January 22, 2004

Another day, another former Enron executive arrested.

Rick Causey, Enron's former chief accounting officer, surrendered to the FBI in Houston this morning and was led in handcuffs to the federal courthouse.

Charged with six counts of conspiracy and securities fraud, Causey is accused of illegally helping the company hide debt and fool investors. His indictment, unsealed this morning, suggests he concealed failures at Enron Services and Enron Broadband Services and made several false and misleading representations to investors. He also manipulated Enron's financial reports in connection with Enron's infamous Raptor side deals, the indictment says.


The indictment handed down under a seal Wednesday was a shoe waiting to drop for Causey, a 44-year-old from The Woodlands, who was fired from the top tier of the bankrupt energy trading company in early 2002 after refusing to testify before Congress.

Criminal charges against Causey have been expected since he was mentioned by job title, but not name, in the October 2002 complaint against Andrew Fastow. It alleged he aided in at least one of the schemes that helped topple the once world-renowned company.

Causey's title was mentioned again last week in an agreement Fastow, Enron's former chief financial officer, made with prosecutors when he pleaded guilty to two conspiracy charges.

Causey and Fastow were at the same high level in the Enron hierarchy, just below former Chairman Ken Lay and former Chief Executive Officer Jeff Skilling.


In the complaint against Fastow, federal prosecutors revealed they were looking at whether Causey illegally helped the company hide debt and fool investors. Enron put itself in a better light with investors, especially analysts, by putting some of its debt onto the books of independent partnerships, some of which enriched Enron insiders such as Fastow.

In his plea statement, Fastow confessed that he and Causey, whose corporate title was used, had an unwritten agreement that a Fastow-controlled side company called LJM would make a profit by helping Enron to hedge its assets.

Fastow also confessed that he and Causey back-dated documents to make it appear an Enron technology company investment was worth more than it really was.


He reportedly received an early copy of the now-famous Sherron Watkins memo warning Lay that Enron accounting improprieties could bring down the company. According to a congressman who investigated the memo, Causey told Lay there was nothing to worry about.

Causey was fired by the Enron board on Feb. 14, 2002, a week after he invoked his Fifth Amendment right against self-incrimination in refusing to testify before the oversight and investigations subcommittee of the House Energy and Commerce Committee.

No clear indication in this story that Causey is another steppingstone to Skilling and Kenny Boy, but it's early days. I'm betting he eventually cops a plea like Fastow did.

Posted by Charles Kuffner on January 22, 2004 to Enronarama | TrackBack

Handcuffs? Ah, the fine art of the perp-walk as photo-op. "Lookee here, folks, we're doin' somethin' about them bad guys!"

I predict that Lay and Skilling will stay free until at least October. If, by that time, Bush has a pretty clear lock on being elected in November, they will stay free indefinitely. Otherwise, they, too, may do the perp-walk, for the greater good of BushCo.

Oh, and let me propose a new (?) cliche, "making a Skilling," meaning making obscene profits not along with your investors and employees, but at their expense. Usage example: "Back in his days in the awl bidness, Dub really made a Skilling."

Posted by: Steve Bates on January 22, 2004 11:58 AM

I'm wondering about the significance of the election, also. I figured that Bush was going to clean-up things beforehand, but your scenario makes sense. If things are going badly, then I believe that Bush would gladly sacriface 'Kenny Boy' (and I mean that literally: on an altar, with a stone knife).

If things are going well, then I forsee this investigation sliding back into the swamp water, like an alligator.

Posted by: Barry on January 23, 2004 1:15 PM