In a courtroom crowded with teary family and friends, Enron's former chief financial officer, Andrew Fastow, was sentenced to six years in jail today for his role in the collapse of what was once the world's largest energy company.
He will serve two additional years at home under court supervision. The total sentence of eight years is two years less than the maximum provided in his plea agreement with government prosecutors.
Judge Kenneth M. Hoyt of the Federal District Court in Houston set the sentence after three lawyers representing Enron shareholders said Mr. Fastow, who pleaded guilty to two counts of wire and securities fraud in 2004, was a crucial witness in their cases against several banks that allegedly participated in fraudulent deals to conceal Enron's massive debt.
While thousands of people lost their jobs and savings when the company declared bankruptcy in 2001, only one disgruntled investor appeared in court to argue against leniency. Brian Durbin said he and his family had been "victims of an elaborate scam" and said Mr. Fastow should serve no less than the 10 years specified in his plea agreement. "A deal's a deal," he said, though he said he had prepared his statement before he knew Mr. Fastow was cooperating in the shareholder lawsuits.
In explaining his decision, Judge Hoyt said he had to "examine the relationship between justice and mercy." Although Mr. Fastow had "drunk the wine of greed," he said, the former high-flying executive had been the "subject of great persecution" including anti-Semitic slurs and personal threats.
The judge also cited the incarceration of Mr. Fastow's wife, Lea. She served a year in jail for her role in a fraudulent Enron tax return. During that time, Mr. Fastow was left to care for his two young sons alone. Acknowledging Mr. Fastow's devotion to his family and community service while simultaneously working to redress his crimes at Enron, Judge Hoyt said, "The best evidence of remorse is what you do going forward."
Although Mr. Fastow's lawyers and government prosecutors asked that he be allowed to surrender voluntarily after the Yom Kippur holiday on Monday, Judge Hoyt refused. Mr. Fastow was allowed to briefly embrace his wife before U.S. Marshals escorted him from the courtroom in handcuffs.
"We're very disappointed he was remanded into custody," said Chris Patti, counsel for the University of California, which is a plaintiff in pending shareholder litigation. "I'm not sure what this will mean for us."
Mr. Patti and other lawyers involved in Enron civil cases had asked the judge at today's hearing to allow Mr. Fastow to remain free until at least October 23, the date they hoped to conclude his deposition. October 23 is also the date Enron's former chief executive, Jeffrey Skilling, will be sentenced.
Another lawyer representing shareholders, Lawrence Irving, testified that Mr. Fastow was "critical" to their case. Referring to Mr. Fastow's testimony in the trials against his former bosses Mr. Skilling and Kenneth Lay, Mr. Irving said, "I have never seen a more impressive witness." Mr. Lay died of a heart attack in July before serving any jail time.
United States Attorney John Hueston testified that the cases against Mr. Skilling and Mr. Lay were weak until Mr. Fastow agreed to help the Justice Department's Enron Task Force: "He allowed the U.S. government to bring jurors inside the executive suite."
Mr. Hueston said Mr. Fastow worked with prosecutors for "in excess of 1,000 hours to untangle the web" of deceit and proved "credible, contrite and truthful" on the witness stand. Moreover, Mr. Hueston said Mr. Fastow was "truly repentant" and "not the same person introduced to the Task Force in 2003."
Mr. Hueston requested that Mr. Fastow be imprisoned in a federal penitentiary in Bastrop, Texas, where he can be treated for his dependency on anti-anxiety medication. The judge said he would recommend that facility but that the decision would be made by the Bureau of Prisons. During his remarks, Mr. Hueston did not argue for or against the maximum 10-year sentence.
Mr. Fastow also addressed Judge Hoyt. Choking back tears, he said he felt shame and regret for his actions. Turning to face Mr. Durbin, the shareholder, Mr. Fastow apologized. Speaking of his friends and family, he said, "I've failed them and have to work everyday of my life to regain their trust."