As noted earlier here, the six-year prison sentence handed down earlier last month to former Enron CFO Andrew Fastow was surprising on several levels, not the least of which was that the Enron Task Force elicited testimony from Fastow during the Lay-Skilling trial that his minimum sentence would be ten years.

The purpose of that testimony was to make Fastow appear to be more credible to the Lay-Skilling jury — he was going to do at least ten years, so he supposedly didn’t have any incentive to lie in order to reduce his sentence.

Thus, it was somewhat surprising that, in the run-up to the Fastow sentencing hearing, Fastow’s attorneys requested a sentence of less than ten years and there was nary a peep from the Task Force objecting to the request.

Then, at the sentencing hearing, the Task Force prosecutors at least tacitly supported the less-than-ten-year sentence by not objecting to Fastow counsel’s requests for leniency to U.S. District Judge Ken Hoyt and even extolling Fastow’s “cooperation” with the Task Force in regard to the Lay-Skilling trial.

Indeed, one of the most surprising aspects of the Fastow sentencing hearing is that neither the Task Force prosecutors nor Fastow attorneys disclosed to Judge Hoyt during the sentencing hearing about Fastow’s contrary testimony during the Lay-Skilling trial.

Or did they? According to this Tom Fowler/Houston Chronicle article, Task Force prosecutors and Fastow’s attorneys met with Judge Hoyt in chambers during a transcribed meeting the afternoon before Fastow’s sentencing.

The transcript of that meeting has not been made public and none of the participants is talking about what was discussed. The Chronicle has filed a motion to unseal the transcript, and neither Fastow nor the Task Force is really opposing the Chronicle’s motion (Fastow has requested that matters regarding his personal medical condition be redacted from the transcript).

But what is really odd about all this is that Fowler reports that the Task Force, in a recent filing that is not yet publicly available, states that it wants to review the transcript of the closed-door meeting because “[t]he government is currently assessing whether to file a notice of appeal of the sentence imposed on Mr. Fastow, and it cannot make that determination without a copy of the transcript of the pre-sentencing hearing.”

Note to Task Force — it’s hard to appeal rulings successfully when you do not object to the ruling in the first place.

This Kristin Hays-Tom Fowler/Chronicle article picks up on an aspect of the six-year sentence assessed to former Enron CFO Andrew Fastow earlier this week that has largely been ignored in the media but noted earlier here.

The Enron Task Force elicited testimony from Fastow during the Lay-Skilling trial that represented to the jury that Fastow was a more credible witness because he had agreed to a minimum ten-year prison sentence and, thus, had no incentive to lie.

As we know now, Fastow had not really agreed to anything of the sort and, in fact, successfully petitioned U.S. District Judge Ken Hoyt for a lighter sentence. The article quotes several experts — including former Enron Task Force director Andrew Weissmann — who express surprise that the Task Force did not attempt to require Fastow to serve a minimum of ten years.

Although interesting, the article fails to address the most troubling aspect of the Fastow sentencing hearing — that is, the apparent failure of any of the attorneys involved to inform Judge Hoyt about how the Lay-Skilling jury was misled by Fastow’s testimony.

When Judge Hoyt finds out about that he was not informed about that, my sense is that he is not going to be pleased.

The public reaction to the Fastow sentence has been fascinating and reflects the dubious nature of the Justice Department’s regulation of business-through-criminalization policy.

Viewed in a vacuum, the Fastow sentence is reasonably fair. Fastow effectively embezzled millions from Enron and ruined the careers of several other Enron executives who he induced to participate in the embezzlement. Six years is a harsh sentence, so Fastow is certainly not getting off lightly.

However, the Fastow sentence was not handed down in a vacuum.

Not only did Fastow and the Task Force prosecutors mislead the jury in order to convict Lay and Skilling, they trampled justice by needlessly ruining the careers of the four Merrill Lynch executives in the Nigerian Barge case and they are currently doing the same thing to the three U.K. bankers in the NatWest Three case.

There is simply no way to reconcile Fastow’s sentence with the six-year sentence handed down to Jamie Olis — who did not steal anything and refused to tell lies about others — or the seven-year sentence of former Enron chief accountant Richard Causey, who also did not steal anything and who has not testified against anybody.

The death of Ken Lay from defending himself against a weak and unjust case, as well as the effective life sentence likely faced by Jeff Skilling, further underscore the confusing message conveyed by the Fastow sentence.

As Larry Ribstein has repeatedly observed, criminal cases involving business executives have become a sort of lottery, incrementally undermining the principles of justice and respect for the rule of law upon which the success of American society is largely based.

If we lose respect for those principles, then “do you really think you could stand upright in the winds [of abusive state power] that would blow then?

It’s a good thing that Andy Fastow’s counsel did not mention Fastow’s following testimony on March 8 in the Lay-Skilling trial during Fastow’s sentencing hearing today in front of U.S. District Judge Kenneth Hoyt:

Q. Does the government decide your sentence?

A. My Judge decides the sentence.

Q. And who is your Judge?

A. Judge Hoyt.

Q. Is that right here in Houston, in this courthouse?

A. Yes.

Q. Do you recall the maximum sentence that you could be sentenced to for these crimes?

A. For the crimes I’ve pled guilty to?

Q. Yes.

A. Yes. Ten years.

Q. And was there a minimum sentence that you pleaded guilty to?

A. My plea agreement states that I agree to a sentence of 10 years. [. . .]

Q. And in agreeing — in addition to agreeing to serving 10 years in prison, did you also have to forfeit moneys?

A. Yes.

The foregoing testimony was elicted on direct examination of Fastow by Enron Task Force prosecutor John Hueston for the purpose of representing to the Lay-Skilling jury that Fastow’s testimony was credible because he had agreed to a floor of ten years of prison time. On March 8th, Skilling counsel Daniel Petrocelli followed up by asking Fastow during cross-examination about the sentence that he had agreed to under his plea deal:

Q. Okay. And you said you have to go to jail for 10 years; right?

A. Well, my sentence is for 10 years. I could potentially have time off for good behavior. [. . .]

Q. Okay. And the reason why you just answered my question in the way you did is because you want to communicate to the jury that Mr. Skilling is a criminal along with you, correct?

