HOUSTON - The wife of former Enron Corp. finance chief Andrew Fastow withdrew a plea agreement Wednesday after a judge rejected a deal that would have sent her to prison for five months.
U.S. District Judge David Hittner, who wanted a sentence of 10 to 16 months for Lea Fastow, set her trial for June 2. She faces four counts of filing false tax returns, and one each of conspiracy to commit wire fraud and money laundering conspiracy.
The proposed sentence for Mrs. Fastow was part of a larger plea deal involving her husband's criminal case. Prosecutors insisted her withdrawal wouldn't affect his plea and cooperation agreement.
Mr. Fastow's lawyers did not immediately comment. He was to face 10 years in prison on two counts of conspiracy and had agreed to cooperate with prosecutors pursuing cases against higher-ups in the collapse of Enron in late 2001.
After on-again, off-again plea talks, Mrs. Fastow pleaded guilty in January to filing a false tax form. She acknowledged helping her husband hide ill-gotten income from the government, including endorsing and depositing checks made out to their 4- and 8-year-old sons.
The proposed deal would have sentenced Mrs. Fastow, 42, to five months of home confinement along with the five months in prison. If convicted on all six counts, she could get as much as 37 years, but the actual sentence would be far less under federal sentencing guidelines.
Mr. Fastow, 42, pleaded guilty to two counts of conspiracy and admitted orchestrating schemes to make the energy giant appear financially healthy while enriching himself.
Prosecutors had supported the split sentence agreement, which the defense proposed to ensure that one of the Fastows would remain home with the children.
Prosecutors said the deal with Mr. Fastow doesn't allow him to withdraw over the change in his wife's situation.
"His plea stands and he is still required to cooperate," said Andrew Weissmann, the director of the Justice Department's Enron Task Force.
A former federal prosecutor and expert in white-collar crime, Robert Mintz, said there might be grounds for Mr. Fastow to withdraw "if there clearly was an expectation on the part of Andrew Fastow that he thought his wife would receive the sentence that the government was offering."
He said the grounds would depend on the precise terms of the deal.
Both Mrs. Fastow's lawyer, Mike DeGeurin, and prosecutors asked to make statements before Judge Hittner made his decision, but the judge cut them off.
Prosecutor Linda Lacewell told the judge her research had showed he must give a reason for denying a sentencing agreement.
"You say I have to give additional reasons? Show me. Give me your cases right now," Judge Hittner told her.
Ms. Lacewell said she didn't have her research with her because she never before had a judge reject a plea.
"I am going to have to go back to the drawing board and think about this," she told reporters outside the courthouse.
"I think that due process was in jeopardy by not allowing the thoughts of counsel to be expressed," she said.
The judge "articulated that his reasoning was that he did not want to be bound by an agreement. The agreement to plead guilty and resolve all of these matters at once included an agreed sentence. It resolved a lot of matters," Mr. DeGeurin said.
"I don't know what is going to happen," he added.
Mrs. Fastow had worked at Enron as an assistant treasurer before stepping down after her first child was born.
Prosecutors said she had played an "integral role" in securing her husband's guilty plea and cooperation more than a year after he was indicted.
The Fastows also relinquished nearly $24 million in cash and property to the government.
Mr. Fastow was indicted in 2002 on 78 counts of fraud, money laundering and other charges. Prosecutors added 20 counts, including tax crimes and insider trading, when a separate indictment charging his wife with two counts of conspiracy and four counts of filing false tax forms was unsealed in May.
The Fastows pleaded guilty before she was scheduled to go to trial Feb. 10. His trial had been scheduled for April 20. His sentencing has been postponed to Oct. 25.
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