If at first you don't succeed, reduce the charges.
The Enron Task Force had successfully sought an indictment on two counts of felony conspiracy and four counts of making false tax statements. On Thursday, those six charges were replaced with one count of willfully delivering a joint 2000 tax form reporting more than $48 million in income to the Internal Revenue Service even though she knew it to be fraudulent.Lea Fastow, 44, could face a maximum 12-month prison term on the one charge, though prosecutors are likely to ask U.S. District Judge David Hittner for a lesser sentence.
On April 7, Hittner refused to give Fastow the five-month prison term she'd previously worked out with prosecutors. At that time she withdrew her prior guilty plea to one felony tax charge.
"This restructure of her case as a misdemeanor validates the theory that the charges against Lea Fastow were always intended as leverage against her husband," said Jacob Frenkel, a Washington, D.C.-based former federal prosecutor and Securities and Exchange Commission lawyer.
The government had previously told Hittner that Fastow "played an integral role in her husband's decision to plead guilty and cooperate with the government in this ongoing investigation."
Andrew Fastow, originally charged with 98 counts, pleaded guilty to two felony charges and faces a maximum 10-year prison term for his role in fraud at the scandal-ridden Enron. But his cooperation with the government has already bolstered cases against ex-Chief Executive Officer Jeff Skilling and ex-top accounting officer Rick Causey.
Several criminal defense lawyers who practice in federal courts said Thursday the current Justice Department is loath to drop felony charges down to misdemeanors as has been done in this case.
"It's extremely unusual," said Houston-based defense lawyer Kent Schaffer. "Obviously this is a case the government didn't want to try, and obviously they want to keep Andy Fastow happy."
Legal onlookers say both sides win here, even if the judge sentences Lea Fastow to the full 12 months.
She wins because she will not have a felony record. That means she will not be banned from voting and she will not have the stigma of being a felon, which could keep her, a former businesswoman and future nursing student, from some future employment.
Many lawyers say even if she gets the maximum sentence, because she's a first-time offender there is a good chance the Bureau of Prisons would release her into a halfway house well before that might happen were she a felon.
The government wins, too, because it did not want to lose Andrew Fastow's enthusiastic cooperation, especially as it continues to pursue and investigate ex-Enron Chairman Ken Lay.
"When Judge Hittner said no to the earlier plea bargain, it put the government in overdrive to keep the peace with the Fastows and not take away from its continuing investigation," Schaffer said.
Speaking of Skilling, by the way, his lawyers have struck back on the weird New York public intoxication incident.
Lawyers for former Enron Chief Executive Jeff Skilling on Wednesday accused the government of unnecessarily prejudicing the jury pool and improperly releasing his high blood alcohol level.Federal prosecutors are asking that Skilling be placed under a midnight curfew and post an additional $2 million bond after a drunken incident in New York City.
"The Task Force has gone out of its way to publicly and unfairly distort the events and place full culpability and responsibility on Mr. Skilling," said the court papers filed by Skilling's Los Angeles-based lead trial counsel, Daniel Petrocelli.
Enron Task Force prosecutors told the court in a public filing last week that Skilling violated his $5 million bond in Manhattan earlier this month by being severely intoxicated, trying to lift a woman's blouse in search of an FBI wiretap and attempting to steal a car's license plate.
The government filing said that after police took Skilling to a hospital the morning of April 9, his blood alcohol level was 0.19 — nearly twice the legal driving limit of 0.10 in many states.
According to Petrocelli's papers, prosecutors have specifically asked that Skilling's travel be restricted, he report weekly rather than monthly to pretrial officials and his bond be raised from $5 million to $7 million.
Skilling's lawyers argue that the Houston pretrial services recommendations, which are not available to the public, are more appropriate and only call for new bond conditions regarding Skilling's use of alcohol. They say Skilling has already "begun to comply with the new conditions," although not yet ordered to do so.
"There is no bona fide justification for this attempt to impose such harsh, unreasonable restraints other than a desire to inflict as much hardship as possible on Mr. Skilling," said Petrocelli in the filing.
The defense motion filed Wednesday asks that U.S. Magistrate Judge Frances Stacy adopt the recommendation of the pretrial services office and ignore the government. Stacy set the initial terms of Skilling's bond in February when he was indicted on 35 felony charges in connection with the scandal-ridden company's collapse.
Enron Task Force prosecutor Linda Lacewell told U.S. Magistrate Frances Stacy in court papers that nothing about Skilling's behavior since the April 9 incident outside a Manhattan cigar bar should convince the court that he will adhere to the existing restrictions in his $5 million bond.Prosecutors have said Skilling violated his bond by being severely intoxicated, trying to lift a woman's blouse in search of an FBI wiretap and attempting to steal a car's license plate. The government said that after police took Skilling to a hospital the morning of April 9, his blood alcohol level was 0.19, nearly twice the legal driving limit of 0.10 in many states.
Skilling's lawyers accused the government on Wednesday of unnecessarily prejudicing the jury pool and improperly releasing his high blood alcohol level.
Lacewell countered Thursday that Skilling's own lawyers were making public statements about the event and that he waived the medical record privacy rights so this investigation could be conducted.
"Given how he behaved during the evening of April 8 and the morning of April 9, it is understandable why Skilling would want to deflect attention from his own misconduct by attacking the government with unfounded allegations," Lacewell said in the filing.
Prosecutors are asking that Skilling be placed under a midnight curfew, post an additional $2 million bond, restrict his travel to Texas and report to pretrial services weekly rather than monthly.
I pretty much figured this would happen. If the prosecution's primary focus is to build the strongest possible case against Skilling and/or Lay, Judge Hittner pretty much backed them into this corner.
I suspected *something* would happen to make sure Lea didn't face long jail time. She's not what the prosecutors are really after, and if hardballing her meant hurting their chances to catch the really big fish, it just wasn't worth sticking it to her.
If they don't do anything to prevent Lea from going to prison for a lengthy stay, who knows how cooperative Andy will be? It's not like his sentence depends on his complete cooperation at this point, so the prosecutors really needed to do something to give him reason to spill his guts and tell all.
If this gives Andy the motivation to really help the government go after Lay, Skilling et al, then it's probably in the best interests of overall justice to go lightly on her if it significantly increases the chances of nailing the big guns. Given the alternative -- Lea in prison for 18 months and the top execs using a "get out of jail free" card because the government's case was weakened by a lack of testimony against them -- this would seem to be far preferable.
Minor point, but didn't the feds require states to lower the blood-alcohol level to something like .08?
Posted by: Brian Boru on April 30, 2004 10:55 PMMinor point, but didn't the feds require states to lower the blood-alcohol level to something like .08?
No, not really. The Feds know this is a states rights issue and that they have no Constitutional right to tell states where to sat their BAC limit.
So now they just do an end-run around the 10th Amendment. They don't FORCE the states to submit, but they will get them addicted to federal highway funds like a crack addict, and then threaten to cut them off if they don't obey. It's despicable, and certainly against the spirit of the 10th Amendment if not the letter.
That was the same thing that happened with the old 55 MPH speed limit. Any state was free to ignore it, but they'd lose federal funding. The whole concept is despicable. If the federal government gets big enough to fund everything, is there really and true power left with the states?
For a while, I think Louisiana refused to cave in to them. I'm not sure if they've since caved -- but for a while they were telling the Feds to shove it and that they'd do without their highway funds to keep their Constitutional sovereignty.
Posted by: Tim on April 30, 2004 11:03 PM