Lea Fastow, wife of the former Enron CFO, pleaded guilty Thursday in a Houston courtroom to one misdemeanor charge for filing a fraudulent tax return. She will serve one year in federal prison and one year of supervision after she is released.

Fastow was surrounded by family and friends, including her mother, before her guilty plea. She expressed regret for her actions before presiding U.S. District Judge David Hittner, and after he left the courtroom, she burst into tears.

Fastow pleaded guilty to one misdemeanor count of willfully delivering a joint 2000 tax return that reported more than $48 million in income to the Internal Revenue Service. Under her original plea bargain, she had pleaded guilty to a tax felony. The misdemeanor plea will not bar her from being employed in certain occupations, nor will it bar her from voting.

Hittner had refused to accept the original plea under the agreement between the defense and prosecution, and on Thursday, he scolded prosecutors for changing the original six felony-count indictment to one misdemeanor. Hittner also suggested that justice may not have been served in the case.

Fastow will be incarcerated in a still-undetermined federal prison. The Bureau of Prisons will decide the location, and for any sentence of 12 months or less, no time off for good behavior is given. The 42-year-old Houston socialite, who worked at Enron from 1990 to 1997, was an assistant treasurer when she left. Among other things, she was instrumental in securing Enron’s world-class art collection.

Her husband Andrew Fastow already has pleaded guilty to two felony charges, and he faces up to 10 years in prison for his role in Enron’s fraudulent schemes. He is cooperating with the Enron Task Force, and most likely will not go to prison until he fulfills his plea agreement and the investigation is complete. That may take up to a year or longer.

In other news, the former corporate secretary for Enron is expected to settle charges with the Securities and Exchange Commission (SEC) and to help federal prosecutors in their investigation of other company executives, the Wall Street Journal reported last Wednesday.

Paula Rieker was a top official in Enron’s investor relations unit and apparently faces civil and criminal charges related to Enron’s demise, the newspaper said. Rieker apparently is expected to settle SEC charges for insider trading and making false statements. Criminal charges also are expected against Rieker as part of an apparent cooperation agreement with prosecutors.

Rieker would be a “potentially strong witness” against former CEO Jeffrey Skilling and Richard Causey, former chief accounting officer. Both men pleaded not guilty and await trial after they were indicted earlier this year on fraud charges and manipulation (see NGI, Feb. 23). “Given her senior positions at Enron, she also could be helpful in the government’s continuing criminal probe of former Chairman Kenneth Lay,” the Journal reported.

Investigators have been looking into Lay’s actions in the final six months of 2001 as Enron disintegrated. Lay has not been charged with any crimes and has denied any wrongdoing, but investigators want to determine if he lied to the public about Enron’s condition.

©Copyright 2004 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.