SEC And DOJ File Charges Against Former Enron CFO
The U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) have both filed charges against Enron's former chief financial officer, Andrew Fastow. The charges relate to Mr. Fastow's role in arranging the off-balance-sheet financing that contributed to the company's abrupt collapse, resulting in unexpected losses for shareholders and employees.
- SEC's charges. The SEC's complaint focuses on six transactions. Three are said to have been part of a scheme to keep special purpose entities off Enron's balance sheet. A fourth is said to have involved undisclosed loans and under-the-table payments. The two remaining transactions are said to have been sham transactions involving unwritten side agreements and backdated documents. The civil charges related to these transactions include violations of the anti-fraud, periodic reporting, books and records and internal control provisions of the federal securities law. The potential penalties include disgorgement of ill-gotten gains and a permanent bar from acting as a director of officer of another publicly held company.
- DOJ's charges. The DOJ has filed criminal charges for wire fraud, mail fraud, money laundering and conspiracy to commit securities fraud. Each of those charges could result in prison time. But before the case goes to trial, the DOJ must win a grand-jury indictment within the next 30 days.
Mr. Fastow's attorney released a statement, saying his client never believed he was committing any crime. In effect, he said the former CFO was simply doing his job: "Enron hired Andy to arrange off-balance-sheet financing. Enron's board of directors, its CEO, and its chairman, directed and praised his work. Accountants and lawyers reviewed and approved his work." Mr. Fastow could agree to cooperate with prosecutors and provide evidence against top Enron executives in exchange for leniency from a sentencing judge.