Enron Chief Financial Officer Andrew Fastow surrendered today on a federal Complaint charging him with securities, mail and wire fraud and money laundering. He was released on a $5 million dollar bond pursuant to an agreement between prosecutors and Fastow's lawyers. The agreement called for Fastow to be released upon posting four parcels of real estate and $3 million in cash as security for the bond.

The criminal complaint was filed along with a civil SEC complaint. According to prosecutors, "The complaint filed by federal prosecutors, along with a civil complaint filed by the Securities & Exchange Commission, makes clear that Enron's strategy of selling ailing assets to the Fastow-controlled entities was intended to help the company "manipulate its balance sheet" and "manufacture sham earnings."

...."The criminal complaint outlines a pattern of "secret agreements" between Fastow and others at Enron that would require Enron to buy back assets sold to LJM if another buyer could not be found. These agreements apparently were kept from Enron's board of directors."

"In addition, it alleges that Fastow and Causey -- although he's not identified by name -- manipulated Enron's balance sheet in a complex transaction that involved back-dating of documents."

We said in a comment to Skippy's post on Fastow today that we think it likely a deal is in the works. Otherwise, the feds woudn't have been so cooperative about letting him surrender and make bail in one day.

After posting that, we learned who is representing Fastow: John Keker of San Francisco and David Gerger of Houston. We don't know Mr. Gerger personally but we do know John Keker through the National Association of Criminal Defense Lawyers and he's a fighter and outstanding trial lawyer as well as a great strategist who often goes to trial--so there may not be a deal inked yet. Add to that Mr. Keker is not a fan of talking to the media, so details may not come out as quickly as they have with other high-profile defendants.

If Fastow does make a deal with the Government, any plea he makes will result in a sentence determined by application of the U.S. Sentencing Guidelines. For the fraud and the money laundering counts a key variable is the amount of loss. The greater the dollar amount of the loss, the higher the sentence, up to the statutory maximum allowed for each count. The statutory maximums are 20 years on the money laundering counts, ten years on the securities fraud and five years on each of the mail and wire fraud counts.

In order for Fastow to get less time than the guidelines specify for his conduct (taking into account his prior criminal history or lack thereof) he has to cooperate and provide information that assists the Government in the investigation or prosecution of others.

So Fastow is between a rock and a hardplace if he wants to avoid a trial. If he chooses to take a deal, it will be interesting to see how much time he gets chopped off his sentence for cooperating and who he gives up.

Many people in his situation believe they have no choice but to take the deal, particularly if they have young children as Fastow does. They don't want to miss all of their kids' childhoods and they feel a responsibility to get out and resume supporting them as soon as possible. Family loyalty usually wins out over loyalty to co-conspirators.

It didn't used to be this way, not back in the 70's and early 80's. The change began with the enactment of the Federal sentencing guidelines in 1987. That's when the rule came in that the only way to get out from under a stiff sentence mandated by the guidelines was to cooperate with the Government. It's proven to be an effective hammer.

We think it's a terrible system that turns everyone into rats. The system was initially devised to reduce disparities in sentences around the country. What it has done instead is remove judicial discretion from the sentencing decision to where judges do little more than approve or modify the parties' mathematical calculations and rubber stamp the Government's assessment of a defendant's cooperation.