Disclosure of Michael Kopper’s Interest in Chewco

I was reading Enron’s 1999 and 2000 10Ks, as one does, and found something interesting. I’m not sure if I already knew this or not, but check this out:

What you’re looking at is Enron’s disclosure of Michael Kopper’s interest in Chewco. While I don’t believe the issue of disclosure was one that came up at any trial, I do think it is interesting that so much was made of this in October 2001. This disclosure was made in 1999. If anyone had a serious problem with it, you’d think they’d have mentioned it earlier.

Today In Enron History

Friday, October 26, 2001.

The stock opened at $16 and would close at $15.40 – a loss of only 5.81% of its value. Nothing to cheer about, certainly, but when compared to the losses every day of the week, it was one of the better days.

The morning was surreal. Overnight there had been a terror threat on the Enron building so when workers got to 1400 Smith Street, they found the surrounding avenues blocked off and police everywhere. Of course, it was a false alarm but it certainly was an external representation of how everyone was feeling inside. Like things were about to go boom.

Ben Glisan was at his desk early, researching Chewco. After the WSJ published a lurid exposé the previous day, it was essential to get a handle on the deal.

From 10 to 11, Ken Lay was on the phone with Deloitte and Touche. At noon he attended an Enron board meeting, in which Glisan gave a presentation on everything he knew about Chewco.

One of the executives present at the meeting, Rodney Faldyn, didn’t like the sound of Chewco. He went to see Rick Causey and told him he felt like there might be a problem with it.

A few hours later, Faldyn and Ryan Siurek called Tom Bauer at Arthur Andersen and asked for clarification about the three percent rule. Bauer explained that three percent of an off the books partnership had to come from an independent investor in order for the partnership to be valid and comply with accounting rules.

Faldyn believed then that Chewco did not meet that standard.

Chewco had been used to buy Calper’s interest in JEDI. JEDI spun off a lot of cash – there had never been any question about the JEDI deals. But if Chewco wasn’t independent, that meant that JEDI wasn’t either, and all the income reported on every income statement, every balance sheet, every bit of information that had exited the Enron building would have been wrong, all the way back to 1997.

Ben Glisan, Rick Causey, and Rodney Faldyn met to discuss Chewco. And thus Enron was confronted with the strangest question ever to face any company anywhere: How do federal accounting laws view homosexuality?

(I need to interrupt myself to say I feel really weird talking about about Kopper’s sexuality. You don’t hear me talking about anyone else’s lover – just Kopper’s – and it’s because he’s gay. It shouldn’t be any big deal. So though I’m talking about Kopper’s love life [a place I have no business being] please know I’m really only trying to explain what was happening. I’m not singling him out or anything like that. I’m not going to discuss the sex lives on any other Enron execs. You can take that to the bank.)

If Kopper’s lover had been his lawfully wedded spouse, the whole deal would have violated accounting rules because the capital would not have come from an independent party. But Kopper wasn’t married. In the eyes of the state of Texas and the US Government, he was a single man, and his “friend” could invest whatever the heck he wanted. But he was Kopper’s live in lover. So was his investment independent or not?

Ken Lay must have felt a lead weight in his chest when he picked up the phone to call the Fed chairman, Alan Greenspan. High-flying Enron needed help, and Ken Lay probably never thought he’d see the day. He told Greenspan that Enron was having problems with its trading partners and cash was drying up. He did not ask for a bailout. He would have no doubt taken one, but he didn’t ask for one. Greenspan said he would monitor the situation. Ken Lay then put in a few other calls to his well-placed Washington friends.

After the call, he had a meeting with James Derrick (general counsel) and Rick Causey. Rick told him that they were still looking at Chewco, they hadn’t drawn any conclusions, but it looked like there might be a very serious problem with it.

That night the Enron 401(k) plan was locked down. After months of friendly reminders, Enron employees could not touch their accounts until November.

Today In Enron History

October 25, 2001

The stock opened at $16.40. It would close at $16.35. Enron’s stock would never close higher than it opened again, not even on the day the Dynegy deal was announced, and the October 25 loss would be one of the smallest ones Enron would know from here on out.

Steve Bergstrom, president of Dynegy, was like most oil and gas execs in Houston: he knew everyone. One of his friends was Stan Horton, CEO of Enron Transportation Services, which was basically Enron’s pipelines. Horton called Bergstrom and asked him to meet for lunch, and added that he’d like Greg Walley and Mark Frevert who was CEO of Enron Wholesale, to join them.

