Ex-Enron official reportedly makes plea bargain with U.S. prosecutors

Causey is likely to testify against Lay, Skilling in trial

December 28, 2005|By NEW YORK TIMES NEWS SERVICE

In a development that transforms the criminal case against Enron's former top officers, the company's former chief accounting officer has reached an agreement with prosecutors to plead guilty to violating federal law during his employment there, people briefed on the decision said yesterday.

The former accounting officer, Richard A. Causey, had been viewed by lawyers in the case as likely to strike a plea deal with prosecutors and possibly serve as a witness for the government in the coming trial of two former chief executives of Enron, Kenneth L. Lay and Jeffrey K. Skilling.

While Causey's name is not widely known to any who have not been paying close attention to the Enron case, he has long been considered potentially one of the most important witnesses in the fraud cases against Lay and Skilling. The three men had been scheduled to go on trial together, facing charges of conspiracy, securities fraud, wire fraud and other crimes, beginning Jan. 17.

Corporate records and other documents establish that Causey engaged in frequent conversations with Lay and Skilling about accounting decisions at Enron, the former energy giant. Causey was one of two participants in an Oct. 12, 2001, meeting with Lay that forms the basis for one of the charges against the former Enron chairman. With the plea agreement, Causey could be compelled to testify about his recollection of that meeting and other events.

While Lay and Skilling have attracted the most public attention, the government's case against Causey appeared to be supported by the strongest evidence.

It included not only witnesses such as Enron's former chief financial officer, Andrew S. Fastow, but also documents that appeared to be part of illegal conspiracies, including what prosecutors contend was an illicit agreement with Fastow that allowed Enron to manipulate its financial statements.

Legal experts said the deal, reached just as the trial was about to start, signals potential weakness and a bit of legal gamesmanship on both sides in the complex case.

"It is certainly going to set the defense scrambling to restructure some of their tactics," Robert A. Mintz, a former prosecutor now with McCarter & English, said of the plea deal. "But it is also a sign that the government is by no means convinced that it has an overwhelming case and is willing to sign up cooperators even at this late stage in the prosecution."

But, the experts said, there is little doubt that, with the plea agreement, the government has gained a key advantage in the case.

"If Causey is pleading, he has to be cooperating," said John Fahy, a former federal prosecutor who is now a partner at Fahy Choi in Rutherford, N.J. "That is going to make him a voice for the prosecution to explain documents in the case, and I think it is going to be trouble for everybody else."

Enron collapsed into bankruptcy in December 2001, amid questions about its widespread use of off-balance sheet partnerships to smooth and improve its reported financial performance. In the weeks and months that followed, evidence emerged of widespread abuse and misuse of the accounting rules at Enron, as the company struggled with an array of poor business decisions that weighed down its financial performance. A number of official reports, including one prepared by a special committee of Enron's board, concluded that the company significantly misrepresented its financial performance in the final years of its existence.

Causey would be the 16th person with ties to the company to plead guilty to committing crimes related to Enron. Much of the company's once-celebrated senior management team have pleaded guilty, including Fastow, who is scheduled to appear as a witness in the cases against Lay and Skilling.

People briefed on the decision said Causey would change his plea at a hearing before federal Judge Sim Lake today. The charges that will be part of the plea and the terms of the agreement could not be immediately determined.

Causey's lawyer, Reid H. Weingarten, did not return a telephone call seeking comment.

Michael W. Ramsey, a lawyer for Lay, said that he would have no comment until today.

Daniel Petrocelli, a lawyer for Skilling, did not return a call last night.

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