By Chris Lane
By Jeff Balke
By Aaron Reiss
By Angelica Leicht
By Dianna Wray
By Aaron Reiss
By Camilo Smith
By Craig Malisow
The media scrum sweated bullets outside the federal building last week, expectantly awaiting two headliners of the developing legal war on the former Enron leadership. The first executive was in the bag, with former managing director Michael Kopperturning government witness. Both he and Leslie Caldwell, chief prosecutor of the federal task force on Enron, finally showed up before the cameras.
Kopper said nothing. Caldwell added little beyond the facts in the plea agreement, but their expressions told it all. The stone-faced Kopper seemed be staring out through several veils of valium. He'd just confessed to two counts of conspiracy carrying a possible 15-year sentence, and he'd given up $12 million and implicated former friend and boss Andy Fastow.
Caldwell's broad smile showed just how much easier her life had gotten with Kopper's decision to squeal. "His knowledge is now our knowledge," she crowed. They might be sharing knowledge, but on this morning they certainly weren't sharing his pain.
After looking over the menu of Kopper's admitted misdeeds in his plea, the only debate among the journalist rabble on the sidewalk seemed to be when Fastow would be barbecued and whether the order would be rare or well done. New York Times reporter Kurt Eichenwald-- balding, bespectacled and dapper in a suit among a crowd clad in jeans, khakis and summer cottons -- helpfully chewed over background details with fellow reporters. Houston Chronicle reporter Mary Flood, an attorney herself, passed out bottled water to the thirsty media masses. Texas Monthlywriter Mimi Swartz, on leave to write a book on the Enron saga with company whistle-blower Sherron Watkins, huddled off to the side on a stone ledge devouring fresh information in the pleadings.
The gathering had all the camaraderie of a campout crew who've been there before. And they are certain to be there again as investigators climb toward their two dream Enron targets, former chairman Ken Lay and former CEO Jeff Skilling.
This is the highest-profile federal task force investigation in Houston since the long-running "Hotel Six" City Hall sting that stretched from 1995 through three trials before ending in 1999. Last week, it seemed like déjà vu when Lay's attorney Mike Ramsey seized the occasion to spin the Lay-Skilling "ignorance is bliss" defense for reporters.
In Hotel Six, Ramsey's client was former councilman Ben Reyes. The lawyer got an acquittal for River Oaks bookie James Angleton, accused of hiring his brother to murder his wife, Doris. Ramsey carries the mantle once held by the legendary Percy Foreman and then successor Richard "Racehorse" Haynes. The presence of Ramsey and other legal Houdinis in a case carried the implication that their clients would need a magic act to get off scot-free.
"Criminals like to hide things," Ramsey lectured to a reporter who had the nerve to suggest that Lay should have known that busy little spiders a few corporate rungs below him were spinning special partnership webs of breathtaking complexity.
A source involved in the Hotel Six investigation sounded envious when contemplating what a cooperating witness of Kopper's stature would have meant for that case. Of the seven defendants indicted, only Reyes and former port commissioner Betti Maldonado were eventually convicted.
"By having Kopper or having someone high up plead, it creates enormous pressure on the people above him, and we never had that," the source said. "If someone would have wilted under the pressure, it would have made a big difference."
How big a difference is highlighted in evidence brought to light by Kopper's plea. It included a previous missing link that may explain the evolution of the Ponzi scheme that ended with Enron's bankruptcy. It also could tie Lay into the roots of the conspiracy.
In November 1997, Lay addressed the Nature Conservancy's International Leadership Council in Santa Barbara, California. He was helping to unveil Enron Earth Smart Power, billed as environmentally friendly energy generated from a 39-megawatt wind farm the company had purchased from Zond Corporation.
"January 1, 1998, will be a historic day in California," Lay told his listeners. "Not only are Californians going to be able to choose their electric company, they will also have the ability to show their commitment to the environment by selecting a brand of electricity which includes power from new clean generation sources."
The energy produced by the 75-foot-tall turbine towers at the Tehachapi facility may have been clean, but the business maneuvering behind Enron's handling of the venture couldn't have been dirtier. As the first of a host of fraudulent deals, it involved, appropriately, tilting at California windmills.
After that hoopla, Kopper claims he and Fastow created one of those now infamous special partnerships called RADR to buy the Zond wind farms from Enron. According to the court pleading, that deal was "to enrich themselves and to enable Enron to retain secret control over the facilities."
Secrecy was necessary because Enron was in the process of purchasing an electric utility in Portland, Oregon, a move that would have disqualified the corporation from the tax breaks available for alternative energy producers. Since Lay was involved in pushing the wind-generation project, it's hard to imagine that he wouldn't also have been aware of the maneuvering behind the scenes to preserve the tax benefits.