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Lea Fastow pleads -- who's next?
Plea deal for wife of ex-Enron CFO could lead husband to talk more about Lay, Skilling, experts say.
May 6, 2004: 5:46 PM EDT
By Krysten Crawford, CNN/Money staff writer

NEW YORK (CNN/Money) - Former Enron Corp. finance chief Andrew Fastow is likely to be more forthcoming with prosecutors about his ex-bosses, Jeffrey Skilling and Kenneth Lay, now that his wife's plea deal has been accepted by a federal judge, legal experts said Thursday.

Lea Fastow, a former Enron assistant treasurer, pleaded guilty to a misdemeanor tax charge Thursday in federal court in Houston. U.S. District Judge David Hittner sentenced her to a year in prison and another year of supervised release. She was not fined since she and her husband have already agreed to forfeit nearly $30 million in funds, according to prosecutors.

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Lea Fastow will spend a year in prison after a federal judge accepted a new plea deal.

Fastow, 42, told the judge Thursday she was guilty of submitting an income tax return that did not include more than $204,000 her family received from her husband's secretive partnerships.

"I've made errors in judgment I will always regret," she told the court, according to Reuters. "I didn't understand the impact they would have on my family and friends. I only intend to do right from now on."

Dressed in a long black skirt and suit jacket, Fastow had no visible reaction when the sentence was imposed. After the hearing, she was seen crying and hugging supporters. Her husband was not with her. She will be told at a later date where and when to surrender to prison officials.

It was the second time Lea Fastow had gone before Hittner to agree to a plea bargain. The first one collapsed April 7 after Hittner refused to stick with a five-month prison term prosecutors recommended, indicating he thought the sentence would be too lenient when probation officials had recommended 10 to 16 months. Hittner's refusal to go along prompted Fastow to pull out of the plea pact.

Although he signed off on the new deal, Hittner spoke harshly to prosecutors at Thursday's hearing.

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More cooperation is expected from Andrew Fastow.

"The Department of Justice's behavior might be seen as a blatant manipulation of the federal justice system and is of great concern to this court," the judge said. Under federal sentencing guidelines, Fastow faced 10 to 16 months in prison. Both sides asked the court to impose 10 months, split between five months in prison and five months of home detention.

Enron Task Force Director Linda Lacewell defended the government's decision, saying Lea Fastow worked hard to convince her husband to cooperate.

Lea Fastow last year was charged with six felony conspiracy and tax counts by the Justice Department, as officials tried to persuade her husband to cooperate with their investigation into the bankrupt former energy giant.

Andrew Fastow pleaded guilty to separate charges in January and will serve a 10-year prison term after he finishes cooperating with prosecutors. The deal was engineered to ensure one of the Fastows was out of prison at all times to care for their young children.

"The government, I think, is very happy with this resolution," said Orin Snyder, a former federal prosecutor with Manatt, Phelps & Phillips in New York.

"It was a game of chicken at this point," Snyder said. "The husband had entered his guilty plea. He knew the government didn't want to prosecute her because it would require them to show their hand. That would hurt them in their case against the big fish they're hoping to convict in the overarching scandal."

Lay, Skilling next?

Legal experts said Thursday that Andrew Fastow, for all his cooperation so far, has likely been holding back from prosecutors, waiting until his wife's fate was official before disclosing his most damaging information.

"The moment that plea is effective by the judge he'll start talking," said Stanley Twardy Jr., a former U.S. attorney in Connecticut and a partner in Day, Berry & Howard.

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Fastow's Plea and Enron Charges

The Fastows' cooperation was considered a coup for prosecutors seeking to propel the investigation forward.

Andrew Fastow's comments led to the indictment of former Enron CEO Jeff Skilling on 35 counts, according to prosecutors. Skilling and co-defendant Richard Causey, Enron's former accounting chief, both have pleaded not guilty.

Prosecutors are still investigating former Enron chairman and CEO Kenneth Lay, according to reports. No charges have been brought against him.

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Said former prosecutor Snyder of Andrew Fastow: "He's just going to be a much more relaxed and helpful cooperating witness if he knows his wife is out of harm's way."

Enron filed what was then the biggest bankruptcy in U.S. history in December 2001 amid revelations about off-the-books partnerships that were used to hide debt and inflate profits. The government probe that followed had focused mostly on lower-level managers until the Fastows agreed to cooperate with prosecutors.

A total of 29 defendants have been charged in the investigation, including 20 former Enron executives, but only 10 have been convicted, including the Fastows. The task force has recovered more than $150 million in proceeds derived from criminal activity, according to the Justice Department.  Top of page

-- Reuters contributed to this story.



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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.