Former Enron Corp. CFO Andrew Fastow is most likely deciding whether to plea bargain with federal prosecutors or become the fall guy after he was charged with five counts of fraud, money laundering and conspiracy last Wednesday in Houston. The U.S. government, claiming they were obtained illegally, is freezing and plans to require Fastow to forfeit about $37 million of his assets, according to the Department of Justice’s Deputy Attorney General Larry Thompson.

Fastow only spent a few hours in custody; by Wednesday afternoon, he had been arraigned with bail bond set at $5 million, secured with real estate owned by him, his wife and his parents, as well as a $3 million Fidelity investment account.

Fastow also allowed prosecutors to freeze $11 million in other assets, and he and his wife Lea had to surrender their passports. He will only be allowed to travel in Texas and California. The assets Fastow secured for his bond, which required the co-signature of his wife and parents, included his current home in the Southampton section of River Oaks (assessed at $700,000); a home now under construction and up for sale in River Oaks (estimated at $4.3 million); a summer home in Galveston (assessed at $288,000); a Vermont cabin situated on 68 acres (worth about $300,000); and a home he obtained for his parents last year, which is also in Southampton (bought for $790,000). “Southampton” is also the name of one of the several special purpose entities that Fastow had set up and run for Enron now under investigation.

During Congressional hearings on the collapse of Enron, Fastow invoked the Fifth Amendment, and refused to testify. He is considered by many to be the one who devised Enron’s complex special purpose entities (SPEs) that were used to hide debt from shareholders and regulators. As manager of the SPEs, Fastow also was estimated to have received about $30 million in profits.

Fastow has maintained through spokespersons that he acted with the full knowledge of Enron’s Chairman Kenneth Lay and CEO Jeffrey Skilling. Lay has not spoken publicly in his defense; Skilling twice testified before Congress that he had no knowledge of any wrongdoing at Enron. Michael Kopper, a former Enron finance official who worked for Fastow, pleaded guilty earlier this year to felony conspiracy to commit wire fraud and money laundering, and has been giving federal officials information concerning his role and that of his superiors (see NGI, Sept. 2).

The Securities and Exchange Commission (SEC) also filed charges against Fastow last week, alleging that he violated securities laws concerning anti-fraud, periodic reporting, books and records and internal controls provisions. The SEC said in a statement that it would seek to permanently bar Fastow from acting as a director or officer of a publicly held company. it also is seeking an injunction from future violations of federal securities laws.

Also last week, 10 of Enron’s former top executives, including Lay, Skilling and Fastow, now face lawsuits by the bankrupt company’s creditors, after the U.S. Bankruptcy Court overseeing the company’s case gave its permission. The lawsuits would be handled in Texas district court.

U.S. Bankruptcy Judge Arthur Gonzalez authorized the creditors to file lawsuits on behalf of Enron alleging fraud and breach of duty, among other offenses. Nearly 70 subpoenas have already been issued after a study was done, according to one of the creditors’ committee’s lawyers.

Also included in the authorization were lawsuits against former Chief Risk Officer Richard Buy, Chief Accounting Officer Richard Causey, and five other individuals: Michael Kopper (who has already pleaded guilty to fraud and money laundering), Ben Glisan Jr., Kristina Mordaunt, Kathy Lynn and Anne Yeager-Patel. Kopper is cooperating with federal investigators as they continue their probe of Enron.

Glisan, Mordaunt, Lynn and Yeager-Patel were involved in the special purpose entity set up and once managed by Fastow that was known as Southampton, which is under investigation by the Department of Justice.

“As a result of its investigations, the committee has determined that, among other things,” some Enron executives “engaged in wrongdoing and misconduct,” said Luc Despins, a committee lawyer. Any of the money that is won through the lawsuits would be added to the assets that creditors eventually would divide when the bankruptcy process is completed.

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