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Non-Tech : The Enron Scandal - Unmoderated -- Ignore unavailable to you. Want to Upgrade?

To: Glenn Petersen who wrote (2559)	12/4/2002 8:10:52 AM
From: Glenn Petersen	Read Replies (2) \| Respond to of 3602

Enron task force slowly moves in on targets By Demetri Sevastopulo Published: December 3 2002 23:00 \| Last Updated: December 3 2002 23:00 ads.ft.com When Enron imploded last December, it vied with Osama bin Laden for front page US newspaper coverage. But while both have more recently been eclipsed by Saddam Hussein, the investigation into the collapse of the energy giant in some respects mirrors the war on terrorism - it is hard to predict when it will end. In the wake of the Enron bankruptcy, the government created a task force to investigate suspected criminal activity at the company run by Kenneth Lay, former chairman and friend of President George W. Bush, and Jeffrey Skilling, former chief executive. The investigation can already boast some impressive results. It secured a conviction of Arthur Andersen for obstructing justice by shredding Enron-related documents. Former top Enron energy trader Timothy Belden agreed to plead guilty to illegally manipulating energy prices during California's energy crisis. His co-operation may shed light on whether top Enron management was complicit in the illegal trading activities. Michael Kopper, a former senior finance executive, also pleaded guilty to running some of the illicit partnerships created by Andrew Fastow, Enron's former chief financial officer. Mr Fastow is accused of creating a web of complex off-balance sheet transactions, which, in addition to allegedly enriching himself, allowed Enron to conceal significant losses that ultimately led to its collapse. Last week, another former Enron executive, Larry Lawyer, admitted to failing to report income he received from deals arranged by Mr Fastow and Mr Kopper. Both Mr Kopper and Mr Lawyer are reported to be co-operating with the authorities. For now, the investigation hinges on Mr Fastow, according to the justice department. His knowledge of the inner financial workings of Enron - should he decide to co-operate - would bring the investigation to the next peg in the Enron chain of command, since he claims to have been following orders from Jeffrey Skilling and Kenneth Lay. "Without question, Lay and Skilling are the ultimate targets of the investigation," says David Gourevitch, a former Securities and Exchange Commission enforcement lawyer. The complexity of the case means that the justice department is dependent on the co-operation of Enron insiders. The agency has been giving the "train speech" - the train is leaving the station and you can either get on it or get run over - to potentially complicit witnesses to encourage them to co-operate, says Mr Gourevitch. In spite of the successes the Enron task force can point to, critics say its record is mediocre given the level of public and political outrage that followed Enron's collapse. "To describe the results to date as unimpressive would be gracious and flattering," said Jacob Frenkel, a former federal prosecutor and head of white collar crime at Smith, Gambrell & Russell. "They should have been all over this at a much higher level a long time ago." But other experts with experience in similar investigations say the justice department may be ready to pounce with several indictments. "When you have this kind of group working, they usually have various indictments baking on the stove," said a former justice department prosecutor. The complex nature of the fraud makes the investigator's task more difficult. "Criminal fraud investigations always take longer than people think they will," says Don Smaltz, a former federal prosecutor who was appointed as an independent counsel during the Clinton era. He says general criminal fraud investigations tend to take on average three years. "I've been through the investigation wars, and I think the Enron investigation is pretty well on track and maybe even a little ahead of the game." One clue to how the investigation may proceed is the reference to Richard Causey, Enron's former chief accounting officer, by title but not name in the criminal complaint against Mr Fastow. Mr Causey is understood to have helped Mr Skilling restructure some of the loss-concealing partnerships. The justice department says it will conclude the investigation only when it can explain what happened at Enron and what steps it took to punish the guilty. "At the end of the day, if the investigation only gets Fastow, Skilling and Lay, then it will have been a joke," says a former Enron employee. "Almost everyone on the executive committee participated in this."