Is former Enron Corp. CFO Andrew Fastow about to be indicted?
According to a report by Bloomberg over the weekend, the Justice Department could file formal criminal charges against Fastow in the next few weeks. That would make Fastow the first Enron executive to be charged in connection with accounting irregularities that led to the second largest U.S. bankruptcy ever.
The Bloomberg article noted that a criminal case was brought last month against three former employees of London-based National Westminster Bank Plc. Those three are accused of skimming $7.3 million from a partnership managed by Fastow. According to Bloomberg, that case lays the foundation for fraud charges against the former Enron finance executive.
But Justice Department spokesman Bryan Sierra told the wire service, “the story is not accurate” and declined to elaborate.
The Bloomberg article, however, stated that former WorldCom Inc. Chief Executive Officer Bernard Ebbers and two other key WorldCom executives could also soon face formal charges from U.S. prosecutors.
Meanwhile, according to a Reuters report Sunday night, the Justice Department is not ready to file criminal charges against Fastow. That article cited sources familiar with the investigation.
In a related story: on Friday Schuyler Tilney, the head of Merrill Lynch’s energy and power group (who was subpoenaed by the Senate Permanent Subcommittee on Investigations to testify at a hearing scheduled for Tuesday), was put on administrative leave. Against the advice of his lawyer, Tilney refused to testify about allegations that Merrill worked closely with Enron.
Qwest Quake: Company may Restate
Management at Qwest Communications International Inc., whose accounting practices are currently being investigated by the SEC, said late Sunday night said it may restate the company’s results for 1999, 2000 and 2001. The restatement would be in connection with sales of optical capacity assets.
Qwest management said it misapplied about $1.16 billion in optical capacity sales.
“Certain adjustments may be required to correct the period in which the revenue was recognized with respect to some transactions, and other adjustments may be required to reverse the recognition of revenue with respect to other transactions,” Qwest management noted in an announcement.
The company’s management did note, however, that its revenue recognition policy was approved by its prior auditor. And who was that? Arthur Andersen.
In addition, further adjustments are required to account for sales of equipment in 2000 and 2001 that the company had previously determined had been incorrectly recorded, the telco’s management added.
Earlier in the year, the company and its board of directors began an analysis of, among other things, revenue recognition and accounting treatment for optical capacity sales — particularly sales to customers from which the company agreed to purchase optical capacity assets. The company also began looking into the sale of equipment by Qwest to certain customers and changes in the production schedules and lives of some of its directories.
In the fourth quarter of 2001, the company reduced revenue and adjusted EBITDA related to these equipment transactions. The company’s management added that in a limited number of transactions it did not properly account for certain expenses incurred for services from telecommunications providers in 2000 and 2001.