October 06, 2004
Rack 'em up

Another Enron guilty plea.

A former assistant treasurer at Enron pleaded guilty Tuesday to a charge of conspiracy to commit securities fraud for lying to credit rating agencies.

Timothy Despain, 39, faces up to five years in prison. But he has agreed to cooperate with prosecutors, and the government is granting him immunity from prosecution for any other possible criminal activity in connection with his work at Enron or his subsequent employer, Halliburton.

In the plea agreement, Despain, assistant treasurer at Enron from January 1999 to May 2002, admitted to lying regularly to credit-rating agencies to falsely bolster Enron's ratings.

Prosecutor Sean Berkowitz told the judge that Despain participated in schemes to falsely claim cash flow of at least $5 billion.

Tuesday afternoon, Despain explained his crimes to U.S. District Judge Ewing Werlein and said others who participated with him include ex-Enron treasurers Ben Glisan Jr. and Jeff McMahon.

He acknowledged that, at the behest of the treasurers of Enron, he and others frequently misrepresented cash flow to hide the nature of the transactions and benefit from the pumped-up credit rating.

"I and others intentionally withheld relevant information from the rating agencies about the true financial performance of Enron and way in which Enron achieved its cash flow numbers," Despain said in his plea agreement.

He said the company set cash flow targets arbitrarily, based on what it thought the agencies wanted, and "Enron consistently struggled to achieve the cash flow targets it had set for itself."

After Enron's collapse, Despain went to work for Halliburton but is no longer employed there. His last job there was as a director of performance management in a budgeting section of finance, according to Halliburton spokeswoman Wendy Hall.

"This has nothing to do with Halliburton whatsoever, and reporting it as if it does is false and misleading," she said.


Dan Hedges, former U.S. attorney for Houston and now a defense attorney, said Despain's plea agreement "is a good indication that he's discussed his activities at Halliburton with prosecutors.

"Now, whether any of it constitutes criminal activity is another question."

Make of that what you will. Meanwhile, the prosecution is still putting on its case in the Nigerian Barge trial.

A former Merrill Lynch executive wrote in e-mail that Enron's former chief financial officer promised to "pay us back no matter what" for an investment in power barges in Nigeria, according to evidence introduced during trial Tuesday.

In a March 2, 2000, message to a colleague discussing difficulties with a Continental Airlines construction-finance project, James Brown suggested getting some sort of oral assurance from the airline, just as it had done with Enron on a past deal.

"We had a similar precedent with Enron last year and we had Fastow get on the phone with Bayly and lawyers and promise to pay us back no matter what," Brown said in the e-mail message, referring to Enron CFO Andrew Fastow and former Merrill executive Daniel Bayly, who like Brown is on trial. "Deal was approved and all went well."

As usual, Tom has a good overview of the latest Enron goings-on.

Posted by Charles Kuffner on October 06, 2004 to Enronarama | TrackBack