The Securities and Exchange Commission (SEC) last week charged the former managing director of Enron North America (ENA) and co-head of its commercial transactions group with violating antifraud provisions of federal securities laws and for aiding and abetting Enron's violations for reporting and record-keeping provisions.
Raymond M. Bowen Jr., who had become Enron's treasurer and was actually named executive vice president and CFO in January 2002 after Enron had declared bankruptcy (see NGI, Feb. 4, 2002), allegedly "knew or was reckless in not knowing of a scheme to manipulate Enron's publicly reported earnings through a variety of devices designed to produce materially false and misleading financial results, including the overvaluation of Enron's 'merchant' investments in energy and technology companies," according to the SEC complaint.
Just a few weeks before Enron declared bankruptcy in late 2001, Enron's board of directors elected Bowen to serve as executive vice president-finance and treasurer. He formerly served as COO of Enron Industry Markets, and from 1998 to 1999, he was treasurer of Enron Capital & Trade Resources. He joined Enron in 1996.
At the time of Bowen's promotion in November 2001, former Chairman Kenneth Lay said, "Ray has extremely good credibility with the investment community and a broad range of experience at Enron. He is well respected and trusted by the banks and other financial institutions."
Bowen resigned from his position as CFO at Enron last September "to pursue other professional opportunities."
In its announcement Monday, the SEC said Bowen had agreed to a permanent injunction and to be barred from acting as an officer or director of a public company for five years. As part of the settlement agreement, which is subject to the approval of the U.S. District Court, Bowen will pay nominal disgorgement of $100 and a civil penalty of $499,900.
Specifically, the SEC alleges that Bowen, who had oversight responsibilities regarding portions of ENA's merchant portfolio during 2Q2000 and part of 3Q2000, knew or was reckless in not knowing that the merchant portfolio was materially overvalued on Enron's books. Bowen also was aware that certain assets were hedged by special purpose entities (SPEs), and knew or was reckless in not knowing that the SPEs did not provide a true economic hedge, and were used to manipulate Enron's financial statements, the commission alleges.
Also, the complaint alleges that Bowen knew or was reckless in not knowing that a $100 million increase to the book value of Enron's largest merchant asset, Mariner Energy Inc., was recorded in 4Q2000 to generate fictitious mark-to-market earnings sufficient to meet Enron's targets.
The SEC said it was assisted in its investigation by the Department of Justice's Enron Task Force. The SEC said its investigation is continuing.
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