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Ex-Official at Enron Makes Deal to Testify Prosecutors Gain Another Key Witness

Posted on: Thursday, 29 December 2005, 09:00 CST

By Simon Romero and Vikas Bajaj

The former chief accounting officer of Enron pleaded guilty Wednesday to a single felony charge of securities fraud and agreed to cooperate with federal prosecutors, giving a significant lift to the government's case against the two leading figures in the scandal over Enron's collapse. In exchange for his help in prosecuting the company's former chief executives, Kenneth Lay and Jeffrey Skilling, the accounting officer, Richard Causey, will face a sentence of seven years that could be reduced by two years, depending on his cooperation at trial. He also agreed to pay a $1.25 million fine.

After Causey entered his plea, Judge Sim Lake of U.S. District Court accepted a motion by defense lawyers to postpone the start of the trial of Lay and Skilling to Jan. 30. Causey was to have gone on trial with them on Jan. 17. The deal Causey and his lawyer, Reid Weingarten, reached with prosecutors appears far more generous than the agreement prosecutors reached with Andrew Fastow, the former Enron chief financial officer, who faces 10 years in prison after agreeing to plead guilty. "Typically, the deals get worse over time, not better," said Robert Mintz, a former prosecutor who is now with the law firm of McCarter English, "and the fact that the government is still willing to strike a fairly reasonable plea deal is a sign that there is no limit to the number of insiders they are willing to sign on board to ensure a conviction." In Causey, prosecutors get access to another top former Enron executive who was involved in discussions where numerous off-balance-sheet transactions and creative accounting entries that led to the company's downfall were devised, approved and executed. For instance, Causey was one of two participants in an Oct. 21, 2001, meeting with Lay that is the basis of one of the seven charges against the former chief executive and chairman. Enron declared bankruptcy in 2001 and it became clear soon afterward that the company had abused and misused accounting rules to make up for an array of poor business decisions. "There is no question that Causey will bring to the prosecution evidence that Fastow could not," Mintz said. For Causey, who had previously pleaded not guilty to more than 30 counts of fraud, conspiracy, insider trading and other charges, the deal guarantees a much shorter stay in federal prison than he would have faced had he been convicted at trial. It also offers the possibility of an even shorter sentence if he performs well as a witness against his former bosses. He will be the 16th person with ties to the company who has so far admitted in court to committing crimes. Though on the whole very damaging for Skilling and Lay, Causey's plea deal could also form the basis of a renewed appeal by their lawyers for a change of venue. Judge Lake has previously rejected the idea of moving the trial away from Houston, or for further delays. But legal experts say the defense will have fresh grounds to ask for a change because the hundreds of people in the Houston area who have been notified that they could be called as jurors will now be subject to renewed publicity about Causey and the case. "It provides a reasonable basis to renew that motion and they may well do it," Alonso said. ***

Simon Romero reported from Houston and Vikas Bajaj reported from New York.

Source: International Herald Tribune

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