Posted on 08/21/2002 7:23:23 PM PDT by FreedomCalls
Ex-Enron Executive Pleads Guilty Wed Aug 21, 7:12 PM ET By KRISTEN HAYS, Associated Press Writer
HOUSTON (AP) - The first former Enron Corp. executive to admit to crimes in the company's crash acknowledged Wednesday that he raked in millions in a corporate shell game and said his high-ranking boss was involved. Entering guilty pleas to money laundering and conspiracy to commit wire fraud, Michael Kopper, 37, told U.S. District Judge Ewing Werlein in an emotionless monotone that he ran or helped create several partnerships that earned him and others millions of dollars while hiding debt and inflating profits at Enron.
He agreed to cooperate with investigators and to surrender $12 million he gained illegally from Enron partnerships to the Justice Department ( news - web sites) and the Securities and Exchange Commission ( news - web sites).
The money "is going to go back to shareholders of Enron," said Leslie Caldwell, head of a nationwide task force of federal prosecutors probing the company's collapse.
Kopper also apologized to those hurt when Enron quickly spiraled into bankruptcy in late 2001, costing thousands of workers their jobs and retirement savings.
He could be sentenced to 15 years in prison and fined up to double the amount determined to have been fraudulently gained. But his testimony against others at Enron could earn him leniency.
"We think this is a substantial breakthrough in our investigation," Caldwell said. "His knowledge will become our knowledge."
Kopper stood expressionless and silent outside the courthouse as his lawyer, David Howard of Philadelphia, read a statement.
"Michael has admitted that he misused his position at Enron to enrich himself and others, and in so doing violated his duties as an Enron employee," Howard said. "Michael hopes that these actions demonstrate his deep regret for his own conduct."
Kopper also admitted funneling money to his one-time boss Andrew Fastow, Enron's former chief financial officer, who prosecutors assert engineered the partnerships, and soliciting friends to invest in them so they would appear to meet accounting criteria to be considered separate from Enron.
Fastow, his wife, Lea, and those friends face property and bank accounts seizures if prosecutors can show those gains emerged from money laundering when they were involved in the partnerships.
The $31.6 million in bank accounts include nearly $22 million held by Fastow, his family or his family's foundation; $1.6 million held by former Enron lawyer and partnership investor Kristina Mordaunt; and $8 million held by other investors and two holding companies.
Also at stake is Fastow's newly constructed $2.6 million house in Houston's wealthiest neighborhood; Mordaunt's $356,450 house in another affluent area; and a 2000 Lexus in her husband's name.
"Under the money laundering statute, proceeds that are traceable to criminal activity are forfeitable," Caldwell said, and prosecutors will seek a court order allowing them to seize the accounts and property.
"We're moving forward very aggressively," she said.
Kopper's cooperation represents a potential watershed in the investigation, given his knowledge of Enron's innermost workings. It also is a drastic shift from February when he invoked his Fifth Amendment right not to testify before Congress.
The $12 million Kopper will turn over to the government within 30 days will be split between the Justice Department and the SEC and may be distributed to both shareholders and former employees, said SEC lawyer Luis Mejia.
"He'd better have the money," Mejia said.
Kopper told Werlein he had sought counseling in the past year for stress-related anxiety and took medication to help him sleep. He remains free after posting $5 million bond set by the judge. Sentencing was set for April 4, 2003.
Investigators are looking into whether Enron managers, from former chairman Kenneth Lay and former chief executive Jeff Skilling on down, knew the network of partnerships — largely backed by Enron stock — was being used to hide debt and inflate profits.
Michael Ramsey, one of Lay's attorneys, said Lay, who stepped down as CEO in January and gave up his board seat the next month, didn't know Kopper and doubted his case would affect Lay.
"He couldn't pick him out of a (police) lineup," Ramsey said.
Robert Mintz, a former federal prosecutor, said Kopper "embodies the perfect cooperating witness because he is not viewed by the public as being one of the most culpable defendants, but at the same time he has a vast array of knowledge and can point the government in the right direction."
Prosecutor Tom Hanusik said if Kopper had gone to trial, the government would have said that from May 1997 through September last year, Kopper took advantage of off-balance-sheet partnerships and accounting methods to funnel millions of dollars to himself, Fastow and others.
One of the partnerships, Chewco, was created in 1997 to buy a pension fund's interest in an Enron partnership. Kopper and his domestic partner invested $125,000 in Chewco and he received more than $7 million and "some of that was kicked back to Enron's CFO," Hanusik said.
The investment from Kopper and his partner didn't satisfy accounting rules that require a 3 percent independent investment in a partnership to allow it to stay off a company's books.
Mordaunt was one of the investors in another partnership, Southampton Place, where a series of complicated transactions left the investors enriched at Enron's expense.
Let's look up Kopper. Whoa! He made to contributions totalling $750 to "The Gay & Lesbian Victory Fund." Hmmmm. He doesn't sound very Republican, more like a Democrat (log cabins notwithstanding).
Let's also check out the Enron CFO, Skilling, to see if he is a Republican. Whoa! He made two contributions totalling $2000 to Sen Schumer. That doesn't sound very Republican either. Wait, those two $1000 contributions were on the same day (is that legal?). I thought the limit was $1000 per person.
Either way I think both of these guys can be considered fully Democrat and not Republican at all. Perhaps even FOBs. Let's check them out as the indictments (or convictions) come in. Score so far: Dems 2, Reps 0.
Foxes watching the chicken coop.
I wonder who the next to fall is???
I missed this paragraph...doh!
I have read 3 version of this story, and this was first time that was printed.
I guess some when the Media Research Center published accounts of newsrooms, newpapers, and magazines holding special homosexual recruitment booths and events at journalism schools and colleges--they were not kidding.
Networks tonight all reported Fastow was in deep-doo-doo. Kopper was his front man and worked on the frauds. Would the DOJ even let Fastow plead out?
Would depend on what bigger fish they can catch
Here is where it gets fun. To avoid the 3% rule, Kopper transferred the funds to his boyfriend William Dodson. Then he asserted that Dodson could not be considered an insider, as a wife or husband would, because Texas does not recognize same sex marriages (they had a full religious marriage ceremony). But Dodson didn't pay gift taxes on the money transferred so he was still in violation of law.
A few weeks ago, James Cramer told a guest that if Michael Chertoff came after him (Cramer), he would sing like a canary, cooperate to the nth degree and beg for mercy. He said: 'This is the very last man I would want to come after me'. He went on to say he was impatient at the amount of time it was taking to put the case together, but that in no way did he believe Chertoff would let any of the Enron guys off the hook. Frankly, after watching Chertoff in action, I agree with him.
Victoria Toensing made the same point. She said as a Federal Prosectuor one case required a year to determine which Federal statute was violated and what charges to file. She also (with great disdain) pointed out that it once took Janet Reno a full year to decide to appoint a Prosecutor, making the point that a year to develop evidence was reasonable.
A writer for the Financial Times said that he initially put all the blame on Ken Lay, but that after studying the evidence and talking to insiders he thinks Lay was probably telling the truth about lack of knowledge of the gory details, and that Skilling was the brains and the 'fixer'.
I have to say that I agree with the writer; my opinion about Fastow's relative responsibility has changed over time. The more I read the more I see him as one of the primary bad guys. It's hard to let Lay off the hook, though. How on earth did he manage to surround himself with such crooks?
Amother possibility, of course, is that Lay has hired a very effective PR team.
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