Enron Defendant Discusses Plea Deal

Ex-Accounting Chief Could Testify vs. Lay and Skilling

Federal prosecutors are engaged in plea negotiations with former Enron Corp. official Richard A. Causey, working toward a deal that could provide crucial momentum for the government heading into the signature trial of the corporate scandal era.

If an agreement is reached, it could be announced in a Houston courtroom as early as next week, according to sources briefed on the case who spoke on condition of anonymity because the negotiations are at a sensitive stage and still could fall apart.

Testimony from Causey, who as chief accountant stood at the center of complicated maneuvers that prosecutors allege helped Enron bury debt and inflate earnings, could help the government substantially streamline its fraud case against former chairman Kenneth L. Lay and Jeffrey K. Skilling. The three men are scheduled to stand trial in Houston on Jan. 17. They could face decades behind bars if they are convicted on fraud and conspiracy counts.

Lawyers for Causey, 45, and the Justice Department's Enron Task Force have not agreed to specific terms of a plea deal, including what charge he might plead guilty to and a potential prison sentence, the sources said.

Enron's December 2001 bankruptcy filing foreshadowed a string of accounting scandals that cost investors billions of dollars and sent the stock markets reeling. Prosecutors have called the four-year-long Enron probe the largest and most sophisticated corporate fraud investigation in history.

Lay, Skilling, and Causey repeatedly have asserted their innocence, arguing that Enron's accounting and its complex business transactions were approved by scores of lawyers and auditors. But 15 former corporate executives already have agreed to plead guilty and help federal prosecutors, including investor-relations personnel and other officials with accounting and dealmaking expertise.

The Wall Street Journal reported yesterday on the possibility of a Causey plea deal.

"Rick Causey is one of three innocent men about to go to trial, and I'm sure the task force would like nothing better than to pressure him out of the trial," Daniel M. Petrocelli, a defense lawyer for Skilling, said yesterday.

"I've talked to Rick Causey, and he does not have the willful, knowing, intentional state of mind it takes to commit a crime," said Michael Ramsey, a lawyer for Lay. "If I ever met a guy with a pure heart, it's Rick Causey."

Prosecutors have tried before to secure a cooperation deal with Causey, who could guide jurors through the maze of Enron's accounting practices. Previous news reports said that early in the investigation he rejected a plea deal that would have subjected him to a statutory maximum of five years in prison, with significant reductions for his help to the government.

Causey, who has been described as a golf-loving family man, is viewed as being more credible than the prickly former finance chief Andrew S. Fastow, who skimmed at least $60 million from Enron. For now, Fastow is likely to be the government's star witness against Lay and Skilling, both of whom have denounced him as a liar and a thief. Fastow pleaded guilty in exchange for a 10-year prison term.

By contrast, Causey earned far less in salary and stock sales. And he has relied on his co-defendants to shoulder the financial burden for many expert witnesses in the upcoming trial.

The government's most importance piece of evidence against Causey is a memo he allegedly signed with Fastow in which they agreed that Fastow would never lose money in the dealings his string of private partnerships had with Enron.

A deal with Causey also would help prosecutors present a simpler case to the jury. With his testimony, they could focus less on arcane deals with names such as Raptors and Chewco and more on what they say are repeated lies and misstatements about Enron's health by Skilling and Lay.

Causey's Washington-based defense lawyers, Reid H. Weingarten and Mark J. Hulkower, declined to comment yesterday. So did Sean M. Berkowitz, chief of the Justice Department task force.

It is not unusual for plea negotiations to heat up on the verge of trial. Former Rite Aid Corp. finance chief Franklyn M. Bergonzi pleaded guilty just days before his 2003 trial, a move that eventually led Martin L. Grass, the company's former chief executive, to plead guilty as well.