FASTOW Plea Talks in Enron Case Said to Unravel

HOUSTON, Jan. 9 - Plea negotiations collapsed on Friday between the government and two prominent defendants in the Enron criminal cases, people involved in the case said. The development upends a significant advance in the two-year investigation that was expected to speed prosecutors' efforts to unravel the full story behind the company's collapse.

The defendants - Andrew S. Fastow, Enron's former chief financial officer, and his wife, Lea, a former assistant treasurer - had tentatively accepted a deal this week to plead guilty, with Mr. Fastow agreeing to cooperate with the continuing investigation.

But a series of public statements by the federal judge handling Mrs. Fastow's case drastically - and, legal experts said, unnecessarily - shifted the dynamics of the negotiations, resulting in the breakdown of the talks, people involved in the case said.

Members of both the prosecution and defense teams left Houston early this afternoon after a fruitless morning of negotiations. At this point, people involved in the case said, there were no further discussions planned and the plea deals were effectively off the table. Both sides, then, are back to preparing for trial, with Mrs. Fastow's scheduled to begin in a month.

The collapse of the discussions does not mean that a plea deal still could not be reached, even under the terms that were agreed upon this week. However, for a deal to happen, one side or the other will have to abandon certain demands.

Already, the collapse of the negotiations has resulted in drastic changes in the progress of the case. The government had been planning to bring a criminal complaint this week against Richard Causey, Enron's former chief accounting officer, which would have included information that prosecutors obtained from Mr. Fastow, people involved in the case said.

Those plans have now been postponed because Mr. Fastow can no longer be counted on as a witness, these people said. Mr. Causey remains a subject of the investigation.

A Justice Department spokesman, Bryan Sierra, said that the government did not discuss plea negotiations. Gordon Andrew, a spokesman for the Fastow family, declined to comment.

In his preliminary cooperation with the government, Mr. Fastow also provided information to the government related to the involvement of Jeffrey K. Skilling, Enron's former chief executive, in certain accounting issues at the company, people involved in the case said. It was not yet clear whether Mr. Fastow's information on Mr. Skilling would merit criminal charges.

Mr. Fastow has long been seen as the central figure in the Enron case. He was charged in October 2002 with 98 counts of fraud, contending that he had used a series of byzantine off-the-books partnerships both to enrich himself illegally with millions of dollars and to defraud Enron shareholders by hiding the company's deteriorating financial condition.

Mrs. Fastow was charged last year with aiding her husband in disguising income they earned from the partnerships and for failing to declare it on their tax returns.

Under his agreement, Mr. Fastow would have been required to serve at least 10 years in prison, with the possibility of more time if the government was not satisfied with his cooperation. Such a long term is virtually unprecedented for a white-collar case involving a cooperating defendant. Mrs. Fastow, who agreed to plead guilty to a single tax count, would have been sentenced to five months in prison, followed by five months of home detention - also a comparatively tough sentence, given that she was a first-time offender in a tax case.

On Wednesday, prosecutors and defense lawyers had almost no doubt that the deals would be approved. Mr. Fastow was scheduled to enter his guilty plea on Thursday, and Mr. Causey, the former accounting officer, had been notified that he would have to surrender to authorities on Friday.

But what had been expected to be an uneventful hearing in Mrs. Fastow's case before Judge David Hittner of Federal District Court here instead set in motion the events leading to the collapse of the agreements.

Under what is known as Rule 11 of the Federal Rules of Criminal Procedure, after a defendant reaches a plea agreement with prosecutors, a revised plea of guilty is then entered with the judge. At that point, the judge can accept the agreed terms of the plea, reject them or defer a final decision until he receives a presentencing report. If the judge ultimately rejects the terms of the deal, the defendant can withdraw the plea.

While that order of events is not specifically required under Rule 11, the language of the rule and tradition in most parts of the country suggest that is how a plea deal should be handled, legal experts said.

But on Wednesday, Judge Hittner turned that process on its head. Rather than waiting for Mrs. Fastow to enter her plea, he rejected the agreement outright, suggesting he thought more jail time was warranted. On Thursday, he held a second hearing, saying that he would accept a guilty plea from Mrs. Fastow, but again he made several comments suggesting that he was prepared to reject the terms.

