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Enron Chief Accountant Enters Plea Bargain

by Glen Shapiro, LawAndTax-News.com, New York

30 December 2005


Enron's former chief accounting officer Richard Causey pled guilty in Houston on Wednesday before US District Judge Sim Lake to one count of securities fraud and agreed to forfeit $1.25 million to the government.

Under the plea bargain, prosecutors and defence attorneys will seek a seven-year prison sentence for him, although this may be reduced to five years if Mr Causey, who has agreed to testify against former chairman and president Kenneth Lay and Jeffrey Skilling, provides a full account of events at Enron to the Justice Department.

Mr Causey has admitted to mischaracterizing $85m of profit from appreciation in Enron's stock price as recurring earnings from operations, and that he took part in an early 2001 business reorganization aimed at hiding hundreds of millions of dollars of losses from one unit in the results of a much larger and more profitable second unit. Messrs Skilling and Lay are both alleged to have taken part in this manoeuvre.

"This is devastating news for Lay and Skilling and it greatly increases the chances that they will be convicted," said CBS News legal analyst Andrew Cohen. "This deal will give prosecutors yet another former Enron insider who presumably can and will point the finger at Ken Lay and Jeffrey Skilling and declare that they knew or should have known about the awful financial dealings going on inside that company."

It had been expected that Lay, Skilling and Causey would mount a unified defence at their trial, which had been due to start on January 17th. The judge agreed on Wednesday to push back the start of the trial to January 30th to allow time for Lay's and Skilling's attorneys to adjust their defence.

Earlier in the month, Kenneth Lay, who is facing seven charges of conspiracy and fraud, urged ex-employees of Enron to come forward and "speak the truth" at his criminal trial. Federal prosecutors are said to have identified around 100 former Enron employees as "unindicted co-conspirators".

Mr Lay explained that: "This has caused virtually all of them to refuse to talk with our lawyers and will almost certainly cause any of those that are subpoenaed by us to testify to assert their Fifth Amendment rights."

Calling on those in the know to come forward, the former Enron boss argued that: "Either we proclaim the truth about Enron and its employees in this trial, or our friends, neighbours, potential employers and others will continue to believe that Enron was a criminal enterprise."

Charges that Kenneth Lay lied to banks regarding his intention to use loans granted to him to purchase Enron stocks on margin before the firm's stock price plummeted in 2001 will be heard will be heard in parallel to the main trial, but by District Judge Sim Lake alone.

Explaining his decision to waive his right to a jury trial, Lay told the judge last May that: "We have confidence in your honor and think a bench trial is the most appropriate way for it to be decided."


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