Ex-Enron Treasurer Cops to Fraud

Ben Glisan will spend five years in jail.
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Updated from 11:07 a.m. EDT

Former

Enron

Treasurer Ben Glisan was sentenced Wednesday to five years in prison after cutting a deal with prosecutors in which he admitted to a role in doctoring the fallen energy merchant's books. Glisan, who began serving his sentence after a plea hearing in Houston, is the highest-ranking Enron executive to cop to a crime in the case and the first to go to jail.

Glisan was indicted this summer on fraud charges that mirrored an October 2002 indictment of Enron's former CFO Andrew Fastow. Both are charged with overseeing a complex network of off balance sheet partnerships that Enron used to smooth out its earnings and deceive investors.

At a hearing in Houston Wednesday, Glisan admitted to a role in setting up several such vehicles, including one called "Talon" that was essentially an accounting gimmick through which Enron disposed of unflattering financial information.

Talon is the lynchpin connecting Glisan and Fastow, whose notorious LJM partnership provided the necessary 3% "outside" investment needed to keep it off Enron's balance sheet. Prosecutors said Glisan admitted that he and others at Enron knew Talon wasn't properly off balance sheet since it was understood Enron would return LJM's investment plus "an agreed-upon profit."

Talon was the prototype for numerous other transactions at Enron meant to shield its true financial condition from the public, prosecutors said, including the infamous "Raptor" vehicles, whose insolvency in the fall of 2001 presaged that of the parent.

"Today's plea further demonstrates the increasingly elaborate -- and fraudulent -- accounting games used by Enron to conceal what has now become apparent: Well before its ultimate collapse in 2001, Enron was a badly failing business," said Acting Assistant Attorney General Christopher Wray. "Glisan today accepted responsibility for his part in Enron's collapse. We fully intend to see to it that all those who have criminal responsibility are brought to justice."

In return for his plea, Glison had the rest of the 26-count indictment against him dropped. He will also surrender to the government more than $1 million in profits from one of the partnerships.

The plea agreement will be critical to prosecutors as they prepare for Fastow's trial, now scheduled for April. With Glisan's admission in hand, prosecutors also hope to walk up the corporate ladder and build a case against Enron's former Chairman Kenneth Lay and former Chief Executive Jeffrey Skilling.

But while prosecutors have Glisan's confession, they don't expect his help.

"We are fully prepared to go forward against Mr. Fastow without Mr. Glisan," said Leslie Caldwell, head of the government's Enron task force. "We have witnesses and we're getting more witnesses and he wasn't one of them. He was never cooperating and we never expected him to cooperate."

The other Enron executives to cut deals in the case are former Fastow aide Michael Kopper and a midlevel executive named Larry Lawyer. Kopper, who pleaded guilty in August to money laundering and conspiracy charges, is currently cooperating with prosecutors and is scheduled to be sentenced Feb. 27.

Lawyer pleaded guilty in November to filing false tax returns and is now scheduled to be sentenced March 8.

The Glisan plea could also mean trouble for some of Enron's bankers because of his in-depth knowledge of the murky financial deals Enron used to move billions of dollars in debts and ailing assets off its balance sheet, as well as to manufacture earnings.

One the charges against Glisan and Fastow stemmed from his participation in Enron's sale of several Nigerian barges to

Merrill Lynch

(MER)

, which subsequently resold the barges to the LJM2 partnership set up by Fastow. The barge transaction was used to generate inflated earnings for Enron and a guaranteed profit for Merrill.

This spring, Merrill Lynch paid $80 million in fines and penalties to the

Securities and Exchange Commission

to settle charges it assisted Enron. But the SEC also charged four former Merrill executives: Thomas Davis, a former executive vice president; Daniel Bayly, former head of Merrill's investment banking division; Schuyler Tilney, former head of Merrill's global energy investment banking group; and Robert Furst, who had been the firm's lead investment banker for Enron. Those executives are contesting the charges.

Sources say federal prosecutors are still investigating the barge matter.