Statement of Deputy Attorney General
LARRY D. THOMPSON
Fastow Press Conference
October 1, 2002
Washington, DCGood Morning.
Early this morning in Houston, Texas, FBI special agents arrested former Enron Chief Financial Officer Andrew FASTOW on charges of Securities Fraud, Money Laundering, Mail Fraud, Wire Fraud, Bank Fraud, and Conspiracy to commit all of these offenses. At the same time, the Department has sought the freezing and forfeiture from FASTOW of an additional $11 million traced to the crimes alleged in today’s complaint with the assistance of the Securities and Exchange Commission and the Internal Revenue Service. This bring to more than $21 million the amount of cash and property frozen from FASTOW and his family when added to the more than $11 million frozen in August.
The charges in today’s complaint describe a conspiracy beginning in 1997 and lasting through July 2001 that reflects the panoply of FASTOW’s alleged criminal conduct. Not only does it charge that FASTOW defrauded investors by persistently falsifying Enron’s financial results – the Complaint also alleges that FASTOW defrauded the company itself by stealing from the same clandestine transactions he had rigged up to swindle Enron’s investors. In the process, as alleged in the Complaint, FASTOW and his co-conspirators systematically and thoroughly corrupted the business of one of the largest corporations in the world.
The criminal conduct described in today’s Complaint involves FASTOW’s and his co-conspirators’ use of so-called "Special Purpose Entities" – business organizations designed by Fastow to hide off of Enron’s financial books debts and non-performing assets that the conspirators referred to as "nuclear waste." The complaint alleges that FASTOW recruited Michael KOPPER, then an Enron Managing Director, to coordinate these "entities."
FASTOW is charged with an array of schemes – including RADR, CHEWCO, SOUTHAMPTON and others – that differed in their details, but all had the common purpose to conceal the nature and extent of Enron's investments by placing tens of millions of dollars of debt off of its own balance sheet. As alleged, this made Enron falsely appear more profitable to investors and disguised the true ownership of assets from regulators. To accomplish this, FASTOW allegedly benefitted from the active cooperation of a leading financial institution that allowed Enron to "park" on its books a money-losing Nigerian power barge.
Even while FASTOW is alleged to have persistently deceived Enron’s investors, FASTOW is also alleged to have stolen millions of dollars from these transactions to benefit himself, his friends and his co-conspirators. In the SOUTHAMPTON deal alone, the Complaint alleges that FASTOW’s family "foundation" pocketed $4.5 million.
Today’s charges are yet another successful step in a concerted strategy of Corporate Fraud Task Force members that combines the efforts and expertise of the Criminal and Tax Divisions and Federal Bureau of Investigation of the Justice Department with our colleagues from the Securities and Exchange Commission and the Internal Revenue Service. This arrest demonstrates the type of coordinated, cooperative law enforcement effort that the President directed the Corporate Fraud Task Force to marshal in cracking down on corporate fraud.Today’s complaint and the allied SEC civil action move the government that much closer to securing just punishment and recompense for truly massive fraud against America’s investors. Our strategy is really straightforward. We aim to put the bad guys in prison and take away their money.
This investigation is active and ongoing. In the last four months alone, it has already produced the guilty plea of Arthur Andersen partner David Duncan and trial conviction of the Arthur Andersen partnership for obstruction of justice.The grand jury has indicted three of FASTOW’s co-conspirators and KOPPER has pleaded guilty and agreed to cooperate in the investigation.
We will continue to use all of the legal weapons at our disposal to combat corporate fraud. In addition to seeking the conviction of corporate criminals, we will seek to freeze and forfeit assets where appropriate so as to punish the bad actors and secure restitution for defrauded investors.
I want to commend Assistant Attorney General Michael Chertoff of the Criminal Division, FBI Director Bob Mueller, the head of the Enron Task Force, Leslie Caldwell, Assistant U.S. Attorney Andrew Weissman, and the entire task force for their work on this matter to date.I also want to thank the SEC and the IRS, also member of the Corporate Fraud Task Force, for their great cooperation and successful efforts in this investigation.
These efforts have been undertaken by many dedicated, professional career people who have clearly answered their country’s call to rool out corporate fraud, wherever it exists.