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Enron's Causey Surrenders to Authorities, Pleads Not Guilty

Jan 22, 2004 | Washington Post

The former chief accountant at Enron Corp. surrendered to authorities in Houston this morning to face charges that he engaged in a scheme to manipulate the company's earnings and improperly boost its stock price.

Richard A. Causey, 44, was indicted on five counts of securities fraud and one count of conspiracy. He faces up to 55 years in prison if he is convicted of all the charges. Causey appeared before a magistrate judge later and pleaded not guilty to all counts. He was released on a $1 million bond.

His attorney, Mark J. Hulkower, said in an interview that "Rick Causey is a decent, honorable, and innocent man. He has done absolutely nothing wrong and will vigorously contest these and any other charges the government may bring. We look forward to seeing him vindicated in court."

Causey reported to Enron's former chief executive Jeffrey K. Skilling, and he was considered a member of Skilling's inner circle. As such, any information Causey might provide investigators could give the two-year-old probe increasing momentum.

Federal prosecutors continue to investigate what Skilling and former Enron chairman Kenneth L. Lay might have known about the company's worsening finances in the months before Enron collapsed into bankruptcy in December 2001. Neither man has been charged with wrongdoing and both have said their decisions were made with advice from lawyers, accountants and board members.

Causey and his co-conspirators "used some of the most sophisticated tricks in the corporate fraud playbook to con the public into believing that Enron was a success," said Deputy Attorney General Jim Comey in a prepared statement.

Investigators at the Justice Department and the Securities and Exchange Commission got a substantial boost earlier this month when Enron's former chief financial officer, Andrew S. Fastow, pleaded guilty to conspiracy. Fastow said he and Causey had an improper, secret agreement that allowed one of Fastow's business partnerships to profit at Enron's expense.

Last year, former Enron executive David W. Delainey pleaded guilty to insider trading based on stock sales he made while conspiring with other senior managers to hide more than $1 billion in losses. Wesley H. Colwell, a former corporate accountant and Causey's golfing buddy, last year settled civil fraud charges with the SEC related to alleged accounting improprieties.

Legal experts said the series of recent plea deals heighten the pressure on Causey to cooperate with prosecutors in exchange for a reduced prison sentence for himself. Causey may be able to shed light on what Skilling, and possibly Lay, knew about accounting issues, including mounting debts and last-minute deals that manufactured earnings to meet quarterly analysts' targets. Causey also had close contact with the chiefs of Enron's major operating divisions, many of which were concealing losses and using "slush fund" reserves to improve their performance, prosecutors claim.

But, at least to date, Causey has refused overtures to plead guilty to offenses related to his tenure at Enron and has maintained his actions were approved by the company's outside auditors.

Causey is remembered by former colleagues as an unusually affable figure, especially in Enron's sometimes cutthroat corporate environment. Causey joined Enron in 1991 after several years at the accounting firm Arthur Andersen LLP. He was fired in February 2002 after a report by Enron's board of directors concluded he had not informed board members of risky accounting maneuvers and had not disclosed information about some of Fastow's partnerships in public financial statements.

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