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