Enron crimes get scant punishment: justice still has yet to be served in ongoing Enron investigation, raising troubling questions about how the U.S. legal system punishes white-collar crime

Insight on the News, Jan 7, 2003 by Kelly Patricia O'Meara

It was nearly a year ago that Linda Lay, wife of former Enron chief executive officer (CEO) Kenneth Lay, appeared on NBC's Today show and tearfully defended her husband as a stand-up guy "who would do absolutely nothing wrong. Never, never, not for one second would he have allowed anything to go on that was illegal." The hullabaloo surrounding the fall of what had been the nation's seventh-largest corporation was the result of another media feeding frenzy, according to the loyal little lady from Houston. She said it resulted from "mass hysteria of who can get the news first on, when, how, why." Asked about the hundreds of millions of dollars in stock and salary with which her husband reportedly walked away prior to the Enron bankruptcy, his wife declared herself mystified: "By anyone's standards it was a massive amount of money and it's gone. It's gone. There is nothing left."

Perhaps it is this single remark that best sums up the case against Enron: It's gone. The money is gone, the once-great energy company is gone, the jobs of thousands of employees are gone, the board members who approved the offshore accounts are gone, the documents detailing the shady financial deals are gone and the pensions, life savings and investment profits of shareholders are gone.

What remains of course is the massive amount of money, "by anyone's standards," that will be spent on investigators, accountants, lobbyists, prosecutors and civil and criminal attorneys attempting to figure out who did what, when, where and for how much. And then there is the question some think never will be answered: "Where is all that money and who is enjoying it?"

Certainly critics of the investigative inquiries have found few answers and little comfort in efforts during the last year to bring to justice the men and women responsible for the Enron debacle. They say openly that it is hard to believe prosecutors have any interest at all in seeing justice done when even the assets of international operator Ken Lay have yet to be frozen.

This has given the former Enron CEO plenty of time to move his money to safer havens, perhaps, some say, even to some of the offshore sanctuaries listed for Enron's 3,000 subsidiaries on its corporate filings with the Securities and Exchange Commission (SEC). But, while the number of people who believe Ken Lay to be broke may be about equal to the number who believe a lone assassin killed John F. Kennedy, investigators seem willing to accept it and instead have focused their efforts on a few of the bankrupt corporation's underlings.

Michael Kopper, a close associate of former Enron chief financial officer (CFO) Andrew Fastow, pleaded guilty in August to two counts of conspiracy in U.S. District Court in Houston. According to the complaint, Kopper and others "devised a scheme to defraud Enron's security holders by enriching themselves through the use of certain SPEs [subsidiary partnership enterprises]." The complaint further alleges that Kopper conspired with Fastow to manipulate the RADR, Chewco, JEDI II and LJM Cayman off-balance-sheet partnerships so that the risk to Enron's financial health was hidden. Kopper's one-count plea of conspiracy to commit wire fraud carries a maximum penalty of five years in prison, and his one-count plea of conspiracy to use stolen property a maximum of 10 years. He is awaiting sentencing, cooperating with prosecutors and has forfeited the $12 million he pocketed from the Enron deals.

Timothy Belden, former head of trading in Enron's Portland, Ore., office, pleaded guilty in federal court in San Francisco to one count of conspiracy to commit wire fraud and faces a maximum sentence of five years in prison. Belden admitted to engaging in crimes to take advantage of California's energy crisis. According to the complaint, "Belden and others conspired to defraud California electricity consumers and customers through a variety of schemes designed to artificially increase payments from the California power manager to Enron." Belden's attorney told the court he "did what was expected of him and his actions were in accordance with Enron's policy, expectations and training." Belden is awaiting sentencing and has forfeited $2.1 million of the loot.

Fastow, widely regarded as the loose cannon who arranged the sham offshore subsidiaries that hid Enron's financial woes [see "Buried Treasure" Feb. 11], was indicted on 78 counts of wire fraud, conspiracy and money laundering. Each conspiracy charge carries a maximum of five years in prison; the money-laundering charges maximums of 10 and 20 years. Fastow is awaiting trial on $5 million bail, and $37 million of his allegedly ill-gotten gains have been located and frozen by authorities.

Arthur Andersen--the once-mighty accounting house whose job it was to provide stockholders, employees and creditors with an honest audit--was found guilty last June of altering evidence in its work with Enron. The firm was not charged with massive shredding of Enron documents, but with one count of obstruction of justice for altering a memo and was sentenced to five years probation and a $500,000 fine. The accounting firm, however, has lost the right to audit public companies and its employee base of 30,000 has deteriorated to a mop-up crew of 3,000. Furthermore, Andersen agreed to pay $60 million to Enron shareholders, employees and creditors. For all intents and purposes, like a growing number of entities associated with Enron, Arthur Andersen is gone.