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Winning the guilty plea of an important former Enron Corp. insider, the US Justice Department on Wednesday set sights on its biggest target yet in the massive fraud investigation: Enron's former chief financial officer.
As part of its plea agreement with Michael J. Kopper, the government sought to seize $22.1 million in bank accounts that prosecutors alleged contain money from illegal Enron deals largely organized by Kopper and Andrew S. Fastow, Enron's former financial officer.
Experts described the move as an unusually aggressive legal strategy typically employed against drug dealers.
The amount includes nearly $12.8 million held by Fastow, his family or his family's foundation; Fastow's new, $2.6 million, five-bedroom home under construction in Houston could also be seized. Fastow, who left Enron in October 2001, has not been indicted or charged with any crime. He has declined to testify before Congress.
The Justice Department listed in court papers bank accounts totaling $20.5 million for Fastow, his family and its foundation, but officials said $7.69 million was contained within a duplicate account when two of the financial institutions merged.
A spokesman for Fastow, Gordon Andrew, said Fastow will "respond at the appropriate time and in the appropriate forum."
The forfeiture request, filed in U.S. District Court in Houston, came as part of a plea agreement formalized Wednesday with Kopper, once a trusted aide to Fastow. Kopper was at the crux of at least three partnerships - known as Radar, Chewco and Southampton - that conducted complicated business deals with Enron. The partnerships were portrayed to investors and U.S. regulators as outside entities but secretly had too-close ties to Enron.
Deputy U.S. Attorney General Larry Thompson, who announced Kopper's guilty plea in Washington, said those deals "made Enron appear more profitable to Wall Street and, in one instance, disguised Enron's regulatory violations."
Kopper pleaded guilty to one count of conspiracy to commit wire fraud and one money-laundering charge. U.S. officials said he faces up to 15 years in prison, though Kopper agreed to give up $12 million in illegal profits and cooperate in the government's continuing criminal probe of Enron's spectacular collapse.
Kopper's $12 million, plus the millions of dollars from bank accounts owned by others, would be used to repay investors defrauded by Enron, officials said. Details of that distribution were still being worked out, although the amount represents just a fraction of the amount lost by investors.
"The money would be put in a court registry awaiting a plan of distribution, and that will happen some time in the future," said Stephen Cutler, head of enforcement at the Securities and Exchange Commission.
Experts said Kopper's plea was significant because it signals the government's interest in understanding and prosecuting others who participated in those controversial deals, whose disclosures in late 2001 led to Enron's bankruptcy. Prosecutors in court papers tied Kopper's roles in those deals closely to Fastow, and said Kopper distributed profits to Fastow, Fastow's wife and other family members.
"The action against Mr. Kopper is an important chapter in the story of Enron's collapse, but much of the story remains untold," Cutler said. "This case is but a first step, albeit a vital one, in our effort to hold responsible and to bring to justice those who participated in this massive betrayal of the investing public's trust."
Among those whose bank accounts the Justice Department also targeted were Fastow's son, Peter; Ben Glisan Jr., Enron's treasurer and another trusted aide to Fastow; Kristina M. Mordaunt, a former in-house Enron lawyer; Kathy Lynn, an Enron financial division vice president; and Anne Yeager, an Enron employee. The government also sought Mordaunt's $321,600 home in Houston and a 2000 Lexus RX-300 sport utility vehicle registered to Mordaunt's husband, Robert Vance Ulsh Jr.
Glisan and Mordaunt each invested $5,800 in the Southampton partnership and earned $1 million in profits. Mordaunt's lawyer has said she did not know the transaction was illegal.
Although a federal judge must approve the forfeitures, the Justice Department's filing effectively freezes those bank accounts, preventing further withdrawals, until the government's request is ruled on, said Richard A. Kirby, a former senior litigation counsel at the SEC.
"They really are using all their powers," said Kirby, now a lawyer with Shapiro, Sher, Guinot & Sandler in Washington.
Another white-collar criminal expert agreed.
"It's an interesting tactical play," said Robert A. Mintz, a former federal prosecutor and expert on white-collar crime. "It's an aggressive step going after money of people who haven't been indicted or pleaded guilty. It certainly has a constraining financial impact if you take people's money away."
(China Daily August 22, 2002)
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