Former Enron chief accountant Richard Causey will be sentenced tomorrow by U.S. District Judge Sim Lake, and Causey’s sentencing hearing highlights another of the Enron Task Force’s dirty secrets that the mainstream media has largely ignored in favor of demonizing former Enron executives.
When Causey entered into his plea deal on the eve of the Lay-Skilling trial, most folks figured that the Task Force would use him as a key witness against his former co-defendant Skilling. The Task Force needed Causey to corroborate former Enron CFO Andrew Fastow’s testimony regarding the Global Galactic agreement, the alleged secret handwritten agreement between Fastow and Causey under which Causey supposedly provided Enron’s assurance — allegedly with Skilling’s blessing — that Fastow’s various special purpose entities would receive a guaranteed rate of return for investing in Enron assets.
Inasmuch as those SPE transactions removed a substantial amount of debt and underperforming assets from Enron’s balance sheet, a key contention in the Task Force’s charges against Skilling and Lay was that Global Galactic proved that Enron’s SPE transactions were shams that helped Skilling and Lay illegally disguise the company’s deteriorating financial condition. So, Global Galactic was a pretty important element in the Task Force’s case against Skilling and Lay.
During his Lay-Skilling testimony, Fastow sang like a canary about the Global Galactic agreement, although the existence of the agreement became more suspect the more Fastow talked about it.
Meanwhile, the Task Force never called Causey to testify during the Lay-Skilling trial, probably because Causey would not corroborate Fastow’s likely false testimony regarding Global Galactic.
Thus, Fastow — who stole millions and then lied to help convict Skilling and Lay — is doing a six-year sentence and will be out in about five.
On the other hand, Causey — who didn’t steal a dime and refused to corroborate Fastow’s lies — will probably serve more time in prison than Fastow.
Is this how we want to go about learning the truth about what really happened at Enron? Ellen Podgor has more here.
Update: Judge Lake sentenced Causey to five and a half years in prison.
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I cannot improve on the brilliant simplicity of the lead sentence in the Wall Street Journal’s article on the death earlier today of Milton Friedman:
