A plea bargain that would have sentenced former Enron Corp. Assistant Treasurer Lea Fastow, 42, to federal prison for five months was rejected by a federal judge in Houston Wednesday, but modifications could revive the deal, according to court sources. Meanwhile, a plea bargain agreement that would send her husband, former Enron CFO Andrew Fastow, 42, to federal prison for 10 years, apparently was being negotiated late Wednesday.

U.S. District Judge David Hittner, who is overseeing Lea Fastow’s case, rejected the plea agreement reached between her lawyers and prosecutors because he said it would have given the court no leeway to increase the sentence, according to a report in the Houston Chronicle. The agreement apparently would have allowed Lea Fastow to plead guilty to one of six criminal counts for a five-month sentence; the one count is subject to a maximum 16-month prison term. An earlier plea bargain deal for Lea Fastow had fallen apart last November (see Daily GPI, Nov. 10, 2003).

Any plea bargain agreements must be affirmed by the federal judge for the case, prosecutors and the defendants.

A plea bargain for Lea Fastow still could be accepted by Hittner with changes, but it would likely involve a longer term in prison. If no agreement is reached, her trial is scheduled to begin Feb. 10, and prospective jurors are scheduled to appear at the federal courthouse in Houston beginning Thursday morning.

A plea arrangement apparently would allow Lea to serve her sentence and be home before her husband’s trial, now scheduled to begin in April, is concluded. Lea worked at Enron until 1997, and she and her husband have two sons, both under 10 years old.

The Chronicle reported that one of Andrew Fastow’s San Francisco-based lawyers, Jan Little, arrived in Houston late Tuesday. And the former CFO’s lead lawyer, John Keker, was expected to arrive in Houston on Wednesday. Also making an appearance in Houston this week is Leslie Caldwell, Enron’s Task Force Director.

Andrew Fastow first was indicted in October 2002 on 78 counts of fraud, money laundering, conspiracy and obstruction of justice (see Daily GPI, Oct. 3, 2002). Last May, he was charged with 31 more criminal counts, including insider trading, filing false tax forms and for conspiracy to falsify the books and records of the failed energy merchant (see Daily GPI, May 20, 2003). Attorneys have requested a change of venue for the trial, preferably outside of Texas. If Fastow fails to reach an agreement for a plea bargain, he faces a long prison sentence if he is convicted on all counts. For each count of money laundering alone the maximum penalty would be 10 to 20 years, and he also could face millions of dollars in fines.

In related news, Enron’s former chief accounting officer, Rick Causey, was expected to turn himself into the FBI in Houston on Thursday, the Chronicle reported. Apparently, a criminal complaint will be filed against him, but it was unclear what the charges would be. Before coming to Enron, Causey formerly worked for Arthur Andersen, Enron’s former accountant.

Last October, Causey subordinate Wesley H. Colwell, the former chief accounting officer for subsidiary Enron North America, settled charges with the Securities and Exchange Commission (SEC) that he and other Enron executives had allegedly inflated earnings through the “misuse of reserve accounts, concealment of losses, inflation of asset values and deliberate use of improper account treatment for transactions (see Daily GPI, Oct. 13, 2003). The SEC allegations at the time were considered to be “very much intended for Causey,” according to sources.

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