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Corporate - Economic Offences


Fastow guilty plea seen as a breakthrough

Sridhar Krishnaswami

Washington , Jan 17

THE guilty plea agreed upon by one of the top Enron executives, Mr Andrew Fastow, has lent hopes to the Justice Department and officials at the Securities and Exchange Commission that bigger fishes like Mr Jeffrey Skilling and Mr Kenneth Lay at the failed Houston-based Corporation could be nailed down the line with a view to coming to better grips as to what went on.

On Wednesday afternoon, Mr Fastow entered his guilty plea with prosecutors that in return for a full cooperation he would, among other things, get a 10-year sentence and forfeit some $ 23 millions including some prized property. The Justice Department is convinced that Mr Fastow has been its biggest break thus far and that through him Mr Skilling and Mr Lay could be targeted with success. Both the former top executives of Enron have denied wrong doing and prosecutors have charged neither of them for any wrongdoing.

As a Chief Financial Officer for the Enron Corporation, Mr Fastow eventually pleaded to two counts of conspiracy to fraud. According to the prosecuting team, Mr Fastow created multiple partnerships and inflated company profits and in the process funnelled millions of dollars to himself, his family and a few friends. Some financial experts are convinced that Mr Fastow's plea agreement is the beginnings of cracking the case open of Mr Skilling and Mr Lay.

"Unquestionably this is the breakthrough that the government has been pursuing. There is nobody besides Mr Fastow which can make this case for the government and that's why they have been pursuing him for so long and so aggressively," says Mr Robert Mintz,a former Federal Prosecutor.

The Chief of the Justice Department's Enron Task Force has said that Mr Fastow was "one of the masterminds behind a massive fraud scheme" that the agreement on cooperation will now give the Task Force a "window into Enron's executive suites". The plea bargain with Mr Fastow has solved a 98 count indictment that would have effectively given him more than 20 years in prison. His wife, Mrs Lea Fastow, has pleaded to one criminal count of tax evasion and faces five months in prison, a deal that has come in for some scrutiny by the presiding judge.

Media reports have it that the Justice Department, before heading the way of Mr Skilling and Mr Lay, will go after Mr Richard Causey, the former Chief Accounts Officer of Enron; and are expected to file criminal charges on material already provided by Mr Fastow.

In December 2001, Enron declared bankruptcy resulting in massive layoffs and investors stuck with worthless stock. Before its collapse Enron was the nation's seventh largest company; and at one time its stock was trading above $ 90 dollars but soon was worthless or came down to literally pennies.

To follow Enron in a series of corporate scams involving so-called accounting failures or dubious accounting procedures were WorldCom and Global Crossing. The corporate scandals shook not only Wall Street but also the political world where Democrats eagerly seized on the deep political pockets of some of these corporations. For instance M Lay of Enron is known to be a solid backer of the President, Mr George W Bush.

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