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Department of Justice Announces Enron Indictments

Aired October 2, 2002 - 10:07   ET


LEON HARRIS, CNN ANCHOR: Right now, let's go to the Department of Justice (UNINTELLIGIBLE) about the Enron indictments.

LARRY THOMPSON, DEPUTY U.S. ATTORNEY... the Department of Justice have sought the freezing and forfeiture from Fastow of an additional $11 million traced to the crimes alleged in today's complaint with the assistant of the Securities and Exchange Commission and the Internal Revenue Service.

This action -- this brings to more than $21 million, the amount of cash and property frozen from Fastow and his family when added to the more than $11 million frozen in August. The charges in today's complaint describe a conspiracy beginning in 1997 and lasting through July of 2001 reflects the panoply of Fastow's alleged criminal conduct.

Not only does the complaint charge that Fastow defrauded investors by persistently falsifying Enron's financial results, the complaint also alleges that Fastow defrauded the company itself by stealing from the same clandestine transactions he had rigged up to swindle Enron's investors.

In the process, as alleged in the complaint, Fastow and his co- conspirators systematically and thoroughly corrupted the business of one of the largest corporations in the world. The criminal conduct described in today's complaint involves Fastow's and his co- conspirators' use of so-called "special purpose entities", business organizations designed by Fastow to hide off of Enron's financial books debts and non-performing assets that the conspirators referred to as "nuclear waste".

The complaint alleges that Fastow recruited Michael Kopper, then an Enron managing director to coordinate these entities. Fastow is charged with an array of schemes, including RADR, Chewco, South Hampton and others that differed in their details, but all had the common purpose to conceal the nature and extent of Enron's investments by placing tens of millions of dollars of debt off of its own balance sheet.

LARRY THOMPSON: As alleged, this made Enron falsely appear more profitable to investors and disguise the true ownership of assets from regulators. To accomplish this, Fastow allegedly benefited from the active cooperation of a leading financial institution that allowed Enron to part on its books a money-losing Nigerian power barge. Even while Fastow is alleged to have persistently deceived Enron's investors, Fastow is also alleged to have stolen millions of dollars from these transactions to benefit himself, his friends and his co-conspirators. In the South Hampton deal alone, the complaint alleges that Fastow's family foundation pocketed $4.5 million.

Today's charges are yet another successful step in a concerted strategy of Corporate Fraud Task Force members that combines the efforts and expertise of the criminal and tax divisions of the Department of Justice and the Federal Bureau of Investigation with our colleagues from the Securities and Exchange Commission and the Internal Revenue Service. This arrest demonstrates the type of coordinated, cooperative law enforcement effort that the president directed the Corporate Fraud Task Force to marshal in cracking down on corporate fraud.

HARRIS: There we go. Attorney General Larry Thompson there announcing the charges that Andrew Fastow is going to be facing. Andrew Fastow, the former CFO of Enron, here, being accused of recruiting others to help him coordinate concealment of the nature and extent of Enron debts -- and it says here, stealing money to benefit himself and his family and friends, to the tune of over tens of millions of dollars.

Let's check in now with our legal analyst Jeffrey Toobin, who has been listening in. Jeffrey, what do you make of the list of charges that we're listening right now to this deputy attorney general file this morning?

JEFFREY TOOBIN, CNN LEGAL ANALYST: Well, it's certainly quite a list.

The government came down with all of its might on Andrew Fastow. It's worth remembering that this moment was really preordained on August 21. On August 21, Michael Kopper, who was Fastow's protege at Enron, agreed to plead guilty and cooperate with the government. He pleaded guilty to crimes where he said Fastow was involved, so it was obvious the government was moving against him.

I think the important point to remember here is these charges all relate to the alleged corrupt use of these partnerships, the illegal -- the illegal money...


TOOBIN: ... the Special Purpose Entities, right.

Ken Lay and Jeffrey Skilling, the former chairman and the former CEO, there has been no evidence so far that they were involved with these Special Purpose Entities. It will be interesting to see if the government can tie these higher-ups, because they are the only two people really left above Fastow in the food chain. There's been no evidence that I've seen so far that they were involved in these partnerships, that they profited from the partners. So it may just end with Fastow in terms of prosecution. HARRIS: Real quickly, we have to go now, but I have to ask you this -- the government has been moving so slowly, it seems, on this Enron case. It has moved quicker on others, with Global Crossing, WorldCom, and all. Are we now to expect more momentum in this case, to expect these other names, Skilling and Lay, to come back in the news quite often now?

TOOBIN: You know, I think that we are sometimes a little too impatient. These cases take a long time to put together. They are very complicated. If you look at Drexel-Burnham (ph), the Michael Milken investigation, that took two years. I think the government has made relatively steady progress here. It's only been about eight months since this task force has been underway. I do think there will be more charges. Skilling and Lay, very much an open question.

HARRIS: All right. Open question. This may still be the tip of the iceberg. We shall see. Jeffrey Toobin, thank you much.


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