In Houston, Texas, the former chief financial officer of the failed Enron energy trading company, Andrew Fastow, pleaded guilty Wednesday to accounting fraud. Enron was the seventh largest U.S. company before its $68 billion collapse in 2001. Thousands of people lost their jobs and their retirement savings. The plea bargain may open the way to Andrew Fastow cooperating with authorities in going after the two executives who headed Enron.
Mr. Fastow pleaded guilty to conspiracy and fraud charges in a deal giving him ten years in prison. Mr. Fastow's wife has also pleaded guilty to lesser charges and is likely to serve more than six months in prison.
Analysts say the deal increases the chances that federal fraud charges will be brought against Kenneth Lay and Jeffrey Skilling, the men who headed and transformed Enron from a regional pipeline company into one of America's most powerful energy giants. The collapse of Enron in December 2001 cost investors billions of dollars and eliminated nearly 6,000 jobs.
Mr. Fastow won numerous awards for excellence in accounting. He received a master's degree from the University of Pennsylvania's Wharton School of Business, one of the country's most prestigious schools. He has admitted to having engineered unscrupulous off-the-books partnerships that enriched himself and his wife. He has agreed to pay $23 million in civil penalties. Enron shareholders have filed charges seeking millions of dollars from Mr. Fastow. He will be sentenced in mid-April.
The Enron case was the most prominent of several corporate bankruptcies that resulted from fraudulent accounting. Its collapse was followed six months later by the collapse of WorldCom, which was then the number two U.S. telecommunications firm.
Later scandals enveloped the New York Stock Exchange whose chief executive had a compensation package exceeding $100 million and the mutual fund industry. Surveys show public opinion favors jail time for corrupt chief executives. But thus far few of the chief executives have been charged or convicted.