Ex-Enron Corp. CFO Andrew Fastow, who was sentenced to six years in prison last month (see Daily GPI, Sept. 27), will be given a day pass through October to allow him to participate in a deposition to prepare for a trial against several of Enron’s former banking partners. Also on Friday, Dynegy Inc. agreed to pay Enron $44 million to resolve litigation issues, a bank settled with Enron for another $20 million, and Enron’s former corporate secretary received probation for helping prosecutors convict Enron founder Kenneth Lay and ex-CEO Jeffrey Skilling.

U.S. District Judge Melinda Harmon in Houston ruled Thursday Fastow will be allowed to participate in the deposition, but he must remain in the custody of the U.S. Marshals Service when he is outside of the federal prison in Bastrop, TX, where he is serving his sentence.

A group of shareholders, led by the University of California as lead plaintiff, had requested Fastow be allowed to provide a deposition in the lawsuit, which is scheduled to go to trial next year. More than 80 lawyers are expected to participate and ask Fastow questions about the banks’ alleged participation in fraud schemes at the bankrupt company.

UC spokesman Trey Davis said the deposition is expected to provide information on the role of financial institutions as “knowing participants” in schemes, which were led by Fastow.

So far, UC and the shareholders have reached settlements with several of Enron’s former banks, for a total of about $7.3 billion (see Daily GPI, Aug. 9, 2005). The lawsuit will proceed to trial next April against those financial institutions that have not settled, which include Merrill Lynch & Co. and Credit Suisse First Boston.

On Friday, Dynegy Inc. agreed to pay Enron $44 million to resolve some litigation issues concerning an agreement dated Nov. 1, 2001. The two companies were in the middle of negotiations at that time to attempt a $22 billion merger (see Daily GPI, Nov. 12, 2001). Dynegy, which backed out of the merger proceedings after Enron’s financial picture became clearer, said it will take a $20 million pretax charge against the settlement payment in its 4Q2006 earnings.

According to court documents, the Dynegy settlement resolves adversarial proceedings, and it releases Dynegy from all future claims asserted by Enron. The settlement is subject to approval by the bankruptcy court, which is expected before the end of the year.

Also on Friday, FleetBoston Financial Corp., Fleet National Bank and some of their affiliates agreed to pay Enron nearly $20 million to settle some outstanding litigation. Under the terms of the settlement, Fleet will pay Enron $10.4 million to settle MegaClaims litigation and $9.35 million to settle commercial paper litigation. Fleet did not admit liability or wrongdoing, and both parties agreed to settle the litigation to avoid the costs and uncertainties of further proceedings. The settlement remains subject to the execution of definitive agreements and the approval of the U.S. Bankruptcy Court for the Southern District of New York.

Following its bankruptcy, Enron’s sued 10 investment firms and accused them of failing to prevent its collapse. The original MegaClaims complaint claimed that banks aided and abetted breaches of fiduciary duties; aided and abetted fraud; and engaged in civil conspiracy. The lawsuit also included bankruptcy based claims relating to equitable subordination; preferential and/or fraudulent transfers; and the recharacterization of certain transactions.

Settlements announced to date have provided more than $800 million of cash payments and the subordination or cash in lieu of subordination of more than $3 billion in claims (see Daily GPI, July 6; May 11). Remaining MegaClaim defendants include Citigroup Inc., Deutsche Bank AG and Barclays plc.

Finally, Paula Rieker, Enron Corp.’s former corporate secretary, was sentenced in Houston on Friday to two years probation. Rieker, who pleaded guilty in May 2004 to insider trading charges (see Daily GPI, May 20, 2004), was considered one of the key witnesses in the successful prosecution of Enron founder Kenneth Lay and ex-CEO Jeffrey Skilling.

Prosecutors requested Rieker’s possible 10-year sentence be reduced because of her cooperation. Rieker, 52, had offered “powerful and credible” testimony, according to court documents. Lay died in July; Skilling is scheduled to be sentenced later this month.

U.S. District Judge Melinda Harmon also fined Rieker $50,000, which will go to the Enron victims’ compensation fund. Rieker already has returned more than $800,000 related to money she made from insider stock trading while she worked at Enron. She had once reported directly to Lay and had kept the minutes of Enron board meetings.

©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.