US District Court Judge Kenneth Hoyt in Houston on September 26 sentenced former Enron CFO Andrew Fastow, who many believe played a key role in the giant energy company's late 2001 collapse, to six years in a federal penitentiary. Fastow also was sentenced to two years of supervised release and community service after the prison term ends.
Fastow, 44, pleaded guilty to two counts of conspiracy in January 2004, when he agreed to cooperate with the government in an agreement that called for him to accept a maximum 10-year sentence.
A number of friends of Fastow, as well as "victims" of his crimes, were allowed to speak at the sentencing.
Hoyt allowed one former Enron shareholder to speak at the hearing. He also allowed comment from three attorneys from California who are involved in an unfolding civil class-action suit that is slated for trial in Houston April 2007. They told Hoyt that while they believed Fastow should serve time, they hoped he would be made available to give a deposition about the role banks played in the collapse of Enron.
Lawrence Irving, a former federal district judge and now an attorney with Lerach Coughlin Stoia Geller Rudman & Robbins LLP, which is the lead law firm in the shareholder class action, told Hoyt: "We believe Andrew Fastow's testimony will lead to the recovery of additional billions of dollars" from banks named in the suit. He noted that $7.3 billion has already been extracted from banks through settlements.
US Prosecutor John Hueston told Hoyt that Fastow's cooperation in the trial of his two former Enron bosses, former Enron CEO Jeffrey Skilling and founder and former Enron Chairman Kenneth Lay, was "critical," and that Fastow had undergone "a remarkable rehabilitation." Hueston made no mention of how the government hoped the judge might rule on the sentencing.
Fastow's attorney, John Keker, told Hoyt that the sentencing should be "sufficient but not unnecessary." Keker pushed for a five-year sentence, plus three years of supervised probation and community service. He also asked that Fastow be allowed to "voluntarily surrender" himself on October 23 to begin serving his sentence.
Keker's request for the month delay in starting the sentence came on the grounds that Fastow is slated to be deposed starting October 10, according to Keker, in the class action suit.
Fastow, speaking to the judge, said he cooperated with the government, and has worked with the class-action lawyers, as a way to "repair the damage that I caused."
In increasingly tearful comments, Fastow said he pleaded guilty in January 2004 because he was "consumed by despair and shame for what I had done at Enron." He told Brian Durbin, the individual former Enron shareholder who spoke earlier at the sentencing, "I wish I could undo what I did at Enron, but I can't."
Fastow brought a sob from his mother, who was sitting in the front row of the packed courtroom, when he said that he had been teaching his kids that "this is the best legal system in the world." He concluded by saying, "I accept the sentence you are about to serve on me without bitterness."
Hoyt, in his concluding remarks, said he recalled when Fastow first came before him, following an indictment on 78 charges in October 2002. Hoyt said Fastow was "drunk on the wine of greed" at the time. He said that Fastow's actions had damaged a lot of people's lives and that "10 to 12" people had written him letters concerning their losses.
But, Hoyt also noted that Fastow had already forfeited to the government some $24 million in cash and property. He said that Fastow's cooperation with the government in its pursuit of Skilling and Lay was "essential." And finally, he said, he could "hear" the concerns in the words spoken by Hueston that maybe the 10 years Fastow had agreed to serve "was a little too much."
After announcing the 72-month sentence, Hoyt denied the request that Fastow voluntarily surrender later. Instead, Fastow was allowed to hug his wife in the center of the courtroom, and then federal marshals handcuffed him and took him away.
Fastow, who was named Enron CFO in 1998 by Skilling, gained notoriety in October 2001 when it was revealed that he had been the compensated manager of an off-balance sheet special purpose entity with a name that represented the first initials of the names of his wife Lea and two young sons.
As managing partner of LJM1 and LJM2 Fastow arranged deals with Enron that allowed the company to remove assets from its books and provided sizable personal profits to Fastow and to his deputy, Michael Kopper.
Fastow, who was an early target of US investigators looking into Enron's collapse, was indicted in October 2002 on 78 charges, a number increased to 102 charges months later.
The government indicted his wife for not paying taxes on funds siphoned from one LJM, and she eventually spent one year in jail. Fastow reached a plea agreement on two charges shortly after his wife's indictment. Fastow also has forfeited $23.8 million in cash and property.
Fastow testified for the government against both Skilling and Lay at their four-month trial that ended May 25 with 19 convictions against Skilling and 10 against Lay. Lay had long argued that Fastow was a "thief" whose actions led to Enron's loss of credibility among investors and credit rating agencies. Lay died of a heart attack July 5.
Skilling's sentencing hearing is slated for October 23 in the Houston courtroom of Judge Sim Lake.
The six-year sentence for Fastow is the same term that Jamie Olis, the former Dynegy tax account, received last week in his sentencing rehearing. On September 18, Judge Hoyt sentenced David Delainey, former CEO of Enron's main trading unit, to a 30-month sentence instead of the 10 years that was the maximum he could have received under his plea agreement with the government.
September 27, 2006
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