September 26, 2006

Ex-C.F.O. of Enron Sentenced to 6 Years


Filed at 6:14 p.m. ET

HOUSTON (AP) -- Andrew Fastow, the mastermind behind financial schemes that doomed Enron Corp., was sentenced Tuesday to six years in prison -- four years less than he had agreed to in a plea bargain -- by a judge who felt he deserved leniency.

Fastow, the former chief financial officer who cooperated with prosecutors in other cases related to Enron's 2001 implosion, had agreed to serve a maximum 10-year term when he pleaded guilty in 2004.

But the judge said he deserved a lighter sentence because Fastow has been persecuted after Enron's failure and because his family has suffered enough. Fastow's wife already has served a year for her role in the scandal.

''Prosecution is necessary, but persecution was not,'' U.S. District Judge Kenneth Hoyt said. ''These factors call for mercy.''

Fastow's attorneys had asked for a lighter sentence, citing Fastow's admission of guilt and his help in the successful prosecution of Enron founder Kenneth Lay and the former chief executive, Jeffrey Skilling.

Rod Jordan, chairman of the Severed Enron Employee Coalition, said he was shocked and disappointed that Fastow was given a reduced sentence.

''I felt that anything less than 10 years was a slap in the face to the employees who suffered so much because of what Fastow did,'' he said. Hoyt ''didn't have to stick with the agreement but I think he should have. Maybe the judge knows something I don't. Do the crime, do the time.''

Fastow was taken immediately into custody after the judge rejected his request to turn himself in later. The judge did allow him to hug his wife, Lea, who was seated in the front row of the packed courtroom. They embraced for several seconds before he was taken away in handcuffs.

''I know I deserve punishment,'' said Fastow, who cried before the sentencing while telling the court he was sorry for what he had done. ''I accept it without bitterness.''

Fastow must serve all six years because there is no parole in the federal system. He also was sentenced to two years probation after his release from prison.

Enron, once the nation's seventh-largest company, crumbled into bankruptcy proceedings in December 2001 after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable. The collapse wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans.

Fastow was originally indicted on 98 counts, including fraud, insider trading and money laundering. He pleaded guilty to two counts of conspiracy, admitting to running various schemes to hide Enron debt and inflate profits while enriching himself. He also surrendered nearly $30 million in cash and property.

At Lay and Skilling's trial, Fastow testified that his bosses were aware of fraudulent financial structures engineered by Fastow and his staff. Skilling and Lay were convicted in May of conspiracy and fraud. Lay's attorneys are working to erase his convictions since his July 5 death from heart disease. Skilling is to be sentenced next month.

Fastow's wife, Lea, pleaded guilty in 2004 to a misdemeanor tax crime and served a year in prison for helping him hide ill-gotten gains from his schemes.

During his brief speech before sentencing, Fastow said he was ashamed for what he had done and had tried to compensate by helping prosecutors and attorneys for investors and employees who had lost money.

''To all of the victims, I apologize to you,'' he said, turning toward the four people who spoke at the sentencing. ''I am ashamed of what I did.''

The three attorneys for people who lost money all recommended a lighter sentence, saying Fastow had been helpful in their efforts to recover money.

In a 175-page court filing from Tuesday in the investor lawsuit, Fastow said Merrill Lynch & Co., the nation's largest brokerage, along with global banks Credit Suisse, Barclays PLC and Royal Bank of Canada helped Enron create financial structures that hid the company's true financial condition.

Fastow said he was committed to making up for his bad choices at Enron.

''I can't undo the harm I have caused,'' said Fastow, whose voice cracked frequently during his speech. ''I can try to repair the damage as best I can.''

He apologized to his family and friends, many of whom could be heard weeping.

''I failed them,'' he said. ''I am more than humbled by the mercy they have shown me when they had every right to reject me.''

The only Enron investor who spoke, Brian Durbin, said he was a small-time investor who considered Enron a ''no-brainer'' because of the company's solid reputation.

''It became clear we, like many others, were victims of an elaborate scam, if not outright theft,'' he said. ''When theft and fraud occur within a company, what chance do investors have?''

One of the prosecutors on the Enron Task Force, John Hueston, credited Fastow with allowing investigators to take ''jurors through the doors of the executive suites at Enron,'' referring to his work on the prosecutions of Lay and Skilling.

''I witnessed a man truly repentant,'' Hueston said.

Defense attorney John Keker said during the hearing that Fastow had been unfairly made the scapegoat of the scandal.

''He is not just remorseful. He is not just sorry. He is doing something to try and rectify the situation he was a part off,'' Keker said.