A. No, Mr. Petrocelli. I’m just trying to answer the questions honestly. My outcome is already determined.

Q. Well, not —

A. I’ll be sentenced to ten years as far as I understand. It doesn’t matter — my sentence isn’t affected by whether Mr. Skilling is convicted or not.

Then, on re-direct examination by Hueston on March 13th, Fastow testified as follows:

Q. And as a result of your pledge to cooperate, did you agree to plead guilty to a 10-year minimum sentence of imprisonment?

A. A 10-year maximum imprisonment.

Q. And what is the minimum amount of time that that plea agreement calls for?

A. It calls for a 10-year sentence.

Q. So after January 14th, can your cooperation lower that 10 years?

A. My understanding is that I will be sentenced to 10 years. The Judge ultimately has a discretion; but in my plea agreement, I agreed to the 10-year sentence.

Later that same day, Hueston asked Fastow about the suggestion made during cross-examination that Fastow had forged the key Global Galactic agreement between Fastow and former Enron chief accountant, Richard Causey:

Q. And after all this time, you found and turned over the document to the FBI, you remembered, late May or June; is that right?

A. I believe that’s correct, yes.

Q. And you turned it over because you were cooperating?

A. Yes, sir.

Q. And this is months after, six months after, you enter your plea of guilty; is that right?

A. Approximately, yes, sir.

Q. And can this document lower your sentence now, under your understanding?

A. My understanding is, no.

Q. And if, as the defense was suggesting, you were just falsely creating this document, wouldn’t it have been better to do so before you entered a plea of guilty, when you were bargaining with the government?

A. Well, one could argue that. [. . .]

Q. Mr. Fastow, if as the defense suggests, you’re on some sort of mission to say or do anything to convict Jeff Skilling, might you have been tempted to just add a couple more initials to that Global Galactic document?

A. Sir, I have no incentive to add any initials. My incentive is to be truthful. If I’m not truthful, I could go to prison for life. By making a document more compelling, I can’t lower my sentence.

Q. By trying to do that, there’s only one thing you’re sentence would do; right?

A. I’m sorry?

Q. If you tried to alter a document or tell a lie, there’s only one direction that sentence can go?

A. That’s correct. That would be a lie. That means my sentence would go up, potentially, to a life sentence.

Want to make a bet that the Task Force prosecutors did not inform Judge Hoyt today during Fastow’s sentencing hearing that Fastow and the Task Force had previously represented to the Lay-Skilling jury that Fastow’s testimony was more credible because he had agreed to a minimum ten-year sentence?

Let’s see if I get this straight.
On one hand, Andrew Fastow — who served up his wife as a sacrifical lamb for his embezzlement of millions from Enron that triggered one of the largest bankruptcy cases in U.S. history, who used the NatWest Three to hide his embezzlement of millions more and then turned on the U.K. bankers to save his skin, who very well may have forged Richard Causey’s initials on the Global Galatic “agreement,” whose bizarre testimony during the Lay-Skilling trial was largely discounted by jurors and who had a large hand in ruining the careers of four innocent Merrill Lynch executives in order to lessen his prison sentence — is sentenced to six years in prison.
On the other hand, Jamie Olis — who worked on a transaction to improve his company’s earnings, did as he was told by his superiors, did not profit from the transaction, defended his company and himself against allegations of wrongdoing with regard to the transaction and did not trigger any type of insolvency case by his company — is sentenced to six years in prison.
These results are not the product of a rational application of our criminal justice system. Ellen Podgor has additional thoughts, particularly how the Fastow sentence may bear on the anticipated life sentence that former Enron CEO Jeff Skilling faces.

As Jamie Olis awaits his resentencing for working on a transaction for which he did not profit, Andrew Fastow’s lawyers (one of whom is Olis’ attorney — small world, isn’t it?) filed a sentencing memorandum earlier this week that claims that Fastow has “stepped up to take responsibility,” has expressed “full remorse” for his role in Enron’s demise and “is a changed man.” WaPo’s Carrie Johnson reports on the memorandum here and a copy of the Fastow sentencing memo can be downloaded here.
Before you become convinced that Fastow has turned his back on his evil ways and become a paragon of virtue, take a moment to review the following:

How Fastow served up his wife as a sacrifical lamb for his effective embezzlement of funds from Enron;
How Fastow used the NatWest Three to hide his embezzlement of funds from Enron and then turned on the bankers to save his skin;
How Fastow may have forged Richard Causey’s initials on the Global Galatic “agreement”;
Fastow’s bizarre testimony in the Lay-Skilling trial; and
Fastow’s involvement in ruining the careers of four innocent Merrill Lynch executives in order to lessen his prison sentence.

Changed man? Heck, it looks to me as if Fastow has manipulated the Enron Task Force in the same manner as he manipulated many of his colleagues at Enron.