In a significant victory for federal prosecutors who are pursuing other high-profile fraud cases post-Enron, a Houston jury late Thursday convicted former Dynegy Inc. executive Jamie Olis, 37, on six counts of fraud.
Other energy executives have pleaded guilty to other crimes, but the Olis case was the first to go to a jury, and prosecutors suggested that the conviction will be the first of many throughout the energy industry.
Olis, Dynegy’s former senior director of tax planning, remains free on bond. He is scheduled to be sentenced in February, and he faces a sentence of up to 35 years in prison.
The former tax executive had pleaded not guilty earlier this year to securities, wire and mail fraud charges for taking part to illegally boost Dynegy’s finances by disguising a $300 million loan as income in a scheme called Project Alpha (see NGI, June 16). The 2001 transaction, which prosecutors said had been put together by Olis and other conspirators, was camouflaged as cash in a five-year natural gas transaction.
The government accused Olis of working to hide a key part of the Project Alpha transaction from former auditor Arthur Andersen, which were two hedges required by the investing banks. According to Andersen witnesses, the auditors refused to allow the hedges, which would be counted as $300 million in cash flow.
However, Michael Shelby, U.S. Attorney for the Southern District of Texas, said Project Alpha “was not a singular act by a single person. This does not end our inquiry.” Shelby noted that the Olis verdict was proof that prosecutors would be able to explain to other juries the complex accounting tactics used by others to commit accounting crimes.
The government’s star witness, Gene Shannon Foster, was Olis’ former boss. Foster had already pleaded guilty to conspiracy and is cooperating with prosecutors (see NGI, Aug. 11). On the stand, Foster named eight other people at Dynegy, including Olis, that he said were involved in the Project Alpha scheme. Another former Dynegy employee, Helen Christine Sharkey, also had pleaded guilty in August for her part in the Alpha scheme and is cooperating with investigators, but she was not called to testify. The defense called no witnesses.
Dynegy issued a statement following the verdict which read, “While it is Dynegy’s policy not to discuss former employees, the company respects the judicial process and the jury’s decision in this matter.” It noted that it has “cooperated fully with the U.S. Attorney’s Office in Houston during the course of its investigations, and it pledges its continued cooperation.”
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