News analysis: in enron case, a guilty plea but no certainties

------------------------- * * X.com * Facebook * E-Mail * * * X.com * Facebook * E-Mail * Messenger * WhatsApp * Dieser Beitrag stammt aus dem SPIEGEL-Archiv. Warum ist das wichtig? At a

top-level Enron management meeting in September 2001, a red-faced Richard A. Causey, the chief accounting officer, pounded the table after hearing his colleagues label the company's

accounting practices as "aggressive." According to executives in the room, Mr. Causey fumed that he considered such criticism a personal affront, adding that he would stake his

career on the propriety of Enron's accounting. Yesterday, more than four years later, Mr. Causey entered a Houston courtroom and pleaded guilty to a single count of securities fraud,

admitting that the way Enron accounted for its financial performance presented a false portrait to investors for at least two years. [Page C1.] This tale of two Richards - one steadfastly

defending Enron's accounting decisions, the other admitting criminal liability in a fraud - is at the heart of the prosecution of Enron's former chief executives, Kenneth L. Lay

and Jeffrey K. Skilling. And in this dichotomy lies the issues and evidence that could determine whether the two remaining defendants go free or spend much of the rest of their lives in

prison. At this point, no one, not even the lawyers involved in the case, can be sure which of the two Richards may appear on the stand - or even if a third may appear, one who admits

limited criminal liability but continues to deny broader allegations. That partly explains why, even as prosecutors were heralding Mr. Causey's admission of guilt, lawyers for the

remaining defendants continued to hold him close by celebrating his integrity. "He is one of the most honest and decent men you can ever get to know," said Daniel Petrocelli, Mr.

Skilling's lead lawyer. The prosecutors, Mr. Petrocelli added, "broke an innocent man." Mr. Causey has never been a top-billed player in the Enron drama. But despite his low

profile, the government and the defense always considered him someone who could play the role of a major witness once the top officers go to court. That is because Mr. Causey, as chief

accounting officer, attended many of the top-level meetings where decisions were made that are at the center of the criminal case. Moreover, unlike other former executives who are government

witnesses, Mr. Causey walks into the courtroom with little excess baggage. Some of the government's star witnesses, including Andrew S. Fastow, the former chief financial officer, and

Ben Glisan, the former treasurer, are weighed down by having defrauded Enron of millions of dollars for their personal gain. Not so with Mr. Causey; there are no secret bank accounts, no

hidden streams of cash flowing from company coffers into his pockets. Where Mr. Fastow was roundly detested within Enron for his sharp tongue and elbows, Mr. Causey was widely liked, often

referred to as a friendly, teddy bear of a man. Indeed, Mr. Causey seems an unlikely character type to be playing such a profound role in a major fraud case. Friends and associates describe

him as a devoutly religious man who is devoted to his wife and children, with little in his life reflecting the fast-paced, reckless image now part of the Enron legacy. Creating part of the

uncertainty is the limited nature of the admissions made by Mr. Causey in an affidavit filed as a result of his plea agreement. In the document, Mr. Causey states generally that he

participated with "others in Enron senior management" to defraud the investing public by misleading them about the company's true financial performance. In support of that

statement, Mr. Causey cites two examples. What is most interesting about those examples is what they are not. They do not involve some of the broader accounting allegations related to

off-books entities, with esoteric names like the Raptors and LJM2, that Enron used to burnish its financial picture. They make no reference to secret handshake deals involving promises to

return money provided by outsiders. Prosecutors contend such deals allowed Enron to present loans as investments, which because of the intricacies of the accounting rules had the effect of

transforming the company's financial reports. Rather, the crimes admitted to by Mr. Causey involve one-time deals that, while significant in their effect on Enron's finances, do

not lock him into the prosecution's portrait of the company's senior management as being engaged in a nearly continuous conspiracy to defraud investors during the final years of

its existence. The allegations admitted by Mr. Causey occurred in the first quarters of 2000 and 2001. In the first instance, Mr. Causey and other executives knew that positive news was

about to push up the company's stock price. To profit from that, they removed a hedge from a partnership that the company partly owned and that held Enron stock. With the hedge, if

Enron's stock price went up, the value of a related investment would go down. After the hedge was removed, Enron reported the stock price increase as recurring profits. The second

allegation that Mr. Causey admitted to involved a transaction relating to the company's retail electricity business. In the first quarter of 2001, the retail business, known as Enron

Energy Services, had hundreds of millions of dollars in trading losses, far exceeding the unit's expected income for the year. To deal with that, Enron shifted the division's

trading books into a separate, highly profitable unit, avoiding direct reporting of the losses. Another curious element of the deal is the fact that Mr. Causey is not obligated to cooperate

with the government; rather, his sentence of seven years could be reduced to five should prosecutors determine that he has provided substantial assistance to their case. Even though that

gives him plenty of motivation to make prosecutors happy, without a cooperation agreement, Mr. Causey, who is 45, cannot be threatened with the loss of his deal if he fails to impress the

government. None of this means the government has obtained a bad deal from Mr. Causey - far from it. With his admission to the two underlying criminal acts, Mr. Causey has become a witness

on charges brought against Mr. Skilling related to the same two transactions. And while Mr. Causey's admissions do not involve any of the charges against Mr. Lay, the former chief

accounting officer was a primary participant with him in at least one meeting in October 2001 that the government contends was part of an effort to deceive Enron's accountants at Arthur

Andersen. Moreover, because of his motivation to cooperate and reduce his sentence to five years, from seven, Mr. Causey could well prove to be an important prosecution witness on other

transactions in which he was involved. Those dealings are reflected in charges that the company manipulated its income through the off-books partnerships, the bogus revaluation of a

significant asset, the stashing away of excess profits for use in another year, and others. His defection to the government is likely to rob Mr. Skilling and Mr. Lay of what could have been

a central defense: that, in making their judgment about accounting decisions, they relied on Mr. Causey's expertise. For months, Mr. Causey has been working with lawyers for his

co-defendants, taking them through each deal and explaining his justification for every accounting decision. Should the second, or even the third, Richard appear on the witness stand, those

statements are sure to be raised by the defense lawyers as they try to undermine the credibility of yet another witness against their clients.