Implications of Plea Deal on Enron Fraud Trial

The former chief accountant for Enron, a once high-flying energy trading company that collapsed amid allegations of massive stock fraud, will plead guilty to unspecified charges Monday. The plea bargain likely means Richard Causey will testify against his two former bosses, Kenneth Lay and Jeffrey Skilling. Farai Chideya discusses the reasons behind the deal with Fortune magazine writer Peter Elkind, co-author of Enron: The Smartest Guys in the Room.

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FARAI CHIDEYA, host:

This afternoon Enron's former chief accountant pleaded guilty to one of the more than 30 criminal counts against him for his role in the company's collapse four years ago. It's part of a deal between prosecutors and the former executive, Richard Causey. Causey pleaded guilty to securities fraud ina Houston courtroom today. And observers of the Enron debacle believe Causey's action could boost the government's case against former chief executives Kenneth Lay and Jeffrey Skilling. They're scheduled to go on trial next month over charges of conspiracy, wire and securities fraud. Earlier I spoke with Peter Elkind, who writes for Fortune magazine. He explained why Richard Causey's plea matters in this case.

Mr. PETER ELKIND (Senior Writer, Fortune Magazine): Well, it helps the prosecution in some very important ways. First of all, it makes the case much cleaner and simpler. The two big guys at Enron who the government has always been after are certainly Jeff Skilling and Ken Lay, the two men who have been the only CEOs of Enron during its entire history. So Rick Causey by contrast was kind of seen as a bit player as a chief accounting officer of the company, but he was a way to get into the accounting issues involving both of them.

CHIDEYA: What's his credibility level?

Mr. ELKIND: Causey's credibility level is good. Unlike Andy Fastow, he didn't line his own pockets to secret partnership deals. He was accused of insider trading, but he's much less tainted than Andy Fastow, and he has a much more amiable personality than Fastow. So he should be a better government witness.

CHIDEYA: Remind us who Andy Fastow is.

Mr. ELKIND: Andy Fastow's the chief financial officer of Enron, and he is the guy that Skilling and Lay pointed at as the bad guy. As recently as a speech a couple weeks ago, Lay was basically laying everything that happened at Enron, everything that led to the company's collapse at Andy Fastow's feet. And that's the picture that Skilling and Lay want to offer as their defense. With Causey on the prosecution side, it's a lot harder to do that.

CHIDEYA: Why do you think that Causey is talking now? What's in this for him?

Mr. ELKIND: Well, what's in it for him is that he thinks there's a decent chance that he would be convicted, and, in fact, there's a pretty strong body of evidence against him. He was more knowledgeable than anybody about all the strange accounting that was going on at Enron. And in particular there's a very questionable deal where--an actual document where it appears that he was guaranteeing, on behalf of Enron, Andy Fastow's partnerships would get a certain return, which would make the accounting fraudulent. And that's the kind of smoking gun that doesn't exist on the other two defendants.

CHIDEYA: Might this new addition to the prosecution's roster delay the start of the trial?

Mr. ELKIND: It's possible because, you know, it's a curve ball, and, in fact, Causey was sitting in on all the strategy sessions with the defense under a joint cooperation agreement with Lay and Skilling's lawyers. And so now suddenly he's on the other side. There may be issues about whether he's allowed to disclose those conversations. And also the defense now needs to plan on how to cross-examine Causey as opposed to viewing him as an ally.

CHIDEYA: Now it's been four years. Is it unusual for the key players to go to trial this long after their alleged violations?

Mr. ELKIND: Well, Enron is really unlike anything else. It is an incredibly complicated case, and it also isn't extraordinary for complicated business cases like this to take a long time. But, you know, Enron is the mother of all complicated cases. It's not surprising it's taken longer than most.

CHIDEYA: Can we expect any other surprises in this case, as the Enron execs get closer to their trial date?

Mr. ELKIND: Well, I don't think there's going to be another surprise quite like this, but I expect during the trial there will be a lot of surprises.

CHIDEYA: Well, we'll certainly keep an eye on it. Peter Elkind, senior writer for Fortune magazine. He was also co-author of the best-selling book "The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron." Thank you.

Mr. ELKIND: Very good to be with you.

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