Fastow Charged With Mail Fraud, Money Laundering

Updated from 12:17 p.m. EDT

The long arm of the law finally reached out today and grabbed one of Enron's former top executives, as Andrew Fastow, the energy company's former chief financial officer, was charged with several counts of securities fraud, mail fraud and money laundering.

A criminal complaint filed against Fastow alleges that the former Enron officer used a series of partnerships he controlled not only to help Enron carry out a deliberate strategy of inflating its profits, but to illegally enrich himself by skimming off profits from these deals.

Fastow is the highest-ranking former Enron executive to be charged in the investigation. The Enron scandal, which began unfolding just over a year ago, sparked a tidal wave of concern about corporate fraud and corporate accounting gimmicks.

The complaint filed by federal prosecutors, along with a civil complaint filed by the Securities and Exchange Commission, makes clear that Enron's strategy of selling ailing assets to the Fastow-controlled entities was intended to help the company "manipulate its balance sheet" and "manufacture sham earnings," according to the prosecutors.

The complaint doesn't identify any other Enron executives by name other than Michael Kopper, Fastow's former right-hand man, who pleaded guilty last month and is cooperating with prosecutors. But it does allude to a secret deal between Fastow and Richard Causey, Enron's former chief accounting officer. The deal, according to the criminal complaint, assured that Fastow's controversial LJM2 partnership would not lose money on any of its deals to buy some of Enron's ailing assets.

Prosecutors, in court papers, allege that "Enron's CAO [Causey] had an undisclosed agreement with Fastow" under which "LJM would not lose money in its dealing with Enron." The court papers say that "any Enron-LJM transaction that resulted in a loss to LJM would be made up later."