Enron Executive Said to Be Aiding in Federal Inquiry
By KURT EICHENWALD
The New York Times
February 26, 2002
A senior official from Enron (news/quote)'s finance division, himself a subject of the criminal inquiry into the company's collapse, has begun cooperating with federal officials handling the case, people who have been briefed on the situation said yesterday.
Ben F. Glisan Jr., a former treasurer with Enron who played a central role in the establishment and operation of a byzantine series of partnerships affiliated with the company, has already begun offering information and evidence to both criminal and regulatory investigators, these people said.
Government officials are said to consider Mr. Glisan a crucial participant in the events that led to the debacle at Enron. His name appears on an array of documents involving the partnerships and their transactions. He also worked closely with both Andrew S. Fastow, the former chief financial officer who controlled many of the partnerships, and Michael Kopper, another former official in the finance division with a primary role in the partnerships.
Mr. Glisan, people who have been briefed on the situation said, has already provided prosecutors with what is known as a proffer, in which evidence and testimony a witness could provide in an investigation are described as the first step in obtaining either immunity or a plea deal. No final deal has been reached with Mr. Glisan, the people who have been briefed on the situation said, meaning that no final determination has yet been reached about whether he is fully cooperating and should receive a deal.
Still, there are strong signs that the government believes that it has found an important witness in Mr. Glisan, with prosecutors already appearing to be working to protect him as a witness for any future cases.
For instance, although Mr. Glisan appears from documents to know more about the Enron partnerships than anyone other than Mr. Fastow and Mr. Kopper, he has not been asked to appear before any Congressional committee to explain his actions. That is because Justice Department officials have made it clear to the investigating committees that calling Mr. Glisan to testify — forcing him either to disclose evidence or to take the Fifth Amendment — would severely damage the criminal inquiry. In response, the committees decided to pass on Mr. Glisan's testimony.
"Glisan is a person who is at the center of everything," one lawyer with a role in the Enron investigation said. "He has the potential of being one of the most critical witnesses in this case."
While operating under a proffer agreement, nothing that Mr. Glisan says can be used against him directly, although it can be used to follow up with investigative leads. But if prosecutors find that he has not been fully truthful in his statements, the chances of negotiating a deal worsen — or are eliminated.
Mr. Glisan's lawyer, Henry F. Schuelke 3rd, did not return telephone calls seeking comment. Leslie R. Caldwell, the federal prosecutor who is heading the Enron investigation, declined to comment.
Some lawyers said that Mr. Glisan's cooperation was not surprising, given his representation by Mr. Schuelke, a white-collar defense veteran who is a partner at Janis, Schuelke & Wechsler in Washington. Mr. Schuelke is described by his colleagues in the bar as a lawyer who does not simply reflexively fight potential charges, but recognizes when a client can most benefit by cooperating. A onetime Army lawyer, Mr. Schuelke has represented a number of public figures, including Bert Lance, who served as the budget director in the Carter administration, and Betty Currie, the secretary for former President Bill Clinton during the Lewinsky scandal.
Mr. Glisan's role in the events at Enron's finance division was particularly extensive. He was one of four senior executives who secretly invested in a lucrative partnership known as Southampton Place. Mr. Glisan invested $5,800, which was transformed into about $1 million in a matter of weeks. That transaction was said to be of particular interest to criminal investigators, in part because of the participants: Mr. Fastow and Mr. Kopper were the two largest investors, followed by Mr. Glisan and Kristina Mordaunt, a lawyer who worked for Mr. Fastow and who later became general counsel for Enron's broadband division.
A special committee of the Enron board determined that Mr. Glisan and the other investors violated the company's code of conduct by accepting the interest in Southampton, and they were dismissed from the company last fall.
As an accountant at Enron before his appointment as treasurer, Mr. Glisan worked on a number of transactions that are now central to the investigation into what role, if any, the Fastow partnerships played in the collapse. For example, he was responsible for "transaction support" in the establishment of a partnership known as Chewco. In that role, he had primary responsibility for accounting matters in that transaction, according to a special committee report issued earlier this month.
Accounting issues involving Chewco played an enormous role in the series of shocks that occurred last fall, ultimately leading to the crisis in confidence that threw Enron into its death spiral. Chewco was controlled by Mr. Kopper, who along with his domestic partner, William D. Dodson, received a windfall of some $10 million from their stake in the partnership. Yet, the degree of Mr. Kopper's control of the partnership had been disguised by a side deal that the outside auditor, Arthur Andersen, claims was hidden from it.
Last October, when the board wanted to be fully briefed on Chewco, it called on Mr. Glisan to provide the information. The discovery of the side deals and other accounting issues last fall led the company and Andersen to conclude that Enron had to restate its prior financial reports back to 1997. It is not clear if Mr. Glisan knew of the side deal, but the committee concluded that he may have known of accounting problems.
"Because Mr. Glisan declined to be interviewed by us on Chewco, we cannot speak with certainty about Glisan's knowledge of the facts that should have led to the conclusion that Chewco failed" to meet the standards required for it to be treated as a separate entity from Enron, the committee's report says. "There is, however, substantial evidence that he was aware of such facts."
Mr. Glisan was also a central participant in the structuring and transactions of a group of partnerships known as the Raptors, which also later required restatements of Enron's financial reports. In those partnerships, Mr. Glisan shared responsibility for accounting judgments that, according to the committee report, "went well beyond aggressive."
Southampton was created to profit from one part of the Raptor transaction, with the idea apparently coming from Mr. Fastow and Mr. Kopper, according to the committee report. Internal company documents show that, even though he was profiting off of Enron from that deal, Mr. Glisan still played a principal role in negotiating for the company about Raptor.
Mr. Glisan presented the first Raptor transaction to the company's directors, minutes of board meetings show. Moreover, on approval documents for the first, second and fourth Raptor partnerships, Mr. Glisan was described as the "business unit originator" and the "person negotiating for Enron." Mr. Glisan signed each of these approval documents.
Ultimately, according to the committee report, the Raptor transactions allowed Enron to avoid reporting some $1 billion in losses over a period of a little more than a year. When the transactions were finally disclosed publicly last fall, the results were devastating to Enron. |
