A FORMER Enron Corp executive pleaded guilty to one count of insider trading, acknowledging he was in on a "senior management" scheme to manipulate the company's earnings to meet or exceed Wall Street's expectations.
David W. Delainey, a former chief executive of Enron North America, agreed yesterday to co-operate with federal prosecutors in exchange for the plea.
His indictment, handed up on Wednesday and unsealed yesterday, alleges he sold $US4.25 million ($6.03 million) worth of stock from January 2000 through January 2001 when he knew about internal scams to manipulate earnings and hide losses so the energy-trading giant would appear financially robust.
"I was aware of material non-public information" during that time span, he softly told US District Judge Kenneth Hoyt during a hearing in federal court in Houston.
Delainey agreed to pay $US4.25 million, his profits from his admitted insider trading, to the Justice Department. In a separate deal, he agreed to pay $US3.74 million to the Securities and Exchange Commission. He was freed on his own recognisance.
He faces up to 10 years in prison and a $US1 million fine.
Enron went bankrupt in the northern autumn of 2001 amid allegations that it hid huge losses through complicated accounting schemes.
The indictment alleges that higher-than-expected profits from Enron North America, the company's once-envied trading unit, were set aside to mask volatility so the unit would appear to grow smoothly, up to 20 per cent each year.
Those reserves also were used to hide hundreds of millions of dollars in losses at Enron Energy Services, the company's failed retail energy unit, and millions more in unpaid bills accumulated during the California power crisis of 2000 and 2001.
Delainey ran the retail energy unit from February 2001 until he left the company in March 2002.
"This misuse of reserves in order to manipulate Enron's earnings results was discussed and approved among Enron's and Enron North America's senior commercial and accounting managers," the indictment said.
Prosecutors also allege:
- Enron managers inflated values of assets to appear to have met earnings targets.
Managers used improper accounting methods to structure transactions to avoid booking losses and writedowns.
Managers manipulated accounting to hide losses on a 1997 contract to supply energy on demand to the Tennessee Valley Authority.
The indictment did not identify the other managers, and federal prosecutor Sam Buell would not say who could be charged next.
John Dowd, Delainey's Washington-based attorney, would not comment.
During the fourth quarter of 2000, when prosecutors allege "Enron corporate management" ordered Enron North America to come up with $US200 million to meet earnings objectives, Kenneth Lay was chief executive and chairman, Jeffrey Skilling was chief operating officer and Andrew Fastow was chief financial officer.
Lay and Skilling, who became chief executive in February 2001, have not been charged. Fastow is awaiting trial on nearly 100 counts of insider trading, money laundering, fraud, conspiracy and filing false tax forms. He has pleaded innocent and is free on bond.
Delainey, a 37-year-old Canadian citizen, worked his way up Enron's corporate ladder after joining its operations in Canada in 1994. He later was appointed chief executive officer of Enron North America and moved on to head Enron Energy Services.