[A-List] US legitimation crisis: Enron

["Keaney Michael" <Michael.Keaney@xxxxxx>]

Top Enron executive charged with fraud
By Rupert Cornwell in Washington
The Independent, 03 October 2002

America's Justice Department yesterday landed its biggest fish in the
Enron case as Andrew Fastow, the company's former chief financial
officer, was charged with fraud, conspiracy and money laundering before
Enron's spectacular collapse last autumn.

The 41-year-old, dressed in a dark suit and red tie, surrendered to FBI
agents in Houston, accompanied by his lawyer. Half an hour later Mr
Fastow was led from the FBI building in handcuffs, and driven to the
federal courthouse for formal arraignment.

Mr Fastow is alleged to have been the mastermind behind the web of
secret Enron-related partnerships, or "special purpose entities", whose
massive debts ultimately led to the bankruptcy in December of what was
the seventh-largest company in the US.

Presenting the case against Mr Fastow, the deputy attorney general Larry
Thompson said that in a conspiracy between 1997 and July 2001, the
former CFO "defrauded investors by his fraudulent transactions, and then
defrauded the company itself by stealing from the transactions he had
set up to swindle investors".

The government is seeking to freeze $37m said to derive from illegal
activity at Enron by Mr Fastow and his family.

Yesterday's charges have been expected ever since the plea bargain
announced on 21 August between the federal government and Mr Fastow's
close associate Michael Kopper, who was a key figure in at least three
partnerships - Radar, Chewco and Southampton - cited in the charges
against Mr Fastow.

The partnerships were set up to keep debts and other non-performing
assets (referred to by those in the know as "nuclear waste", Mr Thompson
noted) off Enron's main balance sheet. Thus Enron's finances could be
presented as far rosier than they really were.

But they were also vehicles for the enrichment of Mr Fastow, Mr Kopper
and other select beneficiaries. Mr Kopper has agreed to surrender $12m
he made from the partnerships. The Justice Department yesterday charged
that Southampton alone sent $4.5m flowing into the coffers of Mr
Fastow's family foundation.

The question now is whether Mr Fastow is the last link in the criminal
chain - or whether his co-operation with authorities could pave the way
for charges against the only two people above him in the Enron
hierarchy: the former chief executive, Jeffery Skilling, and the
company's chairman Kenneth Lay.

Lawyers said the charges had come in the form of a criminal complaint,
less rigid than a formal grand jury indictment and allowing a defendant
more time to co-operate.

Though Mr Fastow declined to testify at Congressional hearings earlier
this year, he has all along let it be known that he operated with the
full knowledge of the company's top executives, and of Arthur Andersen,
Enron's disgraced auditor.

But Mr Lay and Mr Skilling insist they were kept in the dark by their
subordinates. Though Mr Lay has been regarded as more of a corporate
ambassador than a hands-on manager, there has been widespread scepticism
at Mr Skilling's claim he had no idea of what was happening.