HOUSTON (AP) — Prosecutors and attorneys for Enron Corp.’s former chief accounting officer, Richard Causey, are in negotiations on a plea bargain on the eve of the trial for founder Kenneth L. Lay and former Chief Executive Officer Jeffrey Skilling, said sources familiar with the discussions.
If Mr. Causey agrees to a deal to plead guilty, his cooperation could prove an enormous help to the government’s case against Mr. Lay and Mr. Skilling. All three face trial next month.
The discussions are ongoing, and there is no guarantee any agreement will be reached, said two persons familiar with the discussions, confirming published reports. They spoke on the condition of anonymity because of the private nature of the talks. The process still could crumble before the fraud and conspiracy trial begins with jury selection Jan. 17.
Any deal with Mr. Causey, 45, could provide prosecutors a potentially devastating witness against Mr. Lay and Mr. Skilling — even more so than assistance from former finance chief Andrew Fastow, who pleaded guilty in January 2004 to two counts of conspiracy.
Fifteen other former Enron executives have pleaded guilty to various crimes, including securities fraud and insider trading. Mr. Causey, Mr. Lay and Mr. Skilling have pleaded not guilty.
“Causey’s defection essentially on the eve of trial would be a huge blow to Skilling and Lay,” said Robert Mintz, a former federal prosecutor. “A last-minute deal for Causey would signal weakness precisely at the time that these defendants are trying to project strength.”
Sean Berkowitz, head of the Justice Department’s Enron Task Force, declined comment. Reid Weingarten, one of Mr. Causey’s attorneys, didn’t respond to requests for comment.
Daniel Petrocelli, Mr. Skilling’s lead trial attorney, defended Mr. Causey.
“Rick Causey doesn’t have a criminal bone in his body,” Mr. Petrocelli said.
Mr. Lay’s lead attorney, Michael Ramsey, was skeptical of whether a plea deal could be reached.
“I don’t think he’s going to say that he’s guilty of something he’s not, so I don’t think the deal’s going to make it,” Mr. Ramsey said. “That’s based on talking to the guy many times. I just think he’s honest.”
Enron crashed in December 2001 upon revelations of hidden debt and inflated profits, leaving thousands out of work and roiling Wall Street with billions of dollars in investor losses.
Mr. Causey, Mr. Skilling and Mr. Lay are accused of conspiring to fool investors into thinking a wobbly Enron was healthy.
The 34 charges against Mr. Causey include fraud, conspiracy, lying to auditors, money laundering and insider trading.
Most of Mr. Causey’s charges overlap with the 35 counts of fraud, conspiracy, insider trading and lying to auditors pending against Mr. Skilling, which stem from accusations of approving false or misleading financial statements and regulatory filings.
Several of Mr. Causey’s charges also overlap with the seven fraud and conspiracy counts against Mr. Lay regarding efforts to convince analysts and credit rating agencies that Enron was strong in the months before it collapsed.
The indictment charges schemes behind misleading financial statements included inflated asset values, hidden debt, sham asset sales, use of energy trading profits to make the company’s money-losing energy retail unit appear healthy and faking earnings in Enron’s sickly broadband unit.