The Chronicle, the Wall Street Journal ($), the NY Times and the Washington Post began reporting last night that former Enron chief accountant Richard Causey will enter into a plea bargain with the Enron Task Force this afternoon in Houston federal court.

The plea deal hedges Causey’s risk of an effective life sentence if he were to stand trial and be found guilty on 36 criminal counts in the Task Force’s legacy case against Causey and his co-defendants, former Enron chairman Ken Lay and former CEO Jeff Skilling.

Although the initial news reports speculate that a key part of Causey’s plea deal will be his agreement to testify against Messrs. Lay and Skilling at trial, I’ll reserve judgment on the probable impact of such testimony until I’ve reviewed the terms of Causey’s cooperation agreement.

It is always troublesome for the other co-defendants to have one of their brethen cop a plea on the eve of trial, particularly when the plea bargaining co-defendant has been part of a joint defense agreement with the two other defendants and has participated in discussions both about his defense and the defenses of his co-defendants.

But Causey has always been the most likely of the three to cop a plea, both for financial and tactical reasons.

In fact, the latest Task Force initiative to pressure Causey into plea bargain negotiations began months ago in regard to Causey-approved accounting over a transaction called Coyote Springs that does not appear to involve either Lay nor Skilling. That pressure was reinforced earlier this month when the Task Force threatened more indictments over the Coyote Springs transaction. Ellen Podgor has additional thoughts on the possible reasons for the late timing of Causey’s plea deals.

On the tactical side, Causey was far more involved than either Lay or Skilling in the details of questionable accounting in regard to certain transactions between Enron and special purpose entities effectively run by former Enron CFO, Andrew Fastow.

An apparent “side” agreement between Causey and Fastow relating to those SPE’s that allegedly was not disclosed to Enron’s auditors has long been considered a key element in the Task Force’s case against Causey.

Lay and Skilling have both denied any knowledge of that Causey-Fastow side deal at the time they were running Enron.

Similarly, over the past couple of months, the Task Force has signaled a change of trial strategy that did not bode well for Causey, in particular.

The Task Force had previously demonized former Enron auditor Arthur Andersen, alleged in previous Enron-related prosecutions that a number of the firm’s former partners were co-conspirators with the defendants and prosecuted the firm out of business.

However, the Task Force recently embraced several former Andersen partners as prosecution witnesses in the upcoming trial against Lay, Skiling and Causey on the theory that Enron duped Andersen just like everyone else.

Inasmuch as Causey had primary responsibility for Enron’s accounting, that change in prosecution strategy impacted Causey more than either Lay or Skilling.

Finally, because the government froze his assets upon his indictment, Causey was not able to pay compensation to his criminal defense attorney (Reid Weingarten) that would normally be expected in a case of this size and complexity.

As a result, Causey’s defense team has been forced to ride the coattails of both Skilling and Lay’s defense teams in preparing for trial, which meant that, from a practical standpoint, the particular problems involved in defending Causey were not likely to be at the forefront of the defense effort.

Thus, it is not entirely clear that Causey will be a particularly effective witness on the core charges that the Task Force is pursuing against Lay and Skilling. We have already seen that the prior testimony of a key Enron executive under a plea bargain did not turn out well for the Enron Task Force in the Enron Broadband trial.

In fact, the plea could actually work to simplify the defense of the remaining two defendants by shifting the focus of the trial away from technical accounting issues over which neither Lay nor Skilling had primary responsibility.

Moreover, even if Causey ends up testifying as a prosecution witness against Lay and Skilling, the defense will be able to use the eve-of-trial timing of the plea deal and Causey’s previous protestations of innocence to impeach the credibility of any such testimony and to present Causey as a witness who — much like former Andersen partner David Duncan — copped a plea to hedge the risk of a long prison sentence even though he really does not think he is guilty of a crime.

Along those lines, the WaPo article on Causey’s plea deal includes the following from a neighbor of Causey:

For friends of Causey, including his next-door neighbor Steve Huey, word of the advanced plea negotiations is bittersweet. They say Causey is devoted to his three children, the youngest of whom is in eighth grade, and is a devout Catholic who helped raise funds for a new church in the Woodlands, an upscale suburb of Houston.

“I don’t think Rick has ever believed he did anything wrong,” said Huey, who shared a Christmas Eve dinner with Causey and his wife, Elizabeth. “I think that Rick’s concern is over the family and what the eventual outcome will be for the family. As you get closer to trial, you start to weigh the options and weigh the odds and the resources the federal government has.”

The most probable immediate impact of the plea deal is that the Lay and Skilling defense teams will request a delay of the beginning of the now-scheduled January 17, 2006 trial and renew their request that the trial be moved out of Houston.

Although the Lay and Skilling teams have already made a persuasive case that the trial should be moved out of Houston because of extraordinary pre-trial publicity and a Houston jury pool that is clearly biased against Lay and Skilling in regard to Enron-related matters, U.S. District Judge Sim Lake‘s previous rulings in the case indicate that he will decline to grant either a delay in the trial or a change of its venue.