Reaping the Wind

Kopper cops to a Fastowian bargain

Using a loan from an Enron subsidiary, Kopper told the feds, he and Fastow set up RADR. For investors, they recruited the trio of William Dodson (Kopper's domestic partner), a friend of Fastow's wife and an unnamed Houston real estate broker. They got the money to buy into the deal from a loan from Fastow to Kopper, who then doled out the money.

The scheme violated a host of accounting regulations and allowed Enron to list the sale of the wind farms as a profit while disguising its control. Over the next two years, Kopper and buddies would receive $2.7 million from the bogus investment. Part of the game was that they had to kick back money to Fastow, according to Kopper. Enron officially repurchased RADR in 2000, with another payout of $1.8 million to the gang. Two months ago the bankrupt Enron finally sold off its wind-generation assets to GE Power Systems.

Curiously, Dodson's name has been absent thus far from the federal court pleadings. Although it's not spelled out in Kopper's plea, immunity for his partner seems to be one of the unwritten conditions of the agreement. It is reminiscent of the federal plea by junk bond king Michael Milkin. He took an enormous financial hit and served jail time, but managed to save his brother Lowell from prosecution, despite Lowell's involvement in the case.

The cat and the canary: Prosecutor Caldwell beams 
as Kopper pleads.
Tim Fleck
The cat and the canary: Prosecutor Caldwell beams as Kopper pleads.

"This plea agreement has a whiff of that," opines a legal source. "Kopper's taking a big hit, giving up a lot of money, probably going to go to jail. And where's Dodson, who clearly received some of the benefit? It sounds like that may have been part of the package, at least on a handshake."

It remains to be seen whether Fastow's wife, Lea, who also worked at Enron, will face indictment. There's no indication the former financial officer has decided to cooperate with the feds, but with Kopper's plea the pressure may be insurmountable.

Veteran Houston attorney David Berg believes the federal task force has been lucky in getting early guilty pleas from Arthur Andersen exec David Duncan and Kopper. He says Duncan never could have been found guilty in a trial, and that his plea contributed to the conviction of his accounting firm and the pressure that cracked Kopper.

According to Berg, the pleas demonstrate the difference between the legal culture of the East Coast, where out-of-court settlements are favored, and the Houston tradition of taking the fight to the prosecutor and saving any deals for the sentencing phase. It's a "put on your boots and come down to court and let's settle this like real men" mentality passed down from Foreman and Haynes to current court gunslingers like Ramsey, the DeGuerin/DeGeurin brothers and Dan Cogdell.

"I would have tried these lawsuits," says Berg. "Every Houston lawyer I know would have tried them. But having said that, with the dominoes starting to fall, they will lead inexorably to the top."

And how high is that?

"It seems to me Mr. Lay is in a difficult position to deny knowledge of anything and everything," the attorney says. On the other hand, "those are much easier cases to defend, and he does have a superb lawyer."

However it goes, fans can look forward to some spectacular legal fireworks in the coming year. Forget the Texans and the Rockets. The real contact sports season is about to begin: It's between Caldwell's Team USA and Andy, Ken and Jeff's Enron Raiders. Place your bets early.

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