Risk & Compliance

Laundry Time

Prosecutors are applying money laundering laws to the recent crop of financial scandals.
Joseph McCaffertyNovember 1, 2002

Last month former Enron CFO Andrew Fastow was formally charged for his alleged role in the scandal at the bankrupt energy giant. The criminal complaint includes charges of securities fraud, wire fraud, mail fraud, bank fraud, conspiracy, and money laundering.

Given the complexity of the alleged crime, the variations on the fraud theme come as no surprise. And conspiracy? Well, no man is an island, right? But the charge of money laundering is puzzling. Isn’t it usually reserved for big-time drug dealers? It was, says attorney Scott Magargee of Philadelphia law firm Cozen O’Connor, but it is being applied more often to financial crimes, even in cases where the money laundering was incidental to the underlying crime.

In Fastow’s case, the charge stems from his alleged use of ill-gotten gains to make legitimate purchases, including a $4.2 million house he was having built. “If you got $100 [illegally] and use that for your kids’ education, some prosecutors say that is money laundering,” says Magargee.

The charge carries with it a maximum sentence of 20 years, effectively doubling Fastow’s potential sentence if he’s found guilty. No house is worth that much.

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