Andrew Fastow, who as CFO guided Enron Corp.’s finances to the heights of success and then to its spectacular fall, was sentenced Tuesday to six years in prison and two years of community service. Fastow, 44, had faced a maximum 10 years in prison under a plea agreement he made with prosecutors two-and-a-half years ago (see NGI, Jan. 19, 2004).
Fastow, his hair now almost completely white, arrived at the Houston federal courthouse last Tuesday accompanied by two U.S. marshals. Wearing a dark gray suit, crisp white shirt and dark blue tie, the once-hailed financial wizard moved through a throng of reporters and onlookers as he made his way into the 11th floor courtroom of U.S. District Judge Kenneth Hoyt.
Following statements in favor of a reduced sentence by both Fastow’s legal team and the prosecution, it was Fastow’s turn to speak before the court. As he stood before Hoyt, Fastow began to sob, and said in a choking voice that he has publicly and privately taken responsibility for his misdeeds. Fastow illegally pocketed about $45 million from his financial shenanigans at Enron, but he said he will deal with the shame of his crimes for the rest of his life.
“I wish I could undo what I did at Enron,” Fastow said, his voice quavering. “But I can’t.” Fastow told Hoyt he was “blessed” with supportive family and friends, but added, “I have failed them…I have to work every day of my life to keep their trust.” He said he would serve his sentence “as part of my repentance that I’ve already begun.”
In halcyon days, Fastow was considered one of the best and most innovative CFOs in the country. He quickly gained the trust of his bosses, former CEO Jeffrey Skilling and Enron founder Kenneth Lay, and he wielded enormous power at the Houston-based energy company. Fastow, who guided Enron into a top 10 position on the Fortune 500, masterminded an ingenious set of special purpose entities (SPE), which were used to not only disguise Enron’s financial problems, but also enrich him and some of his subordinates. The disclosure of the illegal SPEs in October 2001 set in motion a huge financial scandal that sent Enron into bankruptcy in less than two months (see NGI, Dec. 3, 2001).
Fastow originally was indicted in October 2002, and he pleaded innocent at his first court hearing (see NGI, Nov. 11, 2002). By the time he pleaded guilty to two counts of conspiracy, Fastow had been facing 98 criminal counts, including conspiracy, fraud, insider trading and money laundering. He traded the guilty plea for a maximum 10-year prison term, and he agreed to cooperate with the Enron Task Force. Fastow was considered a key witness in the successful prosecution of Skilling and Lay earlier this year (see NGI, May 29). Lay died in July; Skilling is scheduled to be sentenced Oct. 23.
Fastow’s wife Lea was in the courtroom, accompanied by his brother Peter and her father, Jack Weingarten. Lea Fastow, who at one time also worked at Enron, served one year in prison for her role in helping to hide her husband’s crimes (see NGI, May 10, 2004). Before Enron collapsed, the Fastows were well known in Houston for their philanthropic efforts. Lea Fastow was a grocery store heiress when she married Fastow, and she will be caretaker of the couple’s 8- and 11-year-old sons while her husband is in prison.
Before Hoyt passed his sentence, Fastow lawyer John Keker asked for Fastow’s sentence to be reduced to five years. He said when he first represented Fastow, his client “was in denial and wanted to fight the government.” However, Fastow is a changed man who is “desperate” to make amends. Fastow, said Keker, has been a “symbol of evildoing at Enron,” but he said his client was only one of many who were involved in Enron’s undoing, including former executives and outside financial institutions. Feker said Fastow had humiliated and shamed his family, especially his wife, and had been “dehumanized” by hatred and anti-Semitism.
Keker told Hoyt that Fastow “has been trying to show in any way he can [that] he’s not the man who lost part of his soul when he was at Enron.”
Federal prosecutor John Hueston also requested leniency. He told Hoyt that Fastow’s assistance had been the “breakthrough” the prosecution needed to conduct the Enron investigation successfully.
Hoyt appeared to agree, telling Fastow, “Prosecution is necessary…but persecution was not…These factors call for mercy.” The judge said his “investigation shows that while you were a leader you were drunk on the wine of greed. You were but one of several. Yet, for almost a year, you alone bore that brunt of that fall and the ridicule of many detractors. As a result, you were the subject of great persecution, according to my findings. While prosecution was necessary and appropriate, punishment appropriate, persecution was not.
“And, finally, your family has taken a particularly acrimonious hit in this process,” Hoyt said. “I don’t know that I have seen a case where this kind of hit has occurred. I’ve seen it threatened, but I have not seen it occur. Seldom does a man’s public fall cause an equally painful fall for his wife. Few men survive their own fall. You’ve had a double portion, and your wife has shared in that. Hence, the court determines that these factors and perhaps others unknown call for mercy, not justice, because you’ve received justice.”
Hoyt recommended Fastow spend 500 hours in a residential drug rehabilitation program for substance abuse related to medication he has taken to reduce anxiety. No other details were disclosed, but Fastow could cut about two years off of his sentence for good behavior and for participating in the drug rehabilitation program.
Hoyt rejected a request that would have allowed Fastow to report to prison in October. Fastow, who likely will be released from prison before he is 50, was placed in handcuffs immediately after the sentencing and taken into custody. He was allowed to hug his wife before he was escorted out of the courtroom.
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