Deadline on plea passes for wife of ex-Enron exec

Published: Saturday, January 10, 2004 at 6:01 a.m.
Last Modified: Saturday, January 10, 2004 at 12:02 a.m.

The government was stymied Friday, at least temporarily, in its attempt to win the cooperation of a key Enron witness when the former executive's wife balked at a plea bargain.

Lea W. Fastow deliberated overnight Thursday with lawyers and her family but did not respond by the noon deadline that U.S. District Judge David Hittner had set for a guilty plea. The judge on Friday afternoon ordered her case to trial as planned Feb. 10 in Houston.

Lea Fastow could be sentenced to four years in prison under the federal sentencing guidelines if she were convicted on all six counts of conspiracy and failing to report income from her husband's secret business partnerships with Enron. She worked out an agreement with prosecutors to serve just five months in prison, but Hittner suggested on Thursday that he might give her a longer sentence.

Fastow and her husband, Andrew S. Fastow, Enron's former chief financial officer, still could make plea deals in the next few weeks.

Mike DeGeurin, a lawyer for Lea Fastow, said, "The government and all the defense lawyers are working over the weekend in the hope we can resolve this case in a reasonable way."

Legal experts said stop-and-start negotiations are not unusual in such cases.

"Once you go down the road to striking a plea, generally you finish the job," said former prosecutor Robert Mintz, noting that potential jurors had been exposed to days of nonstop publicity about the possible guilty pleas and that information prosecutors glean in plea talks can be used to cross-examine defendants if they take the stand in a trial.

Earlier this week, Andrew Fastow tentatively agreed to cooperate with an investigation into what former Enron executives Jeffrey K. Skilling and Kenneth L. Lay knew about the energy firm's worsening finances when they sold stock and made optimistic public statements about Enron's health.

Under the deal, which was contingent on a lenient sentence for his wife, Andrew Fastow would have served 10 years in prison and forfeit more than $20 million that he allegedly gained illegally from partnerships that hid Enron's debt and enriched him and business associates.

Spokesmen for the Justice Department and the Fastow family didn't return calls for comment. Leslie Caldwell, head of the department's Enron Task Force, left the Houston courthouse Friday, telling a reporter she was headed for the airport.

It's not clear what information Fastow could share with the government, though sources said he has provided some evidence against former chief accounting officer Richard A. Causey. Causey's lawyer, Reid Weingarten, has said his client followed the law and accounting rules.

Bruce Hiler, an attorney for Skilling, said in a prepared statement: "None of the recent developments changes our firm belief that an objective fact finder would conclude that Mr. Skilling did not do anything wrong. We're sympathetic to the human story here and to those who feel pleas are better than facing a trial in the poisoned atmosphere that exists, but it changes nothing on the true facts."

Michael Ramsey, an attorney for Lay, said a possible Fastow plea would have "no impact" on Lay if the truth were told.

Separately, the University of California added two banks and two law firms to a class-action lawsuit it filed on behalf of Enron shareholders. The university said Milbank, Tweed, Hadley & McCloy improperly helped structure deals that served to manipulate Enron's earnings, reaping fees of more than $150 million. The university also sued Houston law firm Andrews & Kurth LLP, Goldman Sachs & Co. and the Royal Bank of Canada, claiming they enabled Enron to inflate income and conceal mounting debt.

Stephen Blauner, a Milbank attorney, called the lawsuit "completely meritless" and said he would move to dismiss the case. He said two judges and a bankruptcy examiner had reviewed Milbank's Enron-related work without criticizing the firm.

Paul Wilson, an RBC spokesman, said the bank would contest the allegations.

Howard Ayers, managing partner of Andrews & Kurth, said the charges in the lawsuit were "simply wrong." Lucas van Praag, a Goldman Sachs spokesman, would not comment on pending litigation.

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