Ex-Accountant's Plea Changes Dynamic in Enron Case

Former Enron accountant Richard Causey pleaded guilty Wednesday to securities fraud. He will testify for the government next month at the trial of Enron founder Kenneth Lay and former CEO Jeffrey Skilling. Steve Inskeep talks to Bethany McLean, Fortune reporter and co-author of The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron.

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STEVE INSKEEP, host:

This is MORNING EDITION from NPR News. I'm Steve Inskeep.

The new star witness against top Enron executives is a man who, until this week, was part of the defense. Former Enron accountant Richard Causey pleaded guilty to securities fraud yesterday. He's agreed to cooperate with the prosecution of Enron founder Kenneth Lay and the former CEO, Jeffrey Skilling. Skilling's lawyer is downplaying the importance of that decision. Dan Petrocelli spoke to reporters in Houston.

Mr. DAN PETROCELLI (Attorney): We have to regroup. We don't have the ability to snap a finger and have Mr. Causey stand up and explain all the accounting decisions and judgments that were made, all of which I am sure he would have fiercely defended and may still fiercely defend. I'm not sure at the end of the day how good of a witness he would be to the government if he tells the truth, and I'm sure he will tell the truth.

INSKEEP: We're going to learn more about this from Bethany McLean. She's co-author of the "The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron."

Good morning.

Ms. BETHANY McLEAN (Co-author, "The Smartest Guys in the Room"): Good morning.

INSKEEP: So the defense lawyer there saying that maybe Causey won't be that good a witness for the prosecution anyway. Will he?

Ms. McLEAN: I think he will be a good witness for the prosecution. He'll certainly be a better witness for the prosecution than he would have been as a member of the defense team because he was Enron's chief accounting officer. With his innocent plea, it greatly complicated the prosecution's attempt to say that Enron was a fraud. His guilty plea makes their lives easier.

INSKEEP: As far as you can tell, what does he know?

Ms. McLEAN: He knows a great deal about what happened at Enron. He and Andy Fastow were the chief accounting officer and chief financial officer, respectively. Those are roles that are normally ...(unintelligible) to the company. In the case of Enron, they were split, but they were extremely senior roles in the Enron executive suite.

INSKEEP: Was Causey a man who had regular contact with the men who are still defendants, Ken Lay and Jeffrey Skilling?

Ms. McLEAN: Absolutely. It was Rick Causey who made--signed off on all of the accounting decisions that Enron made. And to many people who have studied Enron closely, it was an accounting artifice, it was a company that specialized in using the accounting rules, and Rick Causey was the man with the trigger for all of those decisions.

INSKEEP: Now I know you've spoken to a lot of people who knew him and worked with him. What kind of a person is Causey?

Ms. McLEAN: A very straightforward man. He was a Texas guy who worked as a fairly junior level accountant at Arthur Andersen, Enron's accountants, before joining Enron; a smart man but not one with necessarily the strength of personality to stand up to Jeff Skilling or Ken Lay.

INSKEEP: Now is this likely to delay the trial of the other two defendants who were expected to go on trial in January?

Ms. McLEAN: It already has been pushed back until late January. It doesn't appear that the trial will be pushed back any more than that.

INSKEEP: So will the defense have time to recover from this?

Ms. McLEAN: I think so. They're obviously going to have to change their strategy, but what's been very interesting in the Enron trials we've seen thus far is Petrocelli is right. You don't know how good of a witness somebody is going to be until they're actually called to testify. David Duncan, Enron's outside accountant at Arthur Andersen, pled guilty earlier and was an absolutely terrible witness for the prosecution. And so you simply don't know until the day that person testifies.

INSKEEP: Well, as far as you can tell, what remains of the case for the defense here?

Ms. McLEAN: It changes everything in the sense that you had before. Andy Fastow, who was a fairly--not-an-easy-to-like man, who has already pled guilty and who stole money from Enron, saying, `Bad things happened here.' And then you had Rick Causey who was his mate at Enron saying, `Nope, everything was fine. We met all the rules.' And you had one man's word against the other. And now suddenly you have a cadre of people lining up against Jeff Skilling and Ken Lay. It just changes the dynamic pretty radically.

INSKEEP: Can't those two men still say, `Whatever may have gone wrong, I didn't know,' as other top executives have said?

Ms. McLEAN: They absolutely can, but it becomes much trickier when you have the two men who reported to them who were responsible for the accounting and the finance functions of the company saying, as they may say at trial, `Yes, Jeff Skilling and Ken Lay did know.' But again, you can't put words in their mouth and we don't know what Causey and Fastow will say until they're called to the stand.

INSKEEP: We've been talking to Bethany McLean, a reporter for Fortune magazine and co-author of "The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron."

Thanks.

Ms. McLEAN: Thanks.

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