Ex-Enron accountant accepts plea bargain

WASHINGTON – A former top accountant at Enron Corp. sealed his plea deal with prosecutors Wednesday and became a key ally for the government in its pursuit of convictions of former CEOs Kenneth Lay and Jeffrey Skilling – who were granted two extra weeks to adjust to the setback.

The accountant, Richard Causey, pleaded guilty to securities fraud in return for a seven-year prison term – which could be shortened to five years if prosecutors are satisfied with his cooperation in the much-anticipated trial. He also must forfeit $1.25 million to the government, according to the plea deal.

The guilty plea by the 45-year-old Causey gives the Justice Department’s Enron Task Force a second key witness to help guide jurors through a maze of complex deals that helped pitch the Houston energy company into bankruptcy.

The agreement essentially rewrites the script for the upcoming fraud trial for Lay and Skilling, the climax of a series of financial scandals that rocked investor confidence and sent markets reeling.

With Causey’s help, prosecutors can dispose of weeks of arcane and potentially confusing testimony by other witnesses about accounting issues that are at the heart of their case. For their part, defense lawyers must now prepare to cross-examine a man who strategized with the defense team for years while maintaining his innocence.

U.S. District Judge Simeon T. Lake III delayed the trial for Skilling and Lay to give the defense time to prepare for Causey’s testimony and retool their case based on the watershed plea deal. The trial, which had been scheduled to begin Jan. 17, is now set for Jan. 30.

The defense had been expected to exploit complex accounting at Enron to muddy the central issue of whether their clients intended to break the law.

The plea agreement described in broad strokes the substantial assistance Causey can provide. At a minimum, he will help prosecutors corroborate testimony by former chief financial officer Andrew S. Fastow, who had been scheduled as the government’s star witness at the upcoming fraud trial.

Defense lawyers had repeatedly called Fastow a liar and a thief because of admissions that he siphoned $60 million from Enron using secretive business partnerships. Fastow pleaded guilty to two criminal charges in exchange for a 10 year sentence.

The deal with Causey comes after a week of intense negotiations between his Washington-based lawyers, Reid H. Weingarten and Mark J. Hulkower, and the government task force led by Assistant U.S. Attorney Sean M. Berkowitz.

Causey had rejected previous government offers, including a far sweeter deal that would have sent him to prison for less than a year. But as the trial approached, taking his case to a jury looked like an increasingly long shot, experts said. Causey also risked Lay and Skilling pointing the finger at him, as the only defendant with accounting expertise.

Prosecutors had been set to produce a document known as the “global galactic” memo, in which Causey and Fastow allegedly agreed in writing that Fastow’s partnerships would never lose money in their dealings with Enron. If it existed, such a deal would clearly violate securities laws.

Defense lawyers in the obstruction of justice case against Arthur Andersen LLP painted accountant and star witness David B. Duncan as a man pressured to admit wrongdoing to spare pain and financial hardship on his family, an issue that jurors in that case later said influenced them to disregard his testimony.

The plea leaves just two men sitting at the defense table for what has been called the most remarkable corporate fraud trial in a generation. Lay and Skilling are unlikely to resolve the charges against them short of a jury verdict, experts say. Lay signaled his take-no-prisoners approach in a blistering speech in Houston earlier this month, when he blasted prosecutors.

“There’s nothing the government can offer them, and there’s nothing they would take,” Philip Hilder, a Houston lawyer who represents several witnesses in the case, said of the company’s former leaders. “This matter is headed for an absolutely certain collision course.”