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Judge Rejects Plea Bargain Deal for Wife of Enron CFO - 2004-04-07

The wife of a former Enron executive may be the first person brought to trial on charges related to that company's collapse after a federal judge in Houston rejected a plea bargain on her behalf. The action could have some impact on the willingness of the defendant's husband to provide information to the government.

Government prosecutors had struck the deal with Lea Fastow in order to obtain a plea bargain and valuable testimony from her husband, former Enron Chief Financial Officer Andrew Fastow. His testimony is critical to the government's case against former Enron Chief Executive Officer Jeff Skilling, and information Fastow provides could also help build cases against other former high-ranking company officials.

Prosecutors say the deal with him is unaffected by what happens in his wife's case, but some legal experts say he could be a little less willing to divulge information if he feels his wife has been treated unfairly.

Lea Fastow is charged with filing a false income tax return. Her attorneys had worked out a deal for a five-month prison sentence, followed by five months of house arrest in exchange for her guilty plea. But U.S. District Judge David Hittner said that was far less than the 10 to 16 months in prison generally given to persons found guilty of this crime. In an unusual move, Judge Hittner announced his decision without hearing arguments from either legal team in the courtroom, something Fastow attorney Mike DeGuerin condemned.

"I do not recall a situation in which neither the government was allowed to speak or the defense was allowed to speak before an important decision like this was made," he said.

Mr. DeGuerin had argued that a home detention would allow Mrs. Fastow to remain with her children, who may well lose both parents after Mr. Fastow begins serving the 10-year sentence he agreed to under his plea bargain. Some legal experts say the judge might have accepted the plea had this not been such a high-profile case involving the loss of billions of dollars by shareholders as well as company employees whose pension funds evaporated.

After Judge Hittner announced his rejection of the Lea Fastow plea bargain deal, her attorneys withdrew her guilty plea and the judge announced that her trial will take place in the city of Brownsville, Texas, with jury selection beginning on June 2. Since no other trial dates have been set for other Enron-related cases, this would be the first such case to go before a jury.

Lea Fastow was not directly involved in the Enron scandal, but she is charged with trying to hide income she and her husband gained as a result of shady deals at the now bankrupt energy trading company. The implosion of Enron late in 2001 was the first in a number of corporate scandals that shook investor confidence and led to increased scrutiny of corporate bookkeeping by the U.S. government.