HOUSTON – A former assistant treasurer at toppled energy giant Enron (search) pleaded guilty to conspiracy Tuesday for his role in making Enron's financial picture appear rosier than it really was.
Timothy DeSpain, 39, admitted lying to -- or keeping pertinent financial information from -- credit rating agencies so Enron could maintain an investment ranking critical to its ability to borrow money and support its volatile trading operation. He agreed to cooperate with the government in ongoing Enron investigations.
DeSpain told U.S. District Judge Ewing Werlein he was directed by treasurers who were his bosses -- Jeffrey McMahon in 1999 and early 2000 and then Ben Glisan Jr. through November 2001 -- not to discuss the extent of some shady financing, and he complied.
He told the judge a 1999 deal in which Enron wrongly counted a sale of treasury securities as cash flow was known to the chief accounting officer, who at that time was Richard Causey.
Glisan pleaded guilty to conspiracy a year ago and is serving a five-year sentence. Causey has pleaded innocent to more than 30 counts of fraud, conspiracy, money laundering and insider trading and is awaiting trial. McMahon has not been charged.
The government said DeSpain, the 15th person to plead guilty in the Enron investigation, was in charge of keeping Enron in touch with credit rating agencies.
In exchange for DeSpain's cooperation, he will not be charged with crimes he may have committed with Enron or his subsequent employer, Halliburton (HAL), the agreement said.
He no longer works for Halliburton (search), and the cooperation agreement doesn't refer to any wrongdoing there. Company spokeswoman Wendy Hall would not say when DeSpain worked at Halliburton, only that he no longer works there and his case has nothing to do with the energy services conglomerate.
DeSpain, who worked at Enron from 1998 to 2002, could receive up to five years in prison and up to a $250,000 fine on the single count of conspiracy to commit securities fraud. His sentencing was scheduled for Feb. 18 but is likely to be postponed.
According to DeSpain's statement, he helped hide the true nature of a year-end 1999 deal in which Enron allegedly wrongly reported $500 million raised from a sale of treasury securities as cash flow from operations. At the time, Enron was seeking -- and eventually got -- an upgrade in its credit rating.
Also, DeSpain said he participated in so-called "prepay" schemes, in which loans from banks were treated as income or cash flow for upfront payment for later delivery of commodities.
"Enron's obligations under the 'prepay' transactions grew to approximately $5 billion," DeSpain said in the statement.
DeSpain answered to three treasurers during his tenure at Enron: McMahon, Glisan and Raymond Bowen. When the judge asked who directed him not to tell credit rating agencies about the shady prepays, he identified McMahon and Glisan, but not Bowen.
Bowen resigned Friday as Enron's treasurer and chief financial officer. He has not been charged with any crimes.
Glisan replaced McMahon in March 2000 and is a key witness in the ongoing fraud and conspiracy trial in Houston of four former Merrill Lynch & Co. executives and two former midlevel Enron executives.
That trial centers on an alleged sham sale of three electricity-producing barges to Merrill Lynch (search) at the end of 1999 to help Enron appear to have met earnings targets.