Bergstrom had floated the idea of combining Enron’s European trading ops with Dynegy’s and since both Whalley and Frevert were coming from trading backgrounds, it looked to Bergstrom like maybe Enron was coming around to that idea in light of the crisis.

They met at the Plaza Club at One Shell Plaza. On the forty-ninth floor, it has an astonishing view of Houston (speaking from experience, especially at night). Whalley gave it to him straight: they wanted to discuss a merger. With the whole company. Not just European ops.

Bergstrom, taken aback, was certainly open the idea. He said he needed to talk to Ken Lay directly. Whalley said that was no problem. A few hours later, Ken Lay got in touch with CEO Chuck Watson. They made an appointment to meet on Saturday at Ken Lay’s home.

Meanwhile, Enron had announced its plan to draw down its $3 billion in bank lines. The WSJ was all over that. They called Mark Palmer and during that conversation casually mentioned Chewco — what was that? Palmer said he had no idea.

Rebecca Smith and John Emshwiller had found the name in an LJM private placement document. Since Enron was in the throes of a crisis, they knew that they could get their names out there if they found a new controversy so they were attempting to find an angle nobody else had found yet. Chewco, it turned out, was that angle.

The article reads in part:

While Enron disclosed its Fastow-related transactions in SEC filings, a computerized search of the SEC’s database of public filings produced no reference to this other employee-related entity known as Chewco.

Chewco was established in 1997 “with approximately $400 million in capital commitments” to buy an interest in Enron assets, according to one of the partnerships documents. The document didn’t further specify what assets were purchased, and it didn’t disclose the financial impact of the transactions for either Chewco or Enron. Chewco was being run by Michael Kopper, a managing director in Enron’s Global Equity Markets Group, according to the document.

Enron, which has maintained that its complex financial transactions with employee-related entities were legal and properly disclosed, didn’t have any comment regarding its dealings with Chewco.

Mr. Kopper, who Enron says left the company this year to focus on helping to run the Fastow-related partnerships, didn’t return phone calls. A person at his office in Houston Thursday said Mr. Kopper was traveling. In response to questions about Chewco, an Enron spokesman would say only that “Michael Kopper was never an executive officer of Enron.” Mr. Fastow repeatedly has declined interview requests. He severed his relationships with the partnerships in July.

This statement is an apparent reference to SEC disclosure regulations regarding related-party transactions. Under SEC rule S-K, a company has to report any transaction that exceeds $60,000 and involves “any director or executive officer.” By contrast, Mr. Fastow, as CFO, would have fallen into that category, but Mr. Kopper, as managing director of a business unit, presumably wouldn’t have.

However, reporting guidance issued by the Financial Accounting Standards Board seems to have a broader definition, one that might include Mr. Kopper. According to FAS Statement 57, a related-party transaction involves a “material” piece of business between the company and a member of management. The statement defines management as directors, top officers, vice presidents in charge of major business units and “other persons who perform similar policy-making functions. Persons without formal titles may also be members of management.”

All that stuff about Michael Kopper is a transparent effort to cause trouble. Classic muckraking.

Inside Enron, Mark Palmer was trying to get some answers about Chewco so he could talk to Smith and Emshwiller about it. He wasn’t able to get good answers so he called a meeting with McMahon, Greg Whalley and a few others. Ken Lay got pulled in and basically everyone tried to cobble together what they knew about Chewco. Jeff McMahon mentioned that an issue was Michael Kopper’s partner was chief investor in the fund.

Ken Lay was confused. “He has another partner in this?”

“Um.. No,” McMahon said. “His.. lover. Michael Kopper’s gay lover.”

Ken Lay finally lost his composure. “What the fuck is happening here!?” he yelled.

The pressure Jeff McMahon was under during this time must have been otherworldly. He was working nonstop to keep the company afloat. Drawing down the bank lines was slated for that day, and the New York bankers weren’t happy about it. No bank had thought that Enron would draw down over $3 billion in one giant gulp. They didn’t want to send it. McMahon was a bulldog. “Send it,” he said.

“But … but.”

“Send it.”

Meanwhile, Andy Fastow, newly fired, spent the day on the phone with attorneys. From 11am to 1:30pm he was on a conference call with Michael Rubenstien, David Gerger, and Lea. Then from 1:30 to 3:00 he was on the phone with Gerger alone. Then at 5:30 he spoke to Gerger again for thirty minutes.

