SEC sues 2 ex-Enron lawyers

Civil suit accuses them of hiding fraud involving sale of stake in Brazilian power project

March 29, 2007|By Bloomberg News

WASHINGTON -- The Securities and Exchange Commission is suing former Enron Corp. attorneys Rex R. Rogers and Jordan H. Mintz, accusing them of hiding fraud at the company whose collapse wiped out at least $1 billion in retirement funds.

Rogers, as an Enron associate corporate counsel, and Mintz, as general counsel for its global finance division, helped cover up the energy trader's financial troubles by omitting required disclosures from public filings in 2000 and 2001, the SEC said in a lawsuit at U.S. District Court in Houston yesterday.

"Mr. Rogers and Mr. Mintz should've acted as gatekeepers," said Frederic Firestone, an SEC enforcement official overseeing the case. "Instead they were active participants in a scheme to make material misrepresentations."

Enron was the world's largest energy-trading company, with a market value of as much as $68 billion, before it collapsed in December 2001. The bankruptcy, the second-largest in U.S. history after WorldCom Inc., wiped out more than 5,000 jobs. Investors are seeking to recover $40 billion in losses.

The SEC's lawsuit stems from Enron's sale of a stake in a Brazilian power project to a partnership controlled by former Chief Financial Officer Andrew S. Fastow. The transaction, aimed at temporarily removing the troubled project from Enron's books, included secret promises to buy back the stake and ensure Fastow's fund didn't lose money, the SEC said.

Mintz knew, or should have known, about the agreement, and acted "knowingly or recklessly" in documenting the buyback, the SEC said. He and Rogers also failed to disclose that Fastow earned more than $18 million from two partnerships through dealings with Enron, the agency said.

"Mr. Mintz denies the charges and intends to fight vigorously in court," said his attorney, Christopher B. Mead, in Washington. "He made documented efforts to regulate the relationship between Fastow and Enron."

Mintz told a congressional subcommittee in 2002 that he had acted on his own to hire an outside law firm in 2001 to scrutinize Fastow's off-books partnerships. The attorney said he wrote five memos to senior executives, in which he questioned potential conflicts of interest and the approval process for transactions between Enron and the partnerships.

The SEC said Rogers also failed to properly disclose that the former Enron chairman, the late Kenneth L. Lay, sold $86 million in Enron shares to the company in 2000 and 2001 to repay loans.

"Mr. Rogers is a person of great integrity and the highest moral character," said his lawyer, W. Edward Tomko III, a former federal prosecutor. "He has never been involved in any wrongdoing, and we look forward to vigorously defending these baseless allegations."

The SEC suit is seeking unspecified fines and forfeiture of ill-gotten gains. It also wants to bar the two from working as officers or directors of public companies.

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