Former Enron finance chief and spouse plead guilty

HOUSTON - - Andrew Fastow, chief architect of the off-the-books deals that brought down Enron, pleaded guilty along with his wife recently in a deal that could take prosecutors to the top of the scandal-ridden company.

The plea bargains represent the biggest breakthrough in the two-year investigation into the scandal that led to the energy giant's collapse and rocked Wall Street and Washington. The former finance chief agreed to a 10-year prison sentence and will help prosecutors build a case against the executives who once occupied the most opulent offices on the company's top floor: former chairman Kenneth Lay and former chief executive officer Jeffrey Skilling.

"I and other members of Enron senior management fraudulently manipulated Enron's publicly reported financial results," Fastow, 42, said in a statement, adding that the purpose was to mislead investors and inflate the company's stock price and credit rating.

"I also engaged in schemes to enrich myself and others at the expense of Enron's shareholders and in violation of my duty of honest services to those shareholders," Fastow stated.

His wife, Lea Fastow, also 42, pleaded guilty to filing false tax forms related to $141,000 in gains from 1997-2000 from a wind farm deal while she was Enron's assistant treasurer.

Lea Fastow's plea deal calls for a five-month prison sentence and a year of supervised release, including five months of house arrest.

U.S. District Judge David Hittner will decide later whether to accept the sentencing deal.

The Fastows remain free on bond and are scheduled for sentencing in April.

The plea arrangements had stalled last week after Hittner refused to guarantee Lea Fastow a five-month sentence.

Her lawyer said the couple insisted on the five-month term to ensure that their two young sons have at least one parent at home. Hittner demanded that he retain the right to alter Lea Fastow's penalty.

Andrew Fastow is the highest-ranking Enron executive charged so far in the 2001 collapse of the Houston-based energy company. Without a plea, he would have gone to trial on 98 counts of fraud, money laundering, insider trading and other charges.

He pleaded guilty to two counts of conspiracy to commit fraud.

The agreement calls for the other counts against him to be dismissed if he fulfils his end of the bargain, which includes forfeiting at least $23.8 million of his assets and co-operating with authorities.

Prosecutors say Fastow masterminded a tangle of partnerships and financing deals that hid Enron debt and inflated company profits while funnelling millions of dollars to him, his family and friends.

Some experts believe his plea could break open the case against Lay and Skilling.

"Unquestionably, this is the breakthrough that the government has been pursuing," said Robert Mintz, a former federal prosecutor and an expert in white-collar crime.

"There is nobody besides Fastow who can make this case for the government and that's why they have been pursuing him for so long and so aggressively."

Lay and Skilling have steadfastly maintained their innocence.

The partnerships Fastow created had names like LJM (the first initials of Fastow's wife and two sons) and Chewco (after Star Wars character Chewbacca).

One guilty plea covered the LJM partnership, while the other involved transactions that Fastow used to pocket an estimated $45 million.

Enron was America's seventh-largest company when it declared bankruptcy in December 2001 amid mass layoffs, leaving investors and retirees stuck with worthless stock.

In the following months, WorldCom, Global Crossing, Adelphia Communications and others suffered a similar fate as investigators uncovered accounting failures across corporate America.

Former company insiders have said Fastow's aggressive and inventive approach to structuring deals appealed to Skilling.

When CFO magazine gave Fastow an "Excellence Award for Capital Structure" in 1999, Skilling told the publication: "Andy has the intelligence and the youthful exuberance to think in new ways."