Today In Enron History

October 18 was a frenetic day for everyone at Enron. Ken Lay and a few others were on the east coast speaking with investors. Back in Houston, Mark Palmer at Corporate was getting the crap beat out of him by reporters at the Wall Street Journal.

Both Rebecca Smith and John Emnshwiller had been contacted by Jim Chanos. He called Emshwiller first to inform him that he had “missed” the $1.2 billion equity write-down that was mentioned in Enron’s conference call. Then he called Rebecca Smith and told her not only about the write-down (which as a journalist she should have gotten herself) but supplied her with the third quarterly report for LJM2 investors – and implied there was something unsavory about it. Thus, Rebecca Smith called Mark Palmer and yelled at him for “trying to cover up” the $1.2 billion – which Ken Lay announced on the phone to journalists and analysts that morning. She then dug into the LJM issues.

Meanwhile, Jim Derrick, general counsel for Enron, got a call from the SEC. They were opening a “preliminary inquiry” into the company’s dealings.

A few hours after hanging up with Rebecca Smith, Palmer picked up the phone and heard her screechy little voice yapping at him again. She was curious about funds from Raptors going to Andy Fastow and Michael Kopper. She also said that somebody (probably Sherron Watkins) said that Jeff McMahon heard bankers complaining that they were being forced to do deals with LJM to get a seat at the Enron table.

By this time, James Derrick had called V&E lawyers. The V&E lawyers called McMahon and asked if it was true about Andy corralling bankers by forcing them into LJM deals. McMahon said it was not true.

With all the stuff happening in Houston, Ken Lay cut short his trip and headed back to the Lone Star State.

A Trivial Observation About Enron Execs

* I was reviewing some handwritten notes from various Enron executives this evening and was struck at the absolute lack of doodles, particularly hearts. I don’t think I’ve taken a page of notes in my entire life that wasn’t covered in hearts, squiggles, squares, 3-D squares, flowers, and stars. I think the lack of doodles indicates a mind that is so focused on what is going on that they don’t doodle.

* This got me thinking. I looked up some writings from Ben Glisan, Michael Kopper, Ken Rice, Jeff Skilling and Rex Shelby. In none of the samples did any of them scratch out anything. I think this is because they think in full, clear paragraphs. Or maybe the sample was so small it was irrelevant. Still, I find it interesting.

* Clear thinking equals clear writing.

EDITED TO ADD

* I also noticed that all of them have very similar handwriting. It is slashing with no curves (Rex does have some curves on his Ys but no other letters) and invariably written in black ink.

EDITED TO ADD

Best handwriting sample I’ve ever seen:

Michael Kopper Is Just Plain Awesome For This Reason

I’ve been thinking about Michael Kopper lately. I think he serves a bigger purpose than just part of the narrative of Enron. I think he played the game particularly well by using the bigotry and stupidity that is Texas and federal law to his advantage.

Michael Kopper’s boyfriend kept the proceeds from Kopper’s challenged transactions because they were not married. They could not get married because the state of Texas and the federal government would refused to formalize their relationship. But Kopper acted exactly like anyone would expect a husband to act: he shared his earthly belongings with the person he chose to spend his life with.

I am sure the federal government was pissed about that. They could punish him in a lot of ways – sending him to prison, for instance – but their own rules made it impossible for them to punish him financially. He could give his money to anyone he damn well wanted to, and since his boyfriend was never accused of doing anything wrong, the DOJ had no recourse but to suck. on. that.

Compare that to other Enron execs who saw their financial lives crumble because they were legally married and the money was considered joint property. I am thinking of a particularly vulgar instance in which the DOJ forced Ken Rice to sell some of his wife’s jewelry — that seems disgustingly petty to me. But Kopper didn’t have that problem because he was, legally speaking, a single man.

Texas and the south in general are squeamish about sex; they’re worried that if two men marry, they might actually, you know, do it. Did you know that sex toys are illegal in Alabama? There are people terrified of orgasms (regarding the sex toy ban, I think they’re terrified specifically of women’s orgasms – like we all might take up jazz and liquor if we’re exposed to them.) They’re obviously trying to preserve something there. My thinking is that they are terrified the ladies might like things that hmmmmm and might realize the fat jerks who burden them with three minutes of silent sex on Tuesday evenings after the children go to bed are, in fact, rather lazy and bad lovers.

