New Enron Indictments Miss Top Execs

The U.S. government demonstrated major progress in its Enron Corp. investigation with a slew of new indictments this week, but did not move closer to ensnaring the topmost executives and may be slowed in its efforts to do so, lawyers said on Friday.

On Thursday, federal prosecutors leveled charges against eight new defendants, nearly doubling the number of executives from the bankrupt energy giant who have either pleaded guilty or have been indicted.

Former Chief Financial Officer Andrew Fastow, whose wife Lea was charged in a new indictment on Thursday, is the highest-ranking executive thus far charged after more than a year of investigation.

Former Enron chairman Kenneth Lay and former chief executive Jeffrey Skilling, both of whom have denied wrongdoing have yet to be charged.

"If you're Ken Lay or Jeff Skilling, yesterday was a good day for you, because it signals that those beneath them are holding a unified front", said Robert Mintz, a former federal prosecutor now in private practice at McCarter & English.

Among the top executives indicted were two close associates of Skilling, former Enron Broadband Services chief Kenneth Rice and Fastow. Both were part of the small fraternity of executives around Skilling, which he called his "Mighty Man Force".

The indictments are an indication that the government could not persuade any other significant players to cooperate and provide information on other targets, he said. The other benefit to the targets is that the Enron Task Force will now have to shift its focus from digging toward preparing for trial, he said.

Philip Hilder, also a former federal prosecutor now in private practice, said the government is by no means finished.

"They're moving forward on several fronts, and it seems as if they will continue to push on", said Hilder, who represents a number of former Enron workers.

Jigsaw Puzzle

The new indictments have painted the broadest picture of the investigation's shape to date, he said.

"I liken it to a jigsaw puzzle, and the entire picture is not quite visible yet. Prosecutors have added some more pieces to the puzzle, and the picture is coming into focus", he said.

It is possible that some of the defendants will plead guilty and avoid trials, now that they are "staring the federal sentencing guidelines in the eyes", Hilder said.

Lea Fastow's lawyers decried the six-count indictment against their client, a former Enron assistant treasurer and relative bit player in the company's collapse, as a "transparent effort to pressure her husband".

Prosecutors had intimated that they would charge her if her husband would not cooperate, Mintz said. "It appears he called their bluff and they had no choice to follow through."

The charges against her - conspiracy to commit wire fraud and launder money and filing a false income tax report - relate closely to the charges in the 109-count indictment against Andrew Fastow. But prosecutors chose to charge her separately, and declined to say why when asked by reporters.

"It would be to the defense's tactical advantage to have the Fastows joined together at counsel's table. It would elicit sympathy from the jury, a husband and wife", Hilder said.

In total, 15 former Enron employees have been charged by the U.S. Justice Department's Enron Task Force, which is investigating the company's spectacular collapse in 2001 into one of the largest U.S. bankruptcies ever.

Prosecutors contend that Enron's growth into the seventh-largest company in the U.S. was fueled by financial fraud on a grand scale. But some former executives, Skilling among them, have said that Enron was merely creative and pushed the financial envelope to drive its expansion. That culture is evident in the defiance of the defendants, Mintz said.

"I think you are led to the inescapable conclusion that many of these defendants still believe they didn't commit any criminal acts", he said.