Published January 13, 2015
A prime defendant in the Enron Corp. criminal trial has struck a plea deal with prosecutors, potentially bolstering the government's case against company founder Kenneth Lay and former CEO Jeffrey Skilling, according to a person familiar with the negotiations.
Richard Causey was expected to plead guilty Wednesday afternoon to one or more of the 34 criminal charges pending against him, this person told The Associated Press Tuesday on condition of anonymity because of the private nature of the discussions.
Causey agreed to testify against his former bosses in exchange for a leaner prison sentence than he would have received if convicted on all counts. The trial is scheduled to begin next month, but a delay is likely to give defense attorneys more time to prepare for the new witness.
Causey is charged with fraud, conspiracy, insider trading, lying to auditors and money laundering for allegedly knowing about or participating in a series of schemes to fool investors into believing Enron was financially healthy. The company imploded in late 2001 amid disclosures of complicated financing schemes that gave the appearance of success.
U.S. District Judge Sim Lake scheduled a change-of-plea hearing for Wednesday afternoon. Causey pleaded not guilty to the charges against him when he was indicted in January 2004.
Lay's lead attorney, Michael Ramsey, didn't respond to a request for comment, nor did one of Causey's lawyers, Reid Weingarten.
Daniel Petrocelli, an attorney for Skilling, told the Houston Chronicle he will ask the court to delay the trial for up to two months. "We have all been working closely together to present a single defense, so if Mr. Causey is not with us, we will have to substantially regroup," Petrocelli said.
Causey's plea and agreement to cooperate with prosecutors are departures from the unified defense he, Skilling and Lay have shown for nearly two years.
Causey, 45, could be more damaging to Lay and Skilling than former Enron finance chief Andrew Fastow, who joined the government's cadre of cooperating witnesses when he pleaded guilty to two counts of conspiracy in January 2004. Unlike his former peer with whom he split financial duties at Enron, Causey didn't skim millions of dollars for himself from shady deals and therefore would bring less baggage to the witness stand.
"While they were preparing to deal with Fastow, Causey is another matter," said Robert A. Mintz, a former federal prosecutor. "Fastow has been so demonized by the books and media accounts of the Enron collapse that he is an enticing target for the defense teams."
Causey would become the 16th ex-Enron executive to plead guilty and cooperate with the government.
Enron, once the seventh-largest company in the country, crumbled into bankruptcy in December 2001 upon revelations of hidden debt and inflated profits that sent investors running and obliterated Wall Street confidence. Thousands of workers lost their jobs and investors lost billions in the first of a string of corporate scandals that prompted stiffer white-collar penalties and more rigorous regulatory scrutiny.
Causey was indicted about a week after Fastow cut a deal with prosecutors and agreed to help the government pursue former top Enron executives.
Skilling was added to the indictment in February 2004, followed by Lay in July that year.
The 35 counts of fraud, conspiracy, lying to auditors and insider trading pending against Skilling largely overlap with those against Causey, where he, too, is accused of painting a falsely rosy public picture of Enron until his abrupt resignation in August 2001. The seven counts of fraud and conspiracy against Lay alleged he perpetuated the ruse after Skilling quit.
Skilling and Lay maintain that they neither committed nor knew of any crimes at Enron, and both have pleaded not guilty.
Causey was one of many Enron accountants who once worked for the energy company's former auditing firm, Arthur Andersen LLP. He joined Enron in 1991 and was named chief accounting officer in 1999.
Causey was fired in February 2002 when an internal probe concluded he failed to adequately protect Enron's interests in deals with partnerships run by Fastow.