The aftermath quickly demonstrated why judges tend to wait until a plea is entered before expressing an opinion on it. Once the plea was entered, the deal could not be revised, only rejected. But without the plea officially changed to guilty, everything was still up for renegotiation.

Knowing that Mr. Fastow had already dangled the information he could provide to prosecutors and secure in the belief that Mrs. Fastow was by far the small fish in the case, her defense lawyers began seeking even better terms, people involved in the case said.

The defense lawyers, led by Mike DeGeurin, began seeking a deal that could have resulted in a dismissal of all charges against Mrs. Fastow, or, at the very least, a guarantee that she would not serve more than five months in prison regardless of the judge's actions, they said. Under the terms of such an agreement, Mr. Fastow would then follow through with his guilty plea. Prosecutors led by Leslie Caldwell, head of the Justice Department's Enron task force, refused to agree to such terms.

The government raised the possibility of allowing Mrs. Fastow to plead guilty to a misdemeanor, which would carry a maximum possible sentence of just more than a year, rather than the maximum 16 months that Judge Hittner could have sentenced her to under the original plea. No matter what, though, prosecutors told the defense team that Mrs. Fastow would have to take her chances with the judge, people involved in the case said.

But Judge Hittner's comments so unnerved Mrs. Fastow, these people said, that she continued to push for terms that would more effectively guarantee a significant limit on the judge's ability to toughen her sentence. Judge Hittner had set a deadline of noon Friday for notification from the parties about Mrs. Fastow's decision - a fairly irrelevant timetable because Mrs. Fastow can change her plea until a verdict from a jury. At noon, the two sides agreed that they were at an impasse, and Mr. DeGeurin called the judge's chambers to notify him that they had not reached a decision.

Minutes later, staff members for Judge Hittner were distributing an order to the press saying that because no resolution had been reached, the trial would begin on Feb. 10. The order itself was unnecessary; if Mrs. Fastow did not enter a change of plea, her trial was already scheduled to begin that day. Now, both sides are playing a game of brinksmanship, calculating how badly the other party needs a deal.

Without a deal, Mrs. Fastow could face as many as four years in prison if she is convicted. Mr. Fastow, 42, who under his deal would be out of prison by the time he was 50, would instead be more likely to serve a sentence well into his 60's. In such negotiations, any prosecutor counts on the reality of such numbers to bring the defendant to the bargaining table.

But on the defense side, the defendants and their lawyers have to weigh how much they believe what Mr. Fastow provides the government in terms of evidence against others, and whether prosecutors can obtain that information some other way. In essence, prosecutors must calculate whether the chance of a future defendant's slipping away will be worth cutting a better deal for Mrs. Fastow, whose six-count tax case has always been seen as the least significant criminal prosecution to emerge from the Enron investigation.

So Lea struck out on the plea deal.........

As Madame DuFarge said, "Marie Antoinette, you ain't gonna get a plea deal"............LOL.

I just hope all those years in jail isn't gonna put a crimp in Lea's shopping. Oh well, there's still EBay. I wonder if they accept payment from offshore banks?

They need to stop pussyfooting with all of these losers and throw then in the can for an extended period of time. In addition, all and I mean ALL of their assets should be liquidated and used to repay stockholders.

When these clowns get out of jail they should get a prison made suit, $100.00, and a bus ride back to the nearest city, along with an admonition to live a better life.

Regards,

When these clowns get out of jail they should get a prison made suit, $100.00, and a bus ride back to the nearest city, along with an admonition to live a better life.

Not likely. I heard one of the Fox talking heads say the Lay family was complaining about being down to their last $10 million a few months ago. IIRC, the amount he cashed out with over the last couple years of operation would make that almost impossible.

A couple years working on the tennis game at club fed and back on the streets to enjoy the loot stashed offshore will be about all that comes of this. Probably a pardon to get them all back in the business world and eligible for government contracts/lobbyist jobs as well.

After all, the Fastow's were "philanthropists." The Fastows showed their "tolerance and compassion" through the (gag) genorosity of the "Fastow Foundation."

