Two former Enron Corp. employees, accountant David T. Leboe and attorney Dale G. Rasmussen, have agreed to settle Securities and Exchange Commission allegations that they manipulated earnings.
The charges were filed in federal court in Houston, where prosecutors are winding down their case against former Enron executives Kenneth Lay and Jeffrey Skilling.
The SEC alleged that Leboe and Rasmussen violated the antifraud provisions of the federal securities laws and with aiding and abetting Enron’s violations of the reporting and record-keeping provisions. According to the complaint, the two individuals, along with others, engaged in a scheme to manipulate Enron’s earnings, which resulted in the company’s filing materially false and misleading financial statements in the company’s 2000 annual report and 2000 third-quarter report.
According to the commission, Leboe and Rasmussen worked on a project known as Coyote Springs 2, which involved the sale of a power-plant development project in Oregon. The SEC pointed out that accounting rules require revenues from this kind of project to be recognized over time, on a percentage-of-completion basis, but that Leboe and Rasmussen “carried out a scheme to circumvent the accounting rules and to recognize an immediate gain based on the appreciation in the price of the turbine generator that was to be installed.”
The complaint alleged that in addition to improperly accelerating the recognition of revenue from the sale of the Coyote Springs 2 construction contract, Leboe also concealed undocumented side agreements from Enron’s independent auditors and actively sought to keep others from disclosing that information as well. Rasmussen was accused of negotiating various terms of the transaction and drafting several key documents, and while doing this, working with Enron’s accountants to ensure that the wording in the legal documents did not jeopardize the company’s efforts to circumvent GAAP.
Without admitting or denying the charges, Leboe and Rasmussen agreed to pay a fine of $30,000 each, which will be contributed to a fund for Enron shareholders. In addition, Leboe was barred from appearing or practicing before the commission as an accountant for five years, after which he can re-apply; Rasmussen was barred from appearing or practicing before the commission as an attorney for three years.