Statement* of Deputy Attorney General
LARRY D. THOMPSON
Fastow Superceder Press Conference
May 1, 2003
As you know, our prosecutors and investigators have been hard at work running down the vast array of allegations of criminal conduct related to the collapse of the Enron Corporation. Although this investigation is far from over, this morning I have three separate indictments to announce in the Department's ongoing response.
In the first action, the grand jury in the Southern District of Texas has brought new charges against Andrew FASTOW, the former Enron Chief Financial Officer, and charged for the first time Ben GLISAN, the former Enron Treasurer, with Securities Fraud, Wire Fraud and Conspiracy to commit those crimes, as well as Money Laundering and Conspiracy to Falsify Books Records and Accounts. FASTOW is also charged with Conspiracy to Commit Money Laundering, Obstruction of Justice, Insider Trading and Filing False Income Tax Returns. This indictment also charges Dan BOYLE, a former Vice President of Global Finance at Enron, with Conspiracies to Commit Wire Fraud and to Falsify Books, Records and Accounts.
Defendant Andrew FASTOW was originally indicted on October 31, 2002 on many of the same charges. Today's indictment adds to the charges against FASTOW four counts of Insider Trading based on FASTOW's personal gains of more than $18 million from the illegal use of inside information in the trading of Enron stock. FASTOW is further charged with falsely understating his income for four consecutive years from 1997 through 2000 in order to conceal his profit from other illegal transactions charged in the indictment.
The indictment also adds Defendant BOYLE to the conspiracy involving the fraudulent Nigerian barge transactions with investment bank Merrill Lynch designed to disguise Enron's losing investment. The defendants are charged with having fraudulently arranged with Merrill Lynch investment bankers to finance a deal to "park" these power barges on the investment bank's books and return them to Enron following the close of the accounting period.
The second action is a 218-count indictment of seven former Enron executives who conspired to deceive investors about the nature and prospect of Enron's Broadband subsidiary. The defendants are:
Defendants HOWARD and KRAUTZ were previously indicted for this criminal conduct.
- Kenneth RICE and Joseph HIRKO, former CEOs of Enron Broadband Services
- Kevin HANNON, the former COO
- Kevin HOWARD, the former Vice-President of Finance
- Scott Yeager, the former Vice-President of Strategic Development
- Rex SHELBY, the former Senior Vice President of Engineering Operations, and
- Michael KRAUTZ, former Senior Director of Transaction Accounting.
As charged in the indictment, this scheme aimed to convince the investing public that Enron Broadband Services had developed sophisticated software in an "intelligent network" to provide "video on demand" to computer users. Although the project never got beyond the testing stage, as the indictment charges, these defendants conspired to make false statements to create and perpetuate the false impression that Enron's essentially non-existent Broadband business was worth as much as $36 billion. To support this scheme, the indictment further charges that these defendants created a fraudulent transaction called "Braveheart" to sell non-existent future "earnings" of the Broadband business and recognize this money as "revenue."
Also, as charged in the indictment, defendants RICE, HIRKO, HANNON, YEAGER and SHELBY illegally traded in Enron stock based on their insider information. These charged trades created more than $186 million in gross proceeds for these defendants' personal benefit.
The indictment also seeks the forfeiture of the proceeds of this illegal scheme as well as additional monies from defendant Andrew FASTOW. Today we are seeking the forfeiture of an additional $37 million from the insider trading proceeds described in the indictments. That amount includes the defendants' trading accounts, houses, jewelry and sports cars. That amount is over and above the $35 million already frozen in this matter.
The third action is the indictment of defendant Lea FASTOW, former Assistant Treasurer of Enron on charges of Conspiracy to commit Wire Fraud and Money Laundering, as well as filing False Tax Returns. These charges stem from her participation in the RADR scheme with defendant Andrew FASTOW and with Michael KOPPER who has previously pleaded guilty to related charges.
As set out in the indictment, that scheme allowed Enron to maintain secret control of a wind farm subsidiary by creating a "Special Purpose Entity" named RADR that included purportedly "independent" investors. In fact, as the indictment charges, Lea FASTOW provided all of the outside money by secretly using nominees essentially renting their names to create the false impression of independence. Also, Lea Fastow is charged with failing to declare income on tax returns for each of the four consecutive years 1997 through 2000.
Today's indictments are a significant milestone in our determined efforts to expose and punish the vast array of criminal conduct related to the collapse of Enron Corporation. They are significant because they encompass a broad range of charged crimes in the Broadband area and with Special Purpose Entity manipulation. These charges add new defendants: Ben GLISAN, the former Enron Treasurer, as well as Kenneth RICE and Joseph HIRKO, former Enron Broadband CEOs. Taken together, these charges bring us closer to a full accounting for the wide range of Enron-related crimes that we are investigating.
I would like to credit the tireless, devoted and continuing efforts of the Enron Task Force, working under the oversight of the Corporate Fraud Task Force, to advance this thorough investigation. With today's indictments, this investigation has achieved charges against 19 individuals and one partnership, six of which have already been convicted. This is in addition to the Corporate Fraud Task Force's overall efforts, which oversee more than 200 investigations and which have already produced charges against more than 200 defendants and more than 75 convictions. I can assure you that our prosecutors and investigators will not rest until we have plumbed the depths of these fraudulent schemes and brought the wrongdoers to justice.
I would also like to give specific thanks for the work of the Department's Tax Division and the investigators of the Internal Revenue Service for their contribution to the tax counts in today's indictments. Their assistance and expertise is invaluable in so many of our significant corporate fraud investigations.
I want to commend Assistant Attorney General Michael Chertoff of the Criminal Division, FBI Assistant Director Grant Ashley, the head of the Enron Task Force, Leslie Caldwell and the entire task force for their work on this matter to date. I also want to thank the SEC Deputy Director of Enforcement Linda Thomsen and IRS Chief of Criminal Investigations David Palmer, whose agencies are also members of the Corporate Fraud Task Force, for their great cooperation and successful efforts in this investigation.
*NOTE: Mr. Thompson frequently speaks from notes and may depart from the remarks as prepared. However, he stands behind the remarks as presented in written format.