Image: Skilling, Lay
Dave Einsel  /  Getty Images file
Former CEO Jeff Skilling, left, and former chairman Kenneth Lay are the highest-profile Enron defendants facing sentencing, but they're far from the only ones.
updated 6/2/2006 6:39:54 PM ET 2006-06-02T22:39:54

Now that Enron Corp. founder Kenneth Lay and former Chief Executive Jeffrey Skilling are felons, the string of ex-executives whose testimony helped the government snag those convictions face punishments of their own.

Sixteen former Enron executives have pleaded guilty to various crimes during the government’s four-plus-year probe into the energy trader’s 2001 collapse. Last week, prosecutors won their most sought-after convictions. That done, most of those underlings, including eight who testified during the trial, will face judges for sentencing this year.

Most prominent among them is former Chief Financial Officer Andrew Fastow, whose January 2004 admission of orchestrating fraudulent deals to manipulate earnings led prosecutors to indictments against Lay and Skilling. There’s also former Chief Accounting Officer Richard Causey, who didn’t testify, but who cut a last-minute plea deal and avoided trial alongside the former CEOs.

During the four-month trial, defense lawyers repeatedly noted how the government can ask judges to impose probation if prosecutors determine cooperators “perform” well.

“The government has sole discretion over your future,” lead Lay lawyer Michael Ramsey needled prosecution witnesses during the trial.

But judges retain the last word on sentencing, and experts said it’s unlikely most cooperators will avoid prison.

While judges will credit cooperators with helping prosecutors, “that will also be balanced against the severity of the crimes and the staggering losses to the many victims of the Enron fraud,” said Robert Mintz, a former federal prosecutor.

“It is a good bet that most of the sentences will involve some jail time,” he said.

Enron crashed into bankruptcy protection in December 2001 when unsustainable accounting tricks designed to make the wobbly company appear healthy cratered. The collapse wiped out more than $60 billion in market value, nearly $2.1 billion in employees’ retirement savings and, initially, 5,600 jobs.

A jury on May 25 convicted Lay and Skilling of perpetuating Enron’s ruse through repeated lies to investors and employees about the company’s health.

Lay was convicted of six counts of fraud and conspiracy and one count of bank fraud and three counts of lying to banks in a separate, non-jury case stemming from his personal banking. Skilling was convicted of 19 counts of fraud, conspiracy, insider trading and lying to auditors and acquitted of nine counts of insider trading.

Of the ex-Enron executives who pleaded guilty, two have served or are serving their prison sentences. Former Enron treasurer Ben Glisan Jr. is slated to be released from prison in September to spend the last four months of his term confined at home. He testified against his former bosses.

He pleaded guilty in September 2003 to conspiracy for creating financial structures to hide losses, which Lay and Skilling argued were proper. He was sentenced to the maximum five years, but shaved more than a year off for good behavior credit and completion of an alcohol treatment program.

Fastow’s wife, Lea, finished a yearlong prison term in July 2005. She pleaded guilty in 2004 to a misdemeanor tax crime for helping her husband hide ill-gotten income from his Enron schemes.

Fastow will go into his Aug. 28 sentencing hearing having already agreed to serve the maximum 10-year term. He pleaded guilty to two counts of conspiracy and was the most-anticipated prosecution witness in their trial.

Causey knows he’s likely to serve between five and seven years. He is to be sentenced in August. He agreed to serve seven years, but prosecutors could recommend he serve only five if satisfied with his help. He did not testify in the Lay-Skilling case, though he was on the defense witness list.

But the rest face anywhere from probation to the maximum penalty of their crimes — a range of three to 15 years, depending on the felon. Their cases are spread between six Houston federal judges.

Several who testified in the Lay-Skilling case or other Enron trials said they hoped they wouldn’t serve prison time. At least one, former top Fastow lieutenant Michael Kopper, faces a sentencing judge who hinted last year that he won’t get his wish.

Kopper testified in the 2004 fraud and conspiracy trial of four former Merrill Lynch & Co. executives and two former midlevel Enron executives regarding a loan from the brokerage disguised as a sale of three Nigerian power barges so Enron could appear to meet earnings targets. Five defendants were convicted and one was acquitted.

During his testimony, Kopper acknowledged his thievery and scheming gained him more than $16 million in cash in addition to lavish salary and bonus packages. He forfeited or surrendered his right to $12 million when he became the first ex-Enron executive to cut a plea deal, admitting to two counts of conspiracy in August 2002.

U.S. District Judge Ewing Werlein last year imposed sentences ranging from 2½ years to three years and 10 months in prison for the five barge felons. He said at the time the barge deal was a “rather small and relatively benign in the constellation of the Enron frauds,” and Glisan’s sentence as well as the 10 years awaiting Fastow were “benchmarks” for those who committed more widespread and serious crimes.

The judge didn’t mention Kopper by name, but his comments seemed to indicate Kopper could face more time in prison than the barge defendants because he had admittedly played a bigger role in Enron frauds. Kopper’s combined conspiracy counts carry a maximum penalty of 15 years in prison, and he is slated to be sentenced in late September.

Sam Buell, a former prosecutor with the Justice Department’s Enron Task Force who is a visiting professor at the University of Texas School of Law, said prosecutor recommendations for leniency almost always prompt a “significant reduction” in sentences as prescribed by federal sentencing guidelines.

But those are just guidelines, so judges can impose whatever punishments they see fit.

“I do expect some unevenness in sentencing in the Enron-related cases because, contrary to the practice in some districts, the cases have not all been assigned to a single judge,” Buell said.

“Of course, they will be watching what each other are doing, but if they really disagree about approach, they surely won’t let consistency stand in the way of doing what they think is right,” he said.

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