Thursday, March 29, 2007
After plowing through the upper levels of Enron's management, the SEC is now targeting two former in-house lawyers for the company by charging them with securities fraud in a civil action. The Commission filed the complaint (here) against Jordan H. Mintz, former general counsel of Enron's Global Finance group (EGF) and Rex R. Rogers, a former associate general counsel. The case concerns a transaction involving Enron's Cuiaba, Brazil power plant to one of former CFO Andy Fastow's special purpose entites, LJM, and the reporting of the transaction. According to the SEC Litigation Release (here):
Mintz, as General Counsel of EGF, was responsible for managing the related party disclosures in Enron's 2000 Proxy Statement (incorporated in its 2000 Form 10-K) and second quarter 2001 Form 10-Q, and closing a fraudulent related party transaction while knowingly or recklessly disregarding that the transaction was in fulfillment of a secret oral side agreement. Rogers, as Enron's top securities lawyer, was responsible for the timing and content of all Enron's SEC filings, including Enron's 2000 Proxy Statement, second quarter 2001 Form 10-Q and relevant 2001 Form 4 filings.
The Commission is seeking the usual remedies of disgorgement, a civil penalty, and director/officer bars against the two defendants, who deny the charges. The violations took place more than five years ago, and there is a split in the circuits whether an SEC enforcement action is subject to the five-year statute of limitations period for collection of a penalty under 28 U.S.C. Sec. 2462. Enron's lawyers, both in-house and outside counsel, have largely avoided government enforcement actions, but this case is consistent with the Commission's approach to look at the "gatekeepers" as potentially liable for reporting violations. (ph)