty in Houston yesterday. Mr. Boyle’s attorney, Bill Rosch, said prosecuting his client “is like prosecuting the piano player in a whorehouse.”
   

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