Everything was on the “up and up” with former Dynegy Inc. executive Jamie Olis, his defense attorney said in opening arguments Tuesday. Instead, said attorney Terry Yates, former Dynegy auditor Arthur Andersen used “accounting tricks” that were most responsible for the design and mismanagement of Dynegy’s Project Alpha, a complex natural gas transaction first set up in 1998.

Yates, who is defending Olis on securities fraud, mail fraud, wire fraud and conspiracy charges for his alleged role in Project Alpha, said in his 30-minute opening statement that Andersen had designed and marketed the scheme and also benefited financially — receiving $8 million, the highest fee of all of the law firms and banks that had advised the company on the deal.

Comparing Project Alpha to a Formula One race car, Yates said the transaction was “dangerous, complex and reckless. Arthur Andersen was the driver. They wanted to get to the finish line to get this deal done.”

While prosecutors allege that Olis withheld pertinent information from Andersen, Yates contended that information was withheld only because Andersen had made the request and only wanted to be made aware of certain things, said Yates. “Nothing was hidden from Arthur Andersen that they did not want to see,” Yates said.

Court observers said Olis, who was fired by Dynegy in February, cried silently while Yates told the jury about Olis’ humble beginnings. He stressed that Olis never intended to defraud anyone, and instead, “he was just a tax guy trying to do his job.”

Olis was charged in June along with his former boss, Gene Foster, and another ex-Dynegy employee, Helen Sharkey, in the scheme, and in August, Foster and Sharkey each pleaded guilty to one count of conspiracy in August and are awaiting sentencing (see Daily GPI, Aug. 6). They also are scheduled to testify.

According to court records, a Dynegy entity called ABG Gas Supply LLC bought natural gas at market prices and sold it to Dynegy after April 2001 at a $300 million discount. Dynegy then resold the gas at market prices, booking the $300 million as cash flow on financial statements for the second, third and fourth quarters. The transaction also allowed Dynegy to book a $79 million tax benefit related to the transaction.

Following Yates’ opening statement, the government’s first witness, Sean Muller, detailed how Andersen, his former employer, had presented the transaction to Dynegy as a way to trim taxes. Muller now has his own business, but he was a tax accountant at Andersen when Project Alpha was set up.

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