That’s my guess. I could be wrong. Maybe there’s some medical reason women shouldn’t have orgasms. Likewise, the thought of men marrying and having sex seems to fill the Powers That Be with fears that, I dunno, maybe everyone will turn gay! Chaos will ensue!

So anyway, Texas, like most states, has a “don’t ask to get married and we won’t burn you at the stake policy” toward gays, which brilliantly allowed Kopper to shrug and saw, “fine with me, motherfuckers.”

Don’t hate the player, hate the game.

Michael Kopper’s Notes To Fastow Re: Chewco

Michael Kopper wrote an analysis of the distributions/purchase of Chewco’s interest in Jedi. Michael Kopper could be a novelist; his thoughts are clear, each one in a neat paragraph. Brilliant. In my opinion, this is a really cool document.

Adoring The Bad Guys: Why I Defend Enron Executives

A few years ago, I was on an Andy Fastow Is A-OK kick (here and here for just the tip of the iceberg). I never excused what he did at Enron but I often said there was something else going on there, that he was a good husband, that he was complex because he was this super-rich man married to an heiress who stole money … it just made no sense to me and so I really tried to understand what drove him to take such risks.

Then one executive (who I adore and respect very much), set me down and looked into my eyes and said, “Cara, you’re giving him far too much credit. He was just a thief. That’s it. There’s no more ‘there’ there.”

I had to take that seriously because I did respect his judgement and he saw Andy Fastow every day for years. He knew him. Other friends told stories of his callousness, his arrogance, etc. And slowly I came to see Andy with their eyes, and the eyes of most of the people in the world. I don’t hate Andy Fastow (not at all). But I no longer think he’s some mysterious super-genius/ tortured soul who stole money for some unfathomable reason.

However, he is the rare one in the collection of Enron prosecution witnesses and plea-deal takers who I have such one-dimensional views about. I find the other prosecution witnesses much more fascinating because there is some ‘there’ there.

I’ve written a lot about Ken Rice. I think he would admit to you that he wasn’t a choir boy. But he didn’t go to prison for what he pleaded guilty to. He didn’t do the thing he pleaded to. And Rick Causey? Oh my stars. If there is a true victim in this, it is that good, decent God-fearing man, Rick Causey. My heart breaks for him. His sentence was the third longest one handed down (Jeff Skilling and Andy Fastow are, of course, in the first two spots) and he literally did nothing wrong. Even at his sentencing, his attorney said repeatedly that Causey believed he was in compliance with GAAP. That’s a remarkable statement to make when you’re pleading guilty to a crime. But perhaps it is too easy to like Rick Causey; he never testified against anyone elese. Indeed, one will search his plea deal in vain for any names at all other than his own. He only says he conspired with “senior management”:

Ken Rice is a good person to dislike (though I certainly do like him). Any dislike I have for the things he said at trial is instantly transferred to blind hatred for the Enron Task Force who made his actions necessary for his own survival.

Another easy one to dislike is Kevin Hannon. He testified that Jeff said, “they’re on to us” at a meeting and thus, Jeff must have been up to something nefarious. I try to dislike Kevin Hannon and I end up giggling because his ridiculous story is so utterly flimsy and without any kind of seriousness that I actually feel bad that is best he could come up with. I want to shake him and say, “Kevin, you’re a smart guy! Work harder here. Maybe claim that Jeff said, ‘Let’s rape our stakeholders’ or something. Something evil and non-ambiguous.”

I like Kevin Hannon just fine; I think he is a perfect example of the weakness of the government’s case against the Enron executives. Lots of people at EBS did not care for him but I think he was of the Enron caste system: ambitious, perhaps brusque, but ultimately just someone who wanted to make a difference in the world. When I go through files and find his emails and whatnot, I always think he reads a lot like Ken Rice. I like them both.

Michael Kopper is considered a bad guy by many people. And yep, I like him too. Michael Kopper is as fascinating as I wish Andy was. There’s a mystery there about what happened when his personality meshed with Fastow’s, and some people I’ve talked with blame everything on Michael Kopper. They claim he was a Svengali and Fastow was a helpless little puppy under his spell. Baloney. I have no doubt that he has a strong, charming personality, but no, he did not lord over Andy Fastow. Also, I have a personal reason for liking him: I suspect he did a favor for me anonymously.

