Former Enron CFO sentenced to 6 years
A judge granted leniency for Andrew Fastow who could have served 10 years behind bars for his role in Enron's demise.
NEW YORK (CNNMoney.com) -- Former Enron financial chief Andrew Fastow, long vilified as the mastermind behind the collapse of Enron, was sentenced to six years in prison Tuesday - a lighter sentence than the 10 years he agreed to in his original plea agreement.
Fastow appeared before U.S. District Judge Ken Hoyt in Houston amid of throng of reporters and victims of the fraud that cost Enron shareholders billions of dollars. Hoyt sentenced him to 72 months in jail and two years of supervised probation following his release.
The judge cited his cooperation with prosecutors and eagerness to assist shareholders that had lost millions in Enron's collapse for the relatively lenient sentence.
Under his plea agreement in January 2004, Fastow pled guilty to two counts of conspiracy and agreed to accept a 10-year prison sentence and forfeit $23.8 million to the federal government. Judge Hoyt imposed no additional fine.
Fastow hugged his wife and surrendered immediately after the hearing, Reuters reported. The judge rejected a request from lawyers for victims suing banks to recover Enron-related losses that Fastow be allowed to surrender Oct. 23, after giving a deposition in that case.
Legal experts said it was a surprisingly lenient ruling given Fastow's prominent role in Enron's demise. Fastow was the creator of the questionable, off-balance sheet partnerships that helped Enron hide millions of dollars in losses from investors.And he admitted to siphoning millions of dollars from Enron through illegal side deals.
Legal observers said the 6-year sentence was particularly unusual given that Judge Hoyt had been harsh in sentencing Fastow's former Enron colleague David Delainey.
Delainey, the former head of Enron's energy trading business, was sentenced to 2 1/2 years behind bars for insider trading last week. Delainey, a Canadian citizen, pled guilty to the charge in 2003 and agreed to testify against both Lay and Skilling during their trial.
But Jack Sylvia, securities litigator at law firm Mintz Levin, told CNNMoney.com that Fastow's testimony against former Enron CEO Jeffrey Skilling and Enron founder Kenneth Lay, as well as his cooperation with attorneys in several shareholder lawsuits tipped the scale in his favor.
"The closest thing you're going to come to showing remorse for your action is to disgorge the money you made and help to recover the funds that shareholders were deprived of," Sylvia said.
But Sylvia said the level of leniency was a surprise, given the fact that before his plea agreement, Fastow faced over 90 different charges that would have resulted in a much stiffer penalty had he gone to trial and been convicted.
"Some might say that by cooperating, he already got a bargain," he said.
Under the original plea agreement, Fastow's sentencing was delayed until after his wife, Lea, served a year in jail for filing a false tax return that helped her husband hide millions of dollars in illegal profits from his side deals at Enron.
Fastow's rabbi speaking to reporters after the sentencing said that Fastow was a changed man and the family had hoped that he would serve even less time.
"What you have seen is a man that innately had good values...a moral man who strayed," said Rabbi Shaul Osadchey. "This man had returned to the true person he actually is [and] hopefully will be in the future."
Fastow was considered one of the star witnesses in the trial against Skilling and Lay earlier this year. He testified that the win-at-all-cost culture within Enron promoted fast dealings.
"In the culture of corruption within the company that rewarded financial performance over economic value, I believe I was being a hero," he testified in March, although he said he later regretted his illegal actions.
But Fastow said that Skilling was not only aware of some of the controversial partnerships used to artificially prop up Enron's performance but that he gave those deals his blessing.
And he said that Enron founder Kenneth Lay was aware of Enron's deteriorating financial condition and expected a big third-quarter loss in 2001, but kept telling the public and employees the company was "fundamentally strong."
Skilling was convicted of 19 counts of fraud, conspiracy, insider trading and lying to auditors. Lay was convicted of 6 counts of fraud and conspiracy related to Enron's collapse and four counts of bank fraud in a separate bench trial.
"There's no doubt that we could not have brought jurors inside the doors of Enron's executive suite without Andy Fastow, " John Hueston, lead prosecutor in the Enron trial, said to the reporters after the sentencing.
But Hueston added that Judge Hoyt's sentence "reflected mercy today."
More Enron sentences to come
Fastow's sentencing comes as the courts begin the process of sentencing other executives involved with Enron's collapse.
Enron's former chief accountant Richard Causey, who was originally slated to be tried alongside Lay and Skilling, cut a deal just weeks before the trial and agreed to serve seven years for securities fraud. Causey was widely expected to be called to testify against his former bosses but he never took the stand. He will be sentenced on Oct. 19. Meet the players.
But the main star of the show in Houston's courtroom will be former CEO Skilling, who will be sentenced on Oct. 23. Skilling will be facing between 20 and 30 years in prison.
He will be facing a judge alone because of Lay's death. But government prosecutors are attempting to hold Lay's co-defendant Skilling responsible for Lay's $43.5 million forfeiture. That would obligate Skilling to pay $183 million in restitution to government for his and Lay's convictions.
Enron's bankruptcy, the biggest in U.S. history when it was filed in December 2001, cost 4,000 employees their jobs and many of them their life savings. Investors lost billions of dollars.
Enron's collapse marked the first of the high-profile corporate scandals that rocked the nation, followed by WorldCom, Global Crossing, Adelphia and Tyco (Charts). The wave of fraud led to passage of the Sarbanes-Oxley law that tightened oversight of how American companies are audited.
From staff and wire reports