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Enron Plea Deal

December 28, 2005 at 12:00 AM EDT
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GWEN IFILL: Now, the big plea deal in the Enron case. It comes just weeks before former chief executives Ken Lay and Jeffrey Skilling were set to appear in federal court. Former chief accounting officer Richard Causey was scheduled to go on trial with them, but today, he pleaded guilty to securities fraud. He agreed to serve seven years in prison and pay the government $1.25 million. All three men were being prosecuted on a variety of criminal charges stemming from the company’s collapse. Thousands of workers lost their jobs, and investors lost billions.

For more on today’s turn of events we turn to Kurt Eichenwald of The New York Times. He’s the author of a book about Enron: “Conspiracy of Fools.” Kurt, welcome back.

KURT EICHENWALD: Thanks for having me.

GWEN IFILL: Tell us again, who is Richard Causey?

KURT EICHENWALD: Well, Richard Causey is probably one of the least-known, moment-important people when used to work at Enron. He was the chief accounting officer. He was the fellow who was in virtually every meeting that has since become the focus of the government case.

He is also one of the very few participants in these events who is now a — who can serve as a government witness who didn’t have his hand in the till. He’s not somebody with secret bank accounts or with money flowing into his pocket out of Enron. And so he has a dual position: He knows a lot and he walks in without a lot of outside taint, which is applying to other witnesses, like the former chief financial officer, Andy Fastow.

GWEN IFILL: So does this make him the missing link in the prosecution’s case against Ken Lay and Jeff Skilling?

KURT EICHENWALD: Well, it’s not actually clear yet. When you look at what Causey has pleaded to, both — there’s a single charge which has underlying it two things he’s admitted, one of them being a fraud involving the company’s reporting of its — what’s called EES, one of its divisions, and the other involving the reporting of its income in 2001 through a project called Gray Hawk.

Now, Causey has said both of these now were fraudulent. None of that applies to Ken Lay. Ken Lay is not charged with any involvement in either of those two transactions. However, Jeff Skilling is. So the question comes down to when Causey gets on the stand, is he going to acknowledge other wrongdoing, or is it simply going to be limited to those two?

GWEN IFILL: Now, it was interesting it listening to the lawyer today after the agreement was announced, because Rick Causey’s lawyer came out and said he didn’t sign a cooperation great, but he’ll tell the truth, and the lawyers for Skilling and Lay came out and said: Hey, this is going to help us because we know what he is going to say, because we have all, up until today, been preparing a common defense. Who’s right?

KURT EICHENWALD: Well, to a degree, it could be both. I mean, the government is going to have certain elements where Rick Causey is going to step forward and say, “This was illegal, and I knew it.” And presumably he’s going to say, “And I told other people.”

In his affidavit that was filed today, he does say that the illegal things he’s admitting to were done in coordination with other senior Enron executives, who went unnamed. But Rick Causey is also not somebody who is taking a step up to some of the more explosive charges he was charged with.

And so, as a result, he has been giving Skilling and Lay the defenses, the accounting defenses, to the allegations that were brought against them. So I don’t think it’s going to be very clear — I’m sorry?

GWEN IFILL: So if they knew what he was going to say, based on having been preparing together in a common way, how much damage can he really do them?

KURT EICHENWALD: Well, to understand that, you have to recognize that the Enron cases have never been about partnerships. They’ve never been about, you know, grand schemes. They’ve been about very specific elements of very complex transactions.

If you have knowledge of those specific elements, you’ve committed a crime. If Rick Causey can walk in and say, “I knew it, and I told Jeff Skilling,” or “I knew it, and I told Ken Lay,” then that links them to the criminal activity. Without that, the link isn’t being provided by Causey. So ultimately, Causey, if he can walk in and provide that very strong link of the criminal element to the defendants, it could be very, very significant.

GWEN IFILL: You mentioned the earlier plea agreement cut by Andy Fastow, which was, as I recall, was supposed to be the clincher in this case sometime ago, and now we have another person turning statement’s witness, and they’re not the only ones, right?

KURT EICHENWALD: Right. There are quite a number of government witnesses.

GWEN IFILL: At least a dozen. So what difference — how is this more damaging, perhaps, or more significant than what Andrew Fastow agreed to?

KURT EICHENWALD: Ultimately, for two reasons: One is that Andy Fastow was stealing money from Enron, which is sort of the thing that makes him a difficult witness; Rick Causey was not. The second thing is just the very nature of the trial. If Rick Causey got on the stand and said, “Here is why I think the accounting was right,” Skilling and Lay simply have to get on the stand and say, “Well, we listened to what that guy you just heard from said,” and under the criminal law, you cannot commit a fraud if you believe you’re doing the right thing. If they say, “We believe what Rick Causey told us,” that in and of itself could be a defense.

Here, if Causey now is saying there are things I did that were illegal, I knew they were illegal and others at Enron knew they were illegal, and he gets on the stand and repeats that, that eliminates that defense that Skilling and Lay may have otherwise had. And now they’re going to have to be attacking Rick Causey’s credibility.

GWEN IFILL: And listening to Skilling and Lay’s attorneys today, it made it sound like they still want to lay this all at Andrew Fastow’s door. But they did win one little victory today, which is they got a delay in the trial, a couple of weeks. Is that significant? Does that do anything to help them?

KURT EICHENWALD: Not really. I mean, you’re talking about the reshaping of a major criminal case. And truthfully, the government now has to be reshaping their case as well, which is why they were not very vociferous in trying to object to extending the case a couple of weeks. So you’ve got a lot of lawyers who are going to be working very, very hard over the next month.

GWEN IFILL: Kurt Eichenwald, as always, thank you.

KURT EICHENWALD: Thanks for having me.