Mark Koenig, I don’t find him mesmerizing the way I find the others, but he did something truly fascinating on the stand. He cried like a four year old girl. He wept and wept and wept. They had to suspend questioning a few times so he could blow his nose and wipe his eyes. I’m at a loss to explain why. My recollection of the testimony on this point is murky, but I think he said he felt guilty because all he wanted to do was make his children proud and he couldn’t do that anymore.

Obviously he is a man with a very strong conscious and a very strong sense of right and wrong. What I think happened, based on nothing but my own beliefs about the DOJ, is that Berkowitz et al did what the Broadband prosecutors did: presented one set of facts to him, got him to believe those “facts”, and then pointed out that since he was complicit, he could make the best deal for himself by testifying against others. I think it’s a lot like the Ken Rice situation in the Broadband trial when Ken testified that he saw the “Shelby 2″ video, when in fact he did not. Ken Rice was not lying. The government presented that in a way that Ken Rice – and even Rex Shelby! – believed it. Others, such as Bill Collins, later complained that he felt the DOJ was going to indict him if he didn’t testify. If I had to guess, I would say that prosecutors convinced Koenig he was guilty, and he actually felt guilty while testifying against Jeff.

There were three types of prosecution witnesses:

1. Outright liars — These are people who lied before Enron and during Enron, so it is no surprise the government manipulated them into lying at trial — examples are Bill Collins and John Bloomer from EBS, Sherron Watkins from Corporate.

2. Bitter idiots — These are people who were ignorant of the subject matter of the trial, but were bitter and frightened enough to be manipulated by the DOJ into lying at trial — examples are Shawna Meyer and David Reece from EBS.

3. Survivalists — These are people who put their own welfare above other innocent people and were willing to lie to protect themselves. Almost all prosecution witnesses fall into this category.

We like to think we are all so very upstanding and would never do anything morally questionable, but when the stakes are your own life, you do what you have to do. That’s why Kevin Hannon, Ken Rice, Michael Kopper and few others are interesting to me. They’re not evil. They’re not even guilty. They just made the difficult choice to survive at any cost.

White Supremacists Target Michael Kopper

I had the shock of my life today when I reviewed my stats and saw that a white supremacist group had linked to one of my posts about Michael Kopper (I decline to name the group because I don’t like the idea of somebody googling for it and finding my site.) My post was linked in the forums where morons were asking for pictures of Michael Kopper to see if he looked Jewish and/or gay. Just think about that for a second. If they believe he’s Jewish and they know he’s gay, why do they care what he looks like?

The things they said about Michael Kopper, and Jews in general, and gays, was absolutely disgusting. I almost furiously typed a response in defense of Michael Kopper but knew it would result in exactly nothing. Pluswhich, I don’t want my good name tarnished by appearing anywhere near that den of inequity.

The sick fucks who read that website do not care about what Michael Kopper did at Enron, only that his sexual preference and his background define him as somehow inferior to the inbred, toothless sister-fuckers on that site. Kopper’s assets, such as his beautiful education and natural intelligence, would shame many ordinary Americans – they would completely decimate the retards who posts on that website. Michael Kopper is flawed as we are all flawed, but his preference for men and his Jewish ancestry do not count against him. I occasionally find search terms like “Michael Kopper faggot” on my blog, and it disgusts me. Those kinds of terms immediately make me sever any potential for conversation with those who would use them. You won’t see me use that word anywhere, ever. Well, except here: those white supremacist faggots must be so incredibly hot for Michael Kopper.

But the subject of Michael Kopper reminds me of another aspect of the Enron defendants I’d like to address. Michael Kopper, like numerous other Enron defendants, has served his time, and thus in the eyes of the law, he has a clean slate. He’s atoned for his misdeeds at Enron, and since the federal government is now cool with him, we should all be cool with him too. Ditto Ken Rice, Kevin Hannon, and the others who have emerged from prison. I am happy to continue talking about what they did at Enron, but I do not believe they should be held back in life because of it. The only people who should not be given second chances are murderers and people convicted of sex assaults… you know, people who probably make up 98% of that website’s readership.

Enron Milestones of 2009

We are within Frisbee distance of 2010. As I look backward at 2009, I feel a great deal of satisfaction that some progress has been made, but mostly a great weariness that the Enron prosecutions continue.

At the very top of the list, Scott Yeager won at the Supreme Court and was later completely exonerated by the Fifth Circuit.

