The government’s massive Enron Corp. investigation is nearly complete following the sentencing in Houston last week of three former executives, including the first and the last employee to plead guilty and agree to cooperate.
Richard Causey, Enron Corp.’s former top accountant, will serve five-and-a-half years in prison for his role in the company’s fraud schemes following his sentencing on Wednesday. Causey, 46, had faced 30 criminal charges and was bound for trial with Enron founder Kenneth Lay and ex-CEO Jeffrey Skilling, but he grabbed a plea deal last December just two weeks before the trial began (see NGI, Jan. 9, 2006).
Causey pleaded innocent when he was charged in early 2004 on fraud and conspiracy charges (see NGI, Jan. 26, 2004). However, after taking the government’s offer last year, Causey became the 16th cooperating witness for the government. He never took the stand against his former bosses — and some feared he could have hurt the prosecution’s case if he had — but his behind-the-scenes involvement in the trial was considered integral to obtaining convictions against Lay and Skilling.
The plea agreement 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. However, prosecutors dropped plans to seize Causey’s Houston home, estimated to be worth about $950,000.
Causey had been promoted to chief accounting officer in 1998, seven years after he began his career at Enron as assistant controller. He previously worked for Enron’s outside accounting firm, Arthur Andersen LLP. Brought on board by Skilling, Causey was considered to be on equal executive footing with former CFO Andrew Fastow. Fastow pleaded guilty to two counts of conspiracy in January 2004 and is serving a six-year prison term.
Following Enron’s collapse in late 2001, Causey remained at Enron. However, he was fired in February 2002 after an independent investigation concluded he had failed to provide proper oversight on Enron’s notorious special purpose entities (see NGI, Feb. 18, 2002). The firing came a week after Causey pleaded the Fifth Amendment when called to testify about the company’s demise before a Congressional committee.
On Friday, Michael Kopper, 41, who helped create the dubious special purpose entities that shifted Enron’s business losses off the books with ex-CFO Andrew Fastow, was sentenced to three years and one month in prison. Kopper had been Enron’s global finance manager, and he was the first former executive to plead guilty and agree to cooperate with the government less than a year after the company declared bankruptcy in August 2002 (see NGI, Sept. 2, 2002). Kopper, who could have received up to 15 years in prison, pleaded guilty to wire fraud and money laundering.
Also on Friday, Mark Koenig, 51, the company’s former investor relations director, was sentenced to 18 months in prison. Koenig pleaded guilty to fraud in August 2004 (see NGI, Sept. 6, 2004). Koenig was a key witness for the prosecution earlier this year in Lay’s and Skilling’s trial.
In related news, the Department of Labor on Thursday entered into an agreement with Skilling to settle an $85 million lawsuit. The agreement bars Skilling from overseeing any company’s employee benefit program. It also waives Skilling’s rights to pension benefits from Enron. The agreement requires approval by the U.S. District for the Southern District of Texas. If the settlement is approved, it will resolve all Labor Department civil actions against Skilling. If Skilling’s convictions are overturned or vacated, the settlement requires Skilling to still pay $2.5 million to the bankrupt company’s pension fund’s participants and beneficiaries in Enron’s savings and stock ownership plans, plus $500,000 in penalties to the Labor Department.
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