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The Troubling Guilty Plea in the Enron Trial

Friday, 30 December 2005 12:00 AM

There are some very troubling signs in the last-minute guilty plea from Enron Chief Accounting Officer Richard Causey.

It looks from the outside like an innocent guy afraid he'll be sent to prison gets a very good deal from the government because it needs his help in the worst way, which is the way it's getting it. He admits to two technical violations of the securities laws, and pleads guilty to only one count – but now faces a situation where the number of years he spends in prison depends on the government's assessment of how well he "cooperates" with the government against the two co-defendants with whom he has just spent months preparing for trial.

The joint trial of the top three executives of the failed Enron Corp. was scheduled to finally get under way on Jan. 17, when a deal was announced with the chief accountant, former Arthur Anderson partner Richard Causey. Unlike Andrew Fastow, Enron's chief financial officer, who had previously agreed to plead guilty and cooperate with authorities, Causey was both well-liked within the company and carried no baggage from having skimmed money for himself, factors that could have undercut credibility. A committed family man, Causey had reportedly talked to prosecutors early on about a possible deal, but those negotiations went nowhere.

The usual rule in criminal cases is that if you're going to cut a deal, you cut it early. If you're going to hold out, hold out – but don't cut a deal on the eve of trial.

As you get closer to trial, the government prosecutors generally get less generous, particularly if they already feel their case is solid. At that point, having done their preparation, they've made their investment, they don't need you, so they throw (most of) the book at you anyway. Remember Mike Milken, who pleaded on the eve of trial (under duress): a classic case of this.

Clearly, the government still needed Richard Causey to make its case against Skilling and co-defendant and former Enron Chairman Ken Lay. Having indicted the three for a pattern of deceiving investors about the health of Enron and falsifying partnership records that could have landed the 45-year-old chief accounting officer in prison facing a sentence of 35 to 40 years, they turned around and allowed him to plead guilty to a single count based on two discrete transactions that, had they been committed by another company, would certainly have been dealt with civilly, if at all.

The recommended sentence is seven years if he doesn't cooperate, five years if he does. With good behavior, it's closer to four. In short, they let him off as easy as they could, on one count, admitting almost nothing.

Why offer such a good deal, so late in the process? Generally, there's only one answer. Weakness. Desperate need. You don't give away one-count pleas unless you're very weak going into trial.

Which, of course, raises the question of what it did get for its half of the bargain.

If the government didn't get any admission of guilt as to the underlying scheme of fraud and deception, which it is claiming that the other two executives also participated in; if it didn't get info on Raptor or other front-subsidiary animals to use against Chairman Ken Lay and Chief Executive Officer Jeffrey Skilling, what did it get?

That's the other troubling piece. Causey has sat for months with Lay and Skilling and their lawyers preparing for this trial, remembering what happened, thinking through how they will approach issues and what each will say. They have been preparing to defend themselves as a team, with each having a role in that team and a part in that defense.

Now, imagine the government had come in and said it wanted a representative in those meetings and a role – to be yanked at the last minute – in that defense. It would, any student of the adversary system would certainly see, violate every single tenet of that system, not to mention the lawyer-client privilege, for the government to be in the room when a defendant gets ready for trial. Wouldn't it? Doesn't it?

Richard Causey is in the uncomfortable position where two years of his liberty depend on whether the government says he "cooperated" against his former co-defendants. But Ken Lay and Jeffrey Skilling are in the much more uncomfortable position, where they face what are effectively life sentences, with two additional weeks to adjust to having lost months of preparation. Whatever crimes they may or may not have committed, they are still entitled to a fair trial.

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There are some very troubling signs in the last-minute guilty plea from Enron Chief Accounting Officer Richard Causey. It looks from the outside like an innocent guy afraid he'll be sent to prison gets a very good deal from the government because it needs his help in...
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Friday, 30 December 2005 12:00 AM
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