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Former Dynegy Execs’ Project Alpha Trial Set for August
The trial of three former Dynegy Inc. executives involved in the financing scheme Project Alpha is expected to begin Aug. 4 and last at least eight weeks, attorneys said Tuesday. Jamie Olis, 37, Gene Shannon Foster, 44, and Helen Christine Sharkey, 31, pleaded innocent in separate appearances before a Houston judge.
U.S. Magistrate Judge Calvin Botley set the August trial date, and U.S. Attorney Jimmy Sledge told the judge that the trial will last at least eight weeks and perhaps longer.
Olis was a former director of tax planning, Foster, a former vice president of tax, and Sharkey was a former member of Dynegy’s risk control and deal structure group. They were charged with conspiracy, securities fraud, mail fraud and wire fraud by the U.S. Attorney’s Office in Houston in connection with Project Alpha (see Daily GPI, June 13). The trio also faces charges filed by the Securities and Exchange Commission (SEC) in connection with Project Alpha.
When the indictments were unsealed last month, Olis was in San Antonio. He was arrested and was freed on $250,000 bond. Foster and Sharkey, who were arrested in Houston, remain free on separate $100,000 bonds. If they are convicted, they each face up to 35 years in prison and fines of up to $2.2 million.
Olis’ attorney Terry Yates, speaking for his client and the co-defendants, said the clients’ case would be ready for a trial in August. “We pleaded ‘not guilty’ because he is not guilty,” Yates said of Olis.
According to the indictments, the defendants set up ABG Gas Supply as a special purpose entity to purchase gas at market price, then resell the gas to Dynegy at a discount. The company then allegedly sold the gas at market prices to generate approximately $300 million in trading revenue.
For the next 51 months of the contract, officials allege that ABG Gas would buy natural gas to sell to Dynegy at a premium to market prices, effectively repaying a loan. However, the money should have been booked as debt because the defendants secretly promised to repay the $300 million with interest, according to the indictment. The indictment stated that the repayment guarantee was hidden from former Dynegy accountants Arthur Andersen.
The defendants agreed that the nature of the transaction should “never, never, never go to anyone,” because the defendants were “the only ones that have complete knowledge of this transaction,” according to the indictment. Federal prosecutors allege that Project Alpha was set up with the assistance of the Citicorp banking unit, Deutsche Bank and Credit Suisse First Boston.
Dynegy has been cooperating with the investigation since it began. Dynegy had already paid $3 million to settle an SEC complaint involving Project Alpha last year (see Daily GPI, Sept. 25, 2002). The SEC had alleged that Dynegy engaged in securities and accounting fraud because it told investors after Project Alpha was disclosed in April 2002 that the project was set up to secure a stable natural gas supply.
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