Enron's former chief accounting officer, Richard A. Causey, has been charged with five counts of securities fraud and one count of conspiracy to commit security fraud related to the collapse of the company more than two years ago, the Department of Justice said today.
Officials said in a statement that the indictment was returned by a federal grand jury in Houston on Wednesday and unsealed today. Mr. Causey pleaded not guilty to all six counts when he appeared today before Magistrate Judge Frances H. Stacy of the United States District Court for the Southern District of Texas.
The charges follow guilty pleas entered earlier this month by Enron's former chief financial officer, Andrew S. Fastow, and his wife, Lea.
"The dominoes continue to fall as we expose the truth about the massive fraud at Enron," Assistant Attorney General Christopher A. Wray said in the Justice Department statement. "On the heels of guilty pleas by Enron's former chief financial officer and treasurer, today's indictment demonstrates that the same tried and true law enforcement methods that we use against drug cartels and organized crime families will also penetrate the most complex corporate fraud scheme."
Mr. Causey turned himself in to the Federal Bureau of Investigation in Houston this morning. If convicted, he faces a maximum of 55 years in prison and a $5.25 million fine on the six charges, the Justice Department said.
Mr. Causey has maintained through his lawyer that he always thought that he had followed accounting rules.
On Wednesday, one of Mr. Causey's lawyers, Mark Hulkower, told The Associated Press that "Rick Causey has done absolutely nothing wrong and we will vigorously contest any charges the government may bring."
The indictment filed today charges Mr. Causey "in a scheme to fraudulently manipulate Enron's publicly reported financial results and artificially inflate its stock price," the Justice Department said.
The statement describes how Mr. Causey, Mr. Fastow and other Enron senior managers "allegedly employed a variety of deceptive devices, ranging from use of improper financial structures to manipulation of reserve accounts and business segment reporting, to produce consistent financial results that would meet investment analysts expectations but did not truthfully reflect the condition of Enron's businesses."
Mr. Fastow pleaded guilty to two felonies on Jan. 14, becoming the highest-ranking officer at the company to admit to participating in crimes that figured in Enron's collapse and move into Chapter 11 bankruptcy protection.
Prosecutors are known to be continuing to try to build a case against Enron's two former chief executives, Kenneth L. Lay and his successor, Jeffrey K. Skilling. Mr. Causey and Mr. Fastow reported directly to those two executives.
In his plea, Mr. Fastow admitted to working with other senior officers to disguise Enron's deteriorating financial health, as well as to engaging in a scheme to defraud Enron of millions of dollars for his own benefit.
Lea Fastow, a former assistant treasurer at Enron, entered a separate guilty plea to a single tax felony stemming from efforts she made to hide income that came from one of her husband's secret dealings with an Enron colleague. The two pleas were negotiated as a joint resolution of the separate criminal cases facing the Fastows.
According to statements he had entered with his plea, Mr. Fastow arranged to use an investment partnership he controlled, LJM2, to provide Enron with a hedge against losses in certain investments.
According to the statement, he had a secret agreement with Enron's chief accounting officer at the time who, while not named in government papers, was Mr. Causey under which LJM2 was guaranteed the return of its investment plus a profit from the arrangement.
The entity created to keep the deal off Enron's books, called Talon, returned $41 million to LJM2 before it entered into any hedging. At that point, Enron began using Talon to avoid disclosing huge losses in its investments.
Mr. Causey was Enron's chief accounting officer from 1998 until the end of 2001, when Enron collapsed, the Justice Department's noted in its statement.