Former Enron Corp financial executives Andrew Fastow and his wife Lea pleaded guilty to criminal charges on Wednesday in the biggest prize yet for prosecutors on the hunt for the people who drove the energy trading giant to ruin.
Federal officials said the plea bargains may enable them to aim squarely at still-unindicted Enron kingpins Ken Lay, the company's former chairman, and Jeff Skilling, its former chief executive.
The once high-flying Fastows, who lived a life of luxury, will soon find themselves in federal prison, a big comedown from the huge Houston mansion they were building when Enron came unglued in 2001.
Lea Fastow, who was assistant treasurer at Enron, confessed to one count of filing a false tax return in exchange for an agreement by prosecutors to recommend a sentence of five months behind bars followed by one year of supervised release.
Her plea came two hours after Andrew Fastow, Enron's former chief financial officer, admitted to cooking the company's books and pleaded guilty to wire and securities fraud.
He told US District Judge Kenneth Hoyt he would cooperate with prosecutors in exchange for a 10-year prison sentence and agreed to forfeit US$29 million in assets, including proceeds from the sale of the unfinished mansion.
Federal officials, in an apparent warning shot to Lay and Skilling, said the Fastows' willingness to talk "opens wide a window into the fraudulent practices of Enron's senior management."
The Securities and Exchange Commission said it had reached a settlement with Fastow that bars him permanently from working as an officer or director of a public company.
"With this settlement and Andrew Fastow's continuing cooperation, we have penetrated Enron's executive suite," Stephen Cutler, the SEC's enforcement director, said in a statement.
Lawyers for Skilling and Lay issued statements maintaining their innocence of any wrongdoing.
"Bottom line, if the truth is told, there still will be no case against Jeff Skilling," attorney Bruce Hiler said.
Enron was the leading US energy merchant firm, a political powerhouse with close ties to President George W. Bush and a Wall Street darling until its loose accounting led to a restatement of earnings and a US$1.2 billion writedown of shareholder equity in the weeks leading up to its December 2001 bankruptcy filing, from which the company has not yet emerged.
Fastow, operating just below Lay and Skilling in the corporate structure, was the primary architect of Enron's financial house of cards that included a maze of off-the-books partnerships to hide billions of dollars in debt and to artificially boost profits.
Authorities have said he also funneled millions of dollars from those deals into his own pockets.
Fastow's plea is the highlight so far of a two-year-long federal investigation that has brought a conviction of former Enron accounting firm Arthur Andersen, guilty pleas from several Enron executives including former treasurer Ben Glisan and Fastow's top lieutenant Michael Kopper, and indictments of 19 other people, most of whom are awaiting trial.
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