Richard A. Causey, 46, Enron Corp.’s former chief accounting officer, last week began serving a five-and-a-half-year prison sentence in Texas for his role in the fraud schemes that brought down the company.
Causey had faced 30 criminal counts and was bound for trial with Enron founder Kenneth Lay and ex-CEO Jeffrey Skilling before he pleaded guilty to one count of securities fraud in December 2005 (see NGI, Jan. 9, 2006; Jan. 26, 2004). Causey, who was a cooperating witness for the government, was sentenced in November (see NGI, Nov. 20, 2006).
The plea agreement with the government stipulated that Causey serve a seven-year prison term, which could be reduced to no less than five years with a government recommendation. The maximum penalty for securities fraud is 10 years in prison and a fine of $1 million or twice the amount illegally gained. Causey was fined $1.25 million, and he forfeited a claim to $250,000 in deferred compensation from Enron. Causey was able to keep his Houston home, estimated to be worth about $950,000.
Causey was assigned to a prison in Bastrop, TX, which is about 30 miles from Austin. With good behavior, Causey may have his sentenced reduced to four years and nine months. The former top accountant may be assigned to work in groundskeeping or on the kitchen detail at the prison for 12-40 cents/hour. He also may apply for a job that pays 23 cents-$1.15/hour in a prison factory that retrofits vehicles for the government.
The Enron saga is still ongoing, but most of the legal-end of the story is expected to be resolved this year. The biggest item on the agenda is the ongoing shareholder lawsuit, which is scheduled for trial in April unless the remaining defendants — former Enron business partners — opt to settle out of court.
The shareholder lawsuits, with lead plaintiff the University of California, were filed in 2001. To date, the shareholders have obtained more than $7.3 billion in settlements, but no cash will be distributed until the actions are resolved. Of the settlements to date, $6.6 billion came from agreements with JPMorgan Chase, Citigroup and the Canadian Imperial Bank of Commerce (CIBC) (see NGI, May 29, 2006). The remaining defendants include Merrill Lynch, Credit Suisse First Boston and several ex-Enron executives.
Merrill agreed to pay Enron’s estate $29.5 million last July to settle its portion of a so-called “MegaClaims” lawsuit (see NGI, July 10, 2006). And last month, the Federal Reserve terminated an enforcement action against CIBC and Citigroup Inc. over structured transactions the banks made with Enron before the energy giant’s collapse. The banks had been prohibited from engaging in certain structured finance deals in order to achieve “misleading earnings, revenue or balance-sheet effect.” The deals involved Enron special purpose entities, which the company used to keep debt off its balance sheet. The agreements between the Fed and the banks had required the banks to establish certain remedial policies and procedures.
Besides the shareholder lawsuits, there are still several criminal cases ongoing. The Enron Task Force was disbanded in October; the Department of Justice’s Fraud Division in Washington, DC, is handling all of the remaining criminal litigation. A few former Enron executives still await sentencing after pleading guilty to various charges.
Skilling’s appeal of his 19 criminal convictions is expected to be filed in the next few weeks (see NGI, Dec. 18, 2006). He began serving his 24-year and four-month prison sentence last month in Minnesota.
Still to be resolved is a scheduled trial in September for three former bankers from Great Britain. David Bermingham, Giles Darby and Gary Mulgrew face wire fraud charges for allegedly stealing $7.3 million from their former employer, Royal Bank of Scotland Group plc’s Greenwich NatWest Unit. The trio, who were the first to be criminally indicted in the Enron case, allegedly benefited through the sale of “Swap Sub,” one of Enron’s special purpose entities (SPE) put together by ex-Enron CFO Andrew Fastow (see NGI, July 1, 2002). The three men have denied the allegations, and they had sought to have their case heard in Great Britain rather than the United States. No charges have been filed against them in Great Britain.
The government also is considering whether to retry three former Merrill Lynch & Co. executives whose convictions from a 2005 Enron-related trial were overturned on appeal (see NGI, May 16, 2005; April 25, 2005).
Two former Enron Broadband Services (EBS) executives, Joe Hirko and Rex Shelby, whose fraud and conspiracy trial in 2005 ended in a mistrial, also may be retried, pending the outcome of appeals to dismiss the remaining charges. Kevin Howard, an ex-EBS executive convicted on five counts of fraud and conspiracy last year, is awaiting a judge’s ruling on a prosecution request to dismiss four of the charges (see NGI, June 5, 2006). The ruling will decide if and when the former executive is sentenced to prison.
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