After refusing to testify against his co-workers, former Dynegy tax attorney Jamie Olis, one of the architects of Project Alpha, was sent to a minimum security federal prison in Texas Thursday to begin serving a 24-year sentence. He was convicted of conspiracy and five counts of securities, wire and mail fraud last year for helping push through the 2001 scheme.

Olis’ sentence was based on the huge losses Dynegy shareholders suffered following Project Alpha’s repercussions. The long-term gas supply transaction used a special purpose entity to portray what was essentially a loan as $300 million in operating cash flow to make the company’s books look better than they were.

As a result of the deal, Dynegy had to restate its 2001 earnings and pay a $3 million fine to the Securities and Exchange Commission (see Daily GPI, Sept. 25, 2002). In addition, the scandal led to the resignation of many of Dynegy’s top officials, including CFO Rob Doty and founder and Chairman Chuck Watson (see Daily GPI, June 25, 2002; May 29, 2002).

Ironically, Olis never profited directly from Project Alpha; he was awarded two annual bonuses totaling $195,000 before the dubious transaction was investigated.

Federal sentencing guidelines were revised in November 2001, requiring double-digit terms for white collar criminals whose actions are tied to investor losses of $100 million or more. Under previous guidelines, he would have served less than a decade.

Two other former midlevel executives charged in the scheme pleaded guilty to single counts of conspiracy and face no more than five years in prison. None of his former bosses who could have called off the scheme, have been charged.

On Tuesday, Olis lost a last-minute bid to the 5th U.S. Circuit Court of Appeals to allow him to remain free on bond while appealing his conviction. Olis’ wife is about six months pregnant and an appeal bond would have allowed him to attend the birth. The Olises also have an 8-month-old daughter.

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