Ken Rice completed his prison sentence and rejoined the world. Michael Kopper also finished his sentence. (Fun fact: Ken Rice and Michael Kopper were roommates at the halfway house.)
Kevin Hannon finished his sentence.

The Supreme Court has decided to hear Jeff Skilling’s case.

The NatWest Three are now out of prison and back at home in England.

In the minus column, Joe Hirko took a plea deal and entered prison. Kevin Howard also took a plea deal, and got twelve months of home confinement.

The Nigerian Barge defendants will be heading back to trial in 2010 after the Fifth Circuit rejected their claim of collateral estoppel and double jeopardy – amazingly, since Scott Yeager just clarified collateral estoppel.

Rex Shelby, the last of the Broadband Three, remains enmeshed as he will not accept a plea deal.

2010 promises to be a pivotal year. Jeff Skilling, the Nigerian Barge defendants, and Rex Shelby will ultimately be resolved. For better or worse, it will all be over this year.

Defending Kopper

I received three emails yesterday from people commenting on my comment about Enron wives. All three said some really disgusting things about Michael Kopper, and I vociferously defended him then, as I will do now to make a larger point.

I do not like to be around people who use words like “faggot” or “nigger”. That includes people who mistakenly believe that because Kopper was part of Fastow’s little conspiracy at LJM that I must dislike him. Using “faggot” to talk about Michael Kopper will get you banned on my blog and a bloody nose if you say it in person.

Michael Kopper is a human being and he deserves the same respect you would extend anyone. Like all Enron executives, he has been portrayed as a one-dimensional cartoon, I guess because it is easier to hate someone that way. He is, in fact, described by people who know him as one of the most polite people you could ever hope to meet. He is also very intelligent (certainly more so than the idiots calling him “faggot”) and he is one of the more gentle souls at Enron.

Furthermore, Michael Kopper has paid his debt to society. Whatever crimes he may have committed at Enron are now resolved in the eyes of the law.

I am happy to talk about Michael Kopper but do not think that because his view of gay marriage probably differs from mine, that I am amenable to putting up with insults about his sexuality and that I am willing to entertain uninformed hatred for his bad acts at Enron. Like every other executive at Enron, I want the world to see he is not a cartoon; he is a warm, sweet guy who has a whole life outside of Enron.

Michael Kopper Free

Los Angeles Times reports that Michael Kopper -described thusly: “former Enron Corp. executive convicted of helping ex-Chief Financial Officer Andrew Fastow skim millions of dollars from the energy trader” was released Friday from federal custody after serving less than two-thirds of his sentence.

Kopper, 43, was the first Enron executive to cut a deal, pleading guilty to two conspiracy counts and cooperating with prosecutors pursuing other company officials. In 2006, a federal judge who heard Kopper testify sentenced him to 37 months, compared with the 15-year maximum term he agreed to in his plea.
He was released from a Houston halfway house, where he had been since late October, said Linda Thomas, spokeswoman for the U.S. Bureau of Prisons. Kopper served about 23 months of his sentence, mostly in low-security prisons in Texarkana and Big Spring, Texas.

Kopper was Fastow’s top lieutenant and managed daily operations and negotiations for LJM2, a Fastow-controlled partnership the two men used to steal millions from Enron. Prosecutors said Kopper’s assistance was crucial in obtaining charges against Fastow, who also pleaded guilty and is serving a six-year sentence in federal prison in Oakdale, La.

Kopper left Enron in 2000 to manage LJM2, a partnership that used money from Enron and investors to buy underperforming and overpriced assets the company wanted off its balance sheet.

Kopper kicked back part of LJM2′s proceeds to Fastow through checks written to Fastow’s two young sons. Lee Fastow, the former CFO’s wife, served a year in prison for endorsing the checks and failing to report them as income on her family’s tax return.

More than 5,000 jobs and $1 billion in employee retirement funds were wiped out when Enron plunged into bankruptcy in December 2001, after widespread accounting fraud was revealed.

“I am horrified I contributed to the pain these people have suffered,” Kopper said of Enron’s employees and shareholders at his sentencing. “We took this trust, and we just threw it away.”

Kopper forfeited $8 million in illegal proceeds from the Fastow partnerships and gave up claims to an additional $4 million in deferred Enron compensation. He will serve two years of supervised release.

I must say that reporting on emerging Enron executives is a new and welcome experience for me. I am so busy documenting the collapse of the company, and so busy trying to keep up with the current and ongoing trials, that I rarely stop to realize that these young men are finally finished serving their sentences.

