Former Enron Corp. treasurer Ben F. Glisan Jr. pleaded guilty yesterday to conspiracy to commit securities fraud, becoming the first executive at the scandal-ridden firm to go to prison.
Glisan, 37, gave a final hug to his wife before admitting his role in a scheme to inflate Enron’s earnings. U.S. District Judge Kenneth Hoyt sentenced Glisan to five years in prison and by three years of supervised release. Glisan also will forfeit $1.3 million in profits and penalties from a transaction that allegedly swindled his own company.
“I have taken full responsibility for my actions,” Glisan said in a Houston courtroom.
U.S. marshals took Glisan into custody after the hearing and transported him to a low-security prison in Bastrop, Tex., where he will be required to work at least seven hours a day in the facility’s food service unit or infirmary, or on upkeep of its 32-acre grounds, a Bureau of Prisons spokeswoman said.
Prosecutors cited the plea of a former Enron “whiz kid,” whose career was promoted by chief executive Jeffrey K. Skilling and chief financial officer Andrew S. Fastow, as a major development.
“Ben Glisan has admitted for the first time that Enron was in fact a financial house of cards and was manipulating its financial statements through accounting tricks,” said Leslie R. Caldwell, head of the Justice Department’s Enron task force. The fact that Glisan is in prison “will send a somewhat chilling message” to other former executives at the company, she said.
Glisan’s plea may be admitted as evidence in criminal cases against others with whom he allegedly conspired, Caldwell said.
Robert A. Mintz, a former federal prosecutor, said “the most critical benefit for the government is some tangible progress in an investigation the public is growing increasingly impatient with.”
Unlike Michael Kopper, another former Enron official who helping prosecutors in their investigation of the company, Glisan is not obligated to cooperate and will not receive a reduction in the amount of his sentence for doing so.
Glisan admitted serving as a mastermind behind one of four transactions code-named the Raptors, which Enron officials used in 2000 and 2001 to conceal losses from its investments in risky start-up companies. With the Glisan guilty plea, the government spelled out a larger line of attack on Enron’s former management. Government officials cited a number of deals that enabled the company to hide huge debts, improperly boost earnings and pull in crucial infusions of cash from loans that were disguised as commodity transactions.
The four Raptor transactions enabled Enron to offset or hide $934 million in losses in outside investments that Enron otherwise would have had to disclose to shareholders. The first such deal, named Talon and the deal associated with the specific count Glisan pleaded guilty to violated accounting rules in part because Enron had funded the transaction with its own stock and bore all of the financial risk in the transaction, the government alleged.
Separately, the Securities and Exchange Commission charged Glisan with playing a role in improperly boosting Enron’s earnings in connection with the sale of energy-generating barges in Nigeria in 1999 and in hiding loans funded by J.P. Morgan Chase & Co. and Citigroup Inc. that the SEC says were disguised as commodity deals called prepays. Without admitting or denying wrongdoing, Glisan accepted an SEC judgment yesterday barring him from serving as a director or officer of a public company.
Prosecutors are believed to be preparing more charges against former Enron employees involved in its failed Internet broadband venture, which would be added to their broad charge of earnings manipulation, people close to the case said.
The central issue for prosecutors and SEC regulators is proving which Enron leaders approved deceptive financial deals and showing that the executives knew the transactions were fraudulent. Lawyers in the case say prosecutors have told them that while other charges are likely to be filed within a month, the targets aren’t the “big fish” at Enron.
Skilling, who ran day-to-day operations at Enron before becoming chief executive in February 2001, ordered the first of the Raptor-like deals to be done and was “intensely interested” in later efforts to keep the investments solvent, according to accounts by former Enron executives and managers.
But Skilling testified to Congress early last year that he was not told the details of the Raptors deals and would not have understood them if he had been. “I was not aware of any financing arrangements designed to conceal liabilities or inflate profitability,” he said. “The financial statements issued by Enron, as far as I knew, accurately reflected the financial condition of the company.” Skilling resigned abruptly in August 2001, four months before the company declared bankruptcy.