A former Enron Corp. assistant treasurer has pleaded guilty to conspiracy, admitting lying or withholding pertinent information from credit rating agencies so the energy giant's financial picture appeared healthier than it was.
Timothy DeSpain, 39, entered the plea Tuesday and has agreed to cooperate with the government in ongoing Enron investigations. He is the 15th person to plead guilty in the Enron investigation.
DeSpain told U.S. District Judge Ewing Werlein he complied with direction from his bosses _ Jeffrey McMahon in 1999 and early 2000 and then Ben Glisan Jr. through November 2001 _ not to discuss the extent of some shady financing deals. Glisan and McMahon were treasurers for Enron, which collapsed in December 2001.
He told the judge a 1999 deal in which Enron wrongly counted a sale of treasury securities as cash flow was known to "the chief accounting officer," who at that time was Richard Causey.
Glisan pleaded guilty to conspiracy a year ago and is serving a five-year sentence. Causey has pleaded innocent to more than 30 counts of fraud, conspiracy, money laundering and insider trading and is awaiting trial. McMahon has not been charged with any crimes.
"I and others knew that maintaining an investment-grade credit rating for Enron debt was critical to Enron's ongoing business operations," DeSpain said in a statement filed with his cooperation agreement.
In exchange for his cooperation, DeSpain would not be charged with crimes he may have committed with Enron or his subsequent employer, Halliburton Co., the agreement said.
He no longer works for Halliburton, and the cooperation agreement doesn't refer to wrongdoing there. Halliburton spokeswoman Wendy Hall didn't answer repeated questions about exactly when DeSpain worked at Halliburton, saying only that he no longer works there and his case has nothing to do with the energy services conglomerate.
DeSpain could receive up to five years in prison and up to a $250,000 fine on the conspiracy to commit securities fraud charge. Sentencing was scheduled for Feb. 18, but is likely to be postponed.
DeSpain answered to three treasurers during his tenure at Enron from March 1998 to mid-May 2002: McMahon, Glisan and Raymond Bowen.
Glisan replaced McMahon in March 2000 and is a key witness in the ongoing fraud and conspiracy trial in Houston of four former Merrill Lynch & Co. executives and two former midlevel Enron executives.
That trial centers on an alleged sham sale of three electricity-producing barges to Merrill Lynch at the end of 1999 to help Enron appear to have met earnings targets. The government says the sale was really a loan because Enron — specifically former finance chief Andrew Fastow — promised Enron would find a buyer for or buy back the barges by mid-2000.
The defendants say Enron was never obligated to buy back or resell the barges on that deadline.
Glisan sent an e-mail to others at Enron — not including DeSpain — in May 2000 reminding them that they had to ensure Merrill was bought out by the next month. Glisan is expected to testify Wednesday in the trial.
McMahon initially pitched the sale to Merrill, but he isn't a prosecution witness in the case.
McMahon replaced Fastow as CFO in October 2001 when the first of many partnerships and financing schemes Fastow masterminded to hide debt, inflate profits and enrich himself came to light. Bowen replaced Glisan in November 2001 after Glisan was fired for investing in one of Fastow's shady partnerships.
In January 2002 McMahon moved up to president and chief operating officer, and Bowen succeeded him as CFO.
Bowen resigned as treasurer and CFO on Friday. He has not been charged with crimes.
DeSpain said he helped hide the true nature of a year-end 1999 deal, Project Nahanni, in which Enron allegedly reported $500 million raised from a sale of treasury securities as cash flow from operations. At the time, Enron was seeking — and eventually got — an upgrade in its credit rating.
Also, DeSpain said he participated in so-called "prepay" schemes, in which loans from banks were treated as income or cash flow for upfront payment for later delivery of commodities.
"Enron's obligations under the 'prepay' transactions grew to approximately $5 billion," DeSpain said in the statement. When Werlein asked who directed him not to tell credit rating agencies about the shady prepays, he identified McMahon and Glisan, but not Bowen.