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Former Enron Financial Chief Faces Mulitple Fraud Charges

Fastow turned himself into authorities in Houston Wednesday morning and is expected to be released later in the day on $5 million bond.

The former Enron financial chief faces charges of securities, wire and mail fraud, as well as money laundering and conspiracy to falsely inflate Enron’s profits through off-the-books partnerships that made the company look more profitable than it was while hiding some $1 billion in debt.

The eventual disclosure of the off-the-books partnerships sparked Enron’s rapid financial disintegration, which ultimately forced the company to file for bankruptcy protection in December 2001. Enron’s collapse sparked a string of corporate scandals and left thousands of Enron employees jobless and with depleted or empty retirement funds.

“Fastow and his co-conspirators systematically and thoroughly corrupted the business of one of the largest corporations in the world,” Thompson told a Justice Department news conference in Washington.

The criminal complaint also alleges that Fastow aimed to enrich himself at the company’s expense, and with the filing of official charges, Justice Dept. officials moved to freeze $11 million of Fastow’s assets — which could include his newly built home in the wealthy River Oaks suburb of Houston.

“Today’s complaint demonstrates the effectiveness of a swift, coordinated law enforcement response to even the most sophisticated financial crimes,” Thompson said of the charges. “Our strategy is straight-forward. We aim to put the bad guys in prison and take away their money.”

Last month, former Fastow aide Michael Kopper, pleaded guilty to financial misconduct and agreed to turn over $12 million of illegally obtained assets in the first federal criminal charges brought against a former Enron official.

Prosecutors have relied on Kopper’s cooperation in substantiating the charges against Fastow, particularly allegations that Fastow used the illegal partnerships to funnel money to himself and members of his family. The complaint alleges that in one transaction, Fastow was able to illegally kick back some $4.5 million to his family foundation.

The off-balance-sheet partnerships netted Kopper, Fastow, and their associates more than $50 million, according to congressional inquiries and investigative reports by Enron’s board of directors. Both men appeared before a congressional committee earlier this year, but both declined to testify, invoking their Fifth Amendment protections against self-incrimination.

Fastow is the highest-ranking Enron official to be charged by the government, leading to speculation on what he might reveal about the roles of former chairman Kenneth Lay or former chief executive Jeffrey Skilling in the false deals.

“I can tell you we are going to get to the bottom of what happened at Enron,” Thompson said, calling the investigation “active and ongoing.”

The Securities and Exchange Commission also filed a related civil lawsuit against Fastow Wednesday, claiming that he violated securities laws and defrauded investors. The SEC is pursuing unspecified monetary penalties against Fastow to help compensate for his alleged illegal financial gains.

Enron’s accounting firm, Arthur Andersen, was found guilty in June on obstruction of justice charges relating to the destruction of Enron-related documents during its audit of the company. David Duncan, the senior auditor in charge of the Enron account, pleaded guilty to an obstruction of justice charge and is now awaiting sentencing.

Fastow could face up to 20 years for the money laundering charges, 10 years for security fraud and five years each on the mail fraud and conspiracy charges. Justice Department officials have said the case would be brought before a grand jury within 30 days.

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