VideoFormer Enron Corp. chief financial officer Andrew Fastow pleaded not guilty to a 78-count indictment that he defrauded the energy trader and its shareholders.
Fastow, appearing yesterday before U.S. Magistrate Marcia Crone, stated that he was innocent of charges ranging from fraud to money laundering to obstruction of justice.
"Your honor, in answer to each of the charges I plead not guilty," he said in the federal courthouse in Houston, according to reports. Fastow was indicted last week.
If convicted, the former Enron CFO could spend the rest of his life in jail. Fastow has been free on $5 million bail since he was initially charged in early October.
A status hearing is scheduled for January 13.
Fastow's attorneys have reportedly argued that he is not guilty of any wrongdoing because his actions were approved by Enron senior managers and the board of directors.
SEC: Vacancies?
Now that Securities and Exchange Commission chairman Harvey Pitt has tendered his resignation, the big question is: Will others be following him out the door?
Observers are already predicting that new Public Company Accounting Oversight Board chairman William Webster will offer his resignation within the next few days.
In addition, there are new rumblings that SEC chief accountant Robert Herdman is also feeling pressure to resign. The SEC indicated on Wednesday that Herdman was "doing his job" and would not comment on speculation over his future, according to ft.com.
If Herdman leaves, however, it would leave the SEC with three critical positions to fill: chairman, chief accountant, and head of the accounting oversight board.
The likely candidates for the three slots?
Several names have reportedly come up for Pitt's job in informal discussions between White House officials and Washington lawyers. The list includes Peter Fisher, the undersecretary for domestic finance at the U.S. Treasury, and James Doty, a former candidate for the SEC chairman's job and a friend of the President.
Reuters yesterday mentioned several other potential candidates for Pitt's job: SEC commissioners Paul Atkins and Cynthia Glassman, Gary Lynch, and former federal judge Stanley Sporkin.
Lynch and Sporkin are both former SEC enforcement chiefs.
One rumored candidate has already removed himself from the short list. Speaking yesterday before an audience at the Securities Industry Association annual meeting, former New York City mayor Rudolph Guiliani said: "I'm not looking for a job. This is not the time for me to go back into government."
A newspaper article had mentioned Guiliani as a possible replacement for Pitt. The ex-NYC mayor is currently working with authorities in Mexico on reducing that country's crime rate.
Although Pitt has promised to stay on at the SEC until a replacement is found, Reuters reports that President Bush may name an interim chairman instead. Translation: the White House apparently wants Pitt out now.
SEC Proposes New Rules for Lawyers
The unsettled state at the SEC does not appear to be hampering the efforts of the commission's staff.
The SEC on Wednesday proposed new rules for corporate lawyers, which will require attorneys to report any wrongdoing at companies they work for.
A final version is expected to be written by late January 2003.
The new rules for lawyers were mandated by the Sarbanes-Oxley Act, which was passed this summer.
The new standards must include a rule requiring an attorney to report "evidence of a material violation of securities laws or breach of fiduciary duty or similar violation by the company or any agent thereof" to the chief legal counsel (or CLO) and the chief executive officer of the company (or the equivalent).
If the senior executives do not respond appropriately to the evidence, the new rules require the lawyer to report the evidence to the audit committee, another committee of independent directors, or the full board of directors.
"It clearly changes the attorney-client relationship...These changes are absolutely necessary," said SEC commissioner Roel Campos, according to published accounts.
Adelphia Sues Deloitte & Touche
Adelphia Communications Corp. has filed suit against Deloitte & Touche LLP, its former outside auditor, for its role in "one of the most egregious instances of corporate self-dealing and financial chicanery in United States corporate history."
The lawsuit charges D&T with "professional negligence, breach of contract, fraud, and other wrongful conduct." As a direct result of Deloitte's own wrongful conduct, "Adelphia has suffered very large damages and was ultimately forced to file for bankruptcy protection," according to the suit.
"Deloitte's audit failures resulted in billions of dollars in damages to Adelphia, our investors and employees," said Adelphia management in a statement. "The Rigas family never could have accomplished their wrongful acts had Deloitte fulfilled its professional responsibilities to Adelphia by disclosing the corporate abuses that it knew, and should have known, were taking place."
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