HOUSTON – A U.S. District judge on Friday ordered the trial for former Enron assistant treasurer Lea Fastow (search) to proceed after she failed to agree to a plea bargain.
The decision marks a setback for federal prosecutors, who counted on a Lea Fastow plea agreement in order to move forward with a potential guilty plea by her husband, Andrew Fastow (search), the former financial mastermind of Enron (search).
Lea Fastow and her defense team faced a midday deadline to agree to Judge David Hittner's modification of a proposed plea bargain, under which Lea Fastow would have pleaded guilty to one count of tax evasion.
Judge Hittner, in a court filing Friday, ordered jury selection to proceed for a trial, which is slated to begin on Feb. 10. Lea Fastow faces six criminal counts of false tax reporting, fraud and money laundering that could send her to prison for as long as 37 years.
Federal prosecutors are targeting Andrew Fastow in their two-year probe of accounting fraud and bogus energy trading at the energy company. The former CFO's cooperation with prosecutors could net indictments of his former bosses -- former Enron Corp. chairman Ken Lay (search) or former chief executive Jeff Skilling (search) -- which has yet to occur in the two-year government investigation.
But an Andrew Fastow plea deal hinged on his wife reaching an agreement with prosecutors first. The Fastows want to avoid having their potential prison sentences overlap, because of their two small children.
Sources have said Andrew Fastow's plea agreement included a 10-year prison sentence and $20 million payment to settle civil charges by the Securities and Exchange Commission (search).
He faces 98 charges for his role in the complex financial deals that hid debt, artificially boosted Enron's profits and siphoned millions of dollars into partnerships he controlled. That trial is scheduled to begin in April.