Fastow Indicted: Enron's Fall Begins

A federal grand jury in Houston indicted former Enron chief financial officer Andrew Fastow on 78 counts of wire fraud, money laundering, conspiracy, and obstruction of justice on October 31, 2002, marking the most significant criminal charge in the Enron scandal that had destroyed the company and wiped out the retirement savings of thousands of employees. Fastow had been the architect of a network of off-balance-sheet partnerships with names like LJM1, LJM2, and Chewco that allowed Enron to hide billions of dollars in debt from investors, analysts, and regulators while enriching Fastow personally by tens of millions of dollars. The partnerships were designed to keep Enron's stock price inflated by moving liabilities off the company's books, creating the appearance of consistent profitability while the underlying business deteriorated. When the scheme unraveled in October 2001, Enron's stock collapsed from over $90 to less than $1, and the company filed what was then the largest bankruptcy in American history. The indictment forced Fastow to cooperate with federal prosecutors, providing testimony that was instrumental in securing convictions against Enron's CEO Jeffrey Skilling and chairman Kenneth Lay. Fastow pleaded guilty to two counts of conspiracy and served six years in prison. The Enron collapse led directly to the Sarbanes-Oxley Act of 2002, which imposed sweeping new requirements for corporate financial disclosure and executive accountability that reshaped American corporate governance.