Friday, December 23, 2005

Will Causey Switch Sides in the Enron Conspiracy Trial?

Like the fifth Beatle, former Enron Chief Accounting Officer Richard Causey has been the unknown defendant in the upcoming Enron conspiracy trial.  Unlike codefendants Ken Lay and Jeffrey Skilling, who as CEOs of the company had high-profile and highly lucrative roles, Causey was responsible for the nuts-and-bolts of the accounting issues at the core of the fraud, including the responsibility for assuring that the transactions with the "special purpose entities" controlled by former CFO Andrew Fastow were handled properly.  A Wall Street Journal article (here) offers the tantalizing speculation that Causey may enter into a last-minute deal with the prosecutors and become a government witness against his former bosses. 

To this point, Lay, Skilling, and Causey have presented a united front, and Lay's recent speech sets forth his defense that presumably represents the position of his codefendants: Enron was a good company dragged down by a few highly-placed bad apples (i.e. all those cooperating witnesses).  The Journal article notes the financial pressure on Causey, who does not have the same deep pockets as Lay and Skilling, and hints that they have been supporting him by having their attorneys carry much of the load, citing to a filing on the venue issue in which Skilling's lawyers submitted a box of documents and Causey's submitted a six-page brief that piggybacked on the codefendant's arguments.  A united front is important for all three because they can bolster the position of each and have their attorneys focus on the government's case exclusively.  If Causey testifies, he will certainly be an important witness for either side, and entering a deal with the government would present significant problems for Lay and Skilling.  Moreover, a last-minute deal would probably result in a postponement of the trial, now set to begin jury selection on Jan. 17, to permit defense counsel to prepare for the different situation.

An interesting question is whether the defendants have a full-scale joint defense agreement that would permit attorneys for one defendant to interact with the other defendants and have the communications protected by the attorney-client privilege through the common interest extension of the privilege.  If there is such an agreement, then a deal by Causey could present major problems for the other defense teams because of the potential conflicts of interest arising from those privileged communications.  Courts have struggled with the issue of whether a person leaving a joint defense agreement to testify for the government means that the remaining attorneys have to withdraw from their representation because they cannot completely cross-examine the former member of the joint defense group.  A disqualification motion by the  Enron Task Force would make an already contentious relationship between the attorneys for both sides even  worse.  (ph)

                                                                                                               

UPDATE: Tom Kirkendall on the Houston's Clear Thinkers blog has an interesting post (here) on the author of the Wall Street Journal article, asking whether the author is advancing a position that will help sales of his book about Enron. (ph)

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