Thursday, December 29, 2005

Where Do Nice Guys Finish?

By all accounts, former Enron chief accounting officer Richard Causey is a very nice person, not prone to engage in temperamental outbursts and degrading harangues that former CFO Andrew Fastow is accused of doing to subordinates, outside auditors, and investment bankers.  With his plea agreement, Causey may become the cornerstone of the government's case against former CEOs Ken Lay and Jeffrey Skilling because, as the "nice guy" of Enron's financial operation, he can put a human face on the fraud.  Counsel for the defendants have tried to portray Causey's decision as one forced on him by the government because of the financial pressure of paying for his attorneys without the kind of resources Lay and Skilling can muster.  Whether or not Causey would ever admit that, he has said he committed a crime in submitting false information to the SEC in Enron's financial disclosures.  Causey's admission is different from that of former Arthur Andersen accountant Dave Duncan, the other person with intimate knowledge of Enron's accounting who was accused of obstruction of justice but was recently allowed to withdraw his guilty plea.  While one can argue whether Duncan and Andersen's conduct constituted obstruction, Causey admitted to conduct that clearly violates the federal securities laws.

Causey's plea goes to the heart of the government's case that Lay and Skilling misled investors about the company by painting a false picture of its operations and profitability.  Lay sets forth the basic position of the defense on the front page of his website ( where he states: "Contrary to popular belief, I firmly believe that Enron was a great company. Enron was a strong, profitable, growing company even into the fourth quarter of 2001. Enron was so successful for so many years because it had the best and brightest people, as continues to be demonstrated by the success of Enron alumni in business and industry around the world."  Causey's admissions regarding the misstatements of Enron's finances seems to directly counter Lay's assertion, and, unlike Fastow, Causey's relative poverty -- he is also forfeiting $1.25 million and waiving any claim to severance or deferred salary from the company -- may even support his testimony because he did not skim profits from the questionable dealings as Fastow and other cooperating witnesses did. 

Nice guys don't always finish last, and Causey is looking at a prison term of at least five years even if he cooperates with the government and testifies at trial.  His niceness may be the counterbalance to Fastow that the government needs in presenting its case to the jury.  Lay has already promised to testify, and there is no word yet whether Skilling will also be a witness in his defense.  It will be interesting to see if Skilling is willing to put his defense in Lay's hands now that Causey has gone over to the other side. Houston Chronicle stories here and here discuss the plea agreement and Causey's background. (ph)

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