Of course the fact that the Fastows screwed Enron shareholders, pensioneers, and jobholders is immaterial.

(Sniffle) Gosh, don't they realize the Fastows are victims (sob)?

(Sniffle) Gosh, don't they realize the Fastows are victims (sob)?

Can't ya just "feel the pain" these fine, upstanding pillars of the community are going thru. A nasty old trial will just make people worried about the economy and hurt the recovery. Let's start a petition drive for a pardon. Somebody has to raise their children to be honest, moral members of society. Where's the compassion

The failure of the government to be serious about prosecuting Enron execs is another of my dissatisfactions with the Bush administration. It looks like they found their 'fall guys' in the Fastows. Everyone else gets to walk! I sometimes wonder if the Fastow is only being prosecuted for the sake of appearances. It sure seems that way.

It looks like they found their 'fall guys' in the Fastows. Everyone else gets to walk! I sometimes wonder if the Fastow is only being prosecuted for the sake of appearances. It sure seems that way.

Fastow is as guilty as sin and deserves to be fully prosecuted. The problem is that the prosecutors need his help to go after Skilling and Lay.

I know he's guilty. He's only one of many. While fastows assistance would be helpful, I cannot beleive it is absolutely eseential given the scope of he fraud.

I think it's shameful that the only person who really seems interested in justice regarding investment fraud is a Democrat - Eliot Spitzer, DA of New York. And that's hard to swallow, because a Democrat, I am not.

BTW, in the past week, MCI (Worldcom) is again being allowed government contacts. Wonderful.

If the government went afer Enron with a only fraction of he zeal with which they are going after Martha Stewart, They'd have dozens of people in custody by now.

It's ridiculous!

So Lea struck out on the plea deal.........

Liz,

You seem to be pretty wired into this Enron thing...

Isn't there still civil litigation between Morgan Chase et al. and the Insurance Companies that "uttered" a Surety Bond in a series of fraudulent transactions on behalf of Enron???

This is looking to have some of the same Banking Players as Pamalot [sp?].

I think it's shameful that the only person who really seems interested in justice regarding investment fraud is a Democrat - Eliot Spitzer, DA of New York. And that's hard to swallow, because a Democrat, I am not.

I saw Spitzer give an interview a couple weeks ago where he claimed the fed gov was in the process of severely limiting the power of the states to prosecute. There was a small article going around about some changes passed to protect nationally chartered banks from all but federal prosecution a few days ago. This DOJ and SEC seem bought and paid for.

January 03, 2003

With a jury verdict looming, insurers and JP Morgan Chase agreed on 60 percent payout for Enron surety bonds. JP Morgan settled its dispute with a group of 11 insurance companies that had issued surety bonds for obligations guaranteeing finance deals the bank set up for Enron Corp. Under the agreement, JP Morgan Chase will receive about 60 percent of the principal amount of $965 million.

Fastow is widely known as the architect of the offhore entities--thousands of them--that hid Enron's debt (which contributed to its fall). Fastow, his wife, his brother and some other anointed pals were making big bucks off these deals.

Apparently the fed's plea bargain insisted that if the Fastows accepted the fed's plea deal but then lied about even a single dollar they stole, the deal would be off and the Fastows would face hard time.

One can imagine the deal fell through b/c the Fastows were reluctant to give out information about the money they (his brother, and God knows who else) had stashed offshore.

Looks like the fed deal fell apart b/c the greedy Fastow's are not willing to give up their stolen "retirement fund."

The problem is that it takes time to bring charges in such a complicated case. As it is turning out, a number of these Enron top dogs (and not so-top dogs) will be hauled off to jail this year. Now won't that be nice for the election? Assuming that the news media will report it.

I'm going to believe it when I see it. As it stands right now, I believe that Skilling and Lay are going to walk. It makes my blood boil (and no, I didn't lose a cent on Enron, so there's no revenge factor here). It's the corruption in the system that riles me so.

That is a very cynical outlook!

Regretfully, you are perfectly correct.

If you are going to be a thief, be a very big one is the moral I guess.

regards,

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