Friday, August 23, 2002

It's not a great time to be a former executive of Enron. Even George Bush's FERC has conceded at this point that your company seems to have gamed the California energy markets. One of your colleagues, Michael Kopper, has just confessed to being the personal beneficiary of over $10 million in fraud. The SEC has frozen the bank accounts of your former CFO and many of his friends and family, based largely on the song of the stool pigeon. And just today, another former colleague was arrested in Britain on charges involving a $1.5 million bribe.

And so these poor folks (remember Linda Lay's thrift shop?) pan their river of woe for a sliver of hope. Jeff Skilling is now reportedly haunting tony Houston bars, drowning his sorrows in white wine and gin, asking anyone who will listen, "Do you believe me? Do you believe what I've said about Enron?" What he really needs is a way to exploit emerging technologies to energize and streamline his search. For the people he seeks are right out here on the Internet, starting with the Pharoah of Denial himself, Robert Musil.

For as soon as reports of Kopper's plea hit the wires, Musil hit the net, breathlessly talking down the news. Perhaps the prosecutors were not demanding Kopper's cooperation, but just giving him a plea bargain out of the goodness of their hearts?

According to Associated Press, "As part of the plea agreement, Kopper has agreed to cooperate with investigators, a potential watershed event in the investigation since he has knowledge of Enron's innermost workings and financial dealings." But another Associated Report says it is not clear whether he has agreed to cooperate.

In fact, Kopper will be cooperating so closely with the prosecutors from here forward that, in an unusual move, he's ceded the right to have his own lawyer present at their meetings. (But then again, as one Houston lawyer ruefully notes, he no longer has the money he'd need to pay his lawyers anyway).

But that's not the important thing here. Here's the important thing:

Of course, the important thing here is whether these charges of crimes against Enron can be leverged though witness cooperation or otherwise into successful charges of crimes by Enron or its officers against the investing public.

What a precious distinction. Never mind that Kopper was an officer of Enron. Consider the role of the "investing public", i.e. the shareholders: not victims, but merely bemused observers as the corrupt machinations of Enron executives sent the company, and their retirement savings with it, down the toilet.

It is also interesting that Mr. Kopper is not pleading guilty to accounting, securities or bank fraud, which are the principle allegations against Enron and its operatives. But that may just be part of his deal with the prosecutors.

Never mind that the government's theory of the case, which Kopper must agree to entirely as part of his guilty plea (viz. Zac Moussaoui's recent lessons at the Leonie Brinkema school of law) is that the SPE's which Kopper looted were set up in the first place to cook Enron's books.

And beyond that, never mind that up until Kopper's plea, the "important thing" regarding Enron on Musil's blog was the lack of indictments, which supposedly indicated that the feds had no evidence of any crime. In fact, it's now pretty clear, they were playing off several Enron officers against each other, looking for the best plea deal. (There were reports of discussions with Fastow, Ben Glisan, and others). And they got a doozy --- the best hope for folks like ex-CFO Fastow was that their accounting structures were so complicated that a discussion of their intricacies would put a jury to sleep. But Kopper's testimony about easily-understood matters such as "kickbacks" and "bribes" will more than likely keep them awake long enough to vote "guilty".

The only thing we haven't seen yet is direct evidence of culpability by members of the board, particularly Ken Lay himself --- a matter of some political import. Remember, Dubya relied so closely on his friend "Kenny-boy" in the formulation of energy policy that Lay, not a formal member of the government, pretty nearly had hire-and-fire authority over the membership of the Federal Energy Regulatory Commission --- the government body tasked with regulating Enron. So it certainly makes a difference whether Ken Lay was a fool or a crook. But the choices now come down to that, and neither reflects well on Dubya's judgment.

(Update: Musil blows another gasket; my further response)


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