The latest reports out of Houston indicate that Michael Kopper, the former managing director of Enron Global Finance, will plead guilty to wire fraud and money-laundering charges. If true, Kopper’s plea will mark the first criminal indictment in the landmark investigation of the once-powerful energy company.
Dow Jones Business News reported that Kopper would enter pleas today to single charges of conspiracy to commit wire fraud and money laundering. The Houston Chronicle said he will also surrender $12 million in criminally derived assets.
Kopper’s plea could mean big problems for his former boss, ex-Enron CFO Andrew Fastow. Before resigning in June 2001, Kopper reportedly ran Chewco, one of the special-purpose entities Fastow engineered—allegedly to hide debt from investors and auditors.
The Chewco venture was set up in late 1997 and used to keep more than $700 million in debt, related to various energy investments, off Enron’s books. The Houston energy specialist bought out the Chewco venture in 2001, resulting in a $12.6 million payment to Kopper and his domestic partner, William Dodson.
The Chronicle reported that executives at former Enron auditor Arthur Andersen claimed they learned early last November that Kopper’s domestic partner held a stake in Chewco. And not just any stake, mind you. Apparently Dodson owned part of the 3 percent of the off-balance-sheet partnership that should have been wholly owned by investors unrelated to Enron.
Under U.S. accounting rules, a partnership only qualifies for off-balance-sheet treatment if outside investors hold a 3 percent stake in the entity. Lacking that, an off-balance-sheet partnership must be consolidated.
While Dow Jones could not determine whether Kopper’s plea was attached to an agreement to cooperate with investigators, Bloomberg News reported that Kopper, if he cooperates, would be a valuable witness in building a case against Fastow.
Bloomberg reported that some of the evidence that the Justice Department has already gathered implicating both Kopper and Fastow was made public in June when charges were filed against three former employees of British bank National Westminster Bank Plc. The bank employees were charged with skimming about $7 million from one of the Enron partnerships.
According to Bloomberg, which cited DOJ evidence, Kopper allegedly negotiated with the U.K. bankers to help them buy a piece of another Enron special-purpose entity, called Southampton Place, from NatWest. Fastow and Kopper allegedly then helped the threesome buy the bank’s share of the partnership before a hedging transaction closed.
Bloomberg also reported that when Enron’s board investigated the company’s financial collapse, they found that Kopper earned $10.5 million on a $125,000 investment in Chewco. He also apparently received $2 million in management fees from Chewco, although Enron’s board could not learn “what, if anything, Kopper did to justify the payments.”
Neither Bloomberg nor Dow Jones could get a comment from Kopper or his attorney.
On the Seventh Day, the SEC Rested
A week after the August 14 filing deadline, the Securities and Exchange Commission says it has completed processing CFO and CEO certification statements. The statements are available on the agency’s Web site.