I am glad that Kopper is out and wish him nothing but the best.

Today In Enron History

Monday, August 20, 2001.

Fresh from a weekend of contemplation, Sherron Watkins calls her friends at Arthur Andersen and reports her concerns about Enron’s accounting treatment of the raptors.

Meanwhile, Andy Fastow busy with meetings all day. In the morning he met with Ken Lay, Greg Whalley, and Rick Causey. At two o’clock in the afternoon he met with Enron general counsel Jim Derrick. An hour later, he was invited to a Policy Committee Meeting. An hour after that, he met with Mark Metts, Kevin Howard, Kristine Mordaunt and a few others about PGE.

Then at the close of business, he called Schuyler Tilney. Schuyler Tilney was the head of Merrill Lynch’s energy group who managed the firm’s relationship with Enron and he was also, personally, an investor in LJM2. He was generally considered a confidant of Fastow. Meanwhile, his wife Elizabeth was an ex-Enron senior vice president and a friend of Ken Lay. When Ken Lay would hear of Sherron Watkins’ concerns about the accounting treatment, he would send her to speak to Elizabeth Tilney, who had worked on the company’s values statement and was presently involved in corporate communications (also, she is the one who introduced the tilted-back E logo in 1996).

But that is all coming in the weeks ahead. It is unknown what Fastow and Tilney spoke about on August 20, 2001.

Also on this day, in 2002, the first federal indictment in the Enron case was handed down. Michael Kopper pleaded guilty to charges of conspiracy to commit wire fraud and money laundering.

Calendar Of Release Dates For Enron Defendants

Michael Kopper, Managing Director Global Equity Markets Group, 01/01/2009

Kenneth D. Rice, CEO Enron Broadband Services, 02/03/2009

Kevin Hannon, COO Enron Broadband Services, 04/20/2009

Gary Mulgrew, Managing Director of Greenwich NatWest, 01/02/2011

Giles Darby, managing director and oil and gas specialist at Greenwich NatWest, 01/09/2011

David Bermingham, Finance Specialist at Greenwich NatWest, 01/11/2011

Andrew Fastow, CFO, Enron Corp., 02/17/2011

Richard Causey, CAO Enron Corp., 10/16/2011

Jeffrey K. Skilling, CEO Enron Corp., 02/21/2028

NatWest Three To Report To Prison

Bloomberg reports that Giles Darby, David Bermingham and Gary Mulgrew, three British former bankers who pleaded guilty in a “$20 million Enron Corp.-related fraud” – were each ordered to surrender to prison during the next three weeks.

Those quotation marks are mine. It is not true that it was “Enron related” fraud – if there was any fraud, then Enron was the victim of the fraud. The allegation is that the NatWest Three conspired with Andy Fastow to skim millions from a deal with Enron.

Background on the alleged fraud

The deal with Enron which is in question involves Swap Sub – the hedging structure that was originally in place to protect Enron against a decline in Rhythms Net stock. Enron had an option to force Swap Sub to buy Enron’s investment in Rhythms for a predetermined amount (I believe it was $41 per share) in the year 2004.

In March 2000, Enron terminated the hedging arrangement with Swap Sub. As the hedge was being unwound, Andy Fastow offered to buy NatWest’s share of the investment (NatWest, Credit Suisse and Andy Fastow’s LJM were the investors.) Fastow created Southampton in order to buy the interest. After the NatWest interest was bought out, Andy Fastow then sold the bankers a personal put option on NatWest’s interest. One of the bankers exercised his option and made a profit of about 7 million dollars, which he split with the others.

Tom Kirkendall has a lavish and expansive NatWest Three archive for more details if you want them. One particulaly good synopsis of the events in question can be found here.

If there was a crime in all this, it wasn’t evidenced from their eventual plea agreement: one count of wire fraud. They were then sentenced to 37 months in prison.

The men will serve their time in different federal prisons, according to orders signed yesterday by U.S. District Judge Ewing Werlein in Houston. Gary Mulgrew was ordered to surrender to the facility in Big Spring, Texas, on April 30*; Giles Darby to the Allenwood facility in White Deer, Pennsylvania, on May 7; and David Bermingham to the prison in Lompoc, California, on May 9.

This is just absurd.

*Mr. Mulgrew will be housed in the same prison as Michael Kopper, Andy Fastow’s assistant and one of the people with whom the NatWest Three did the original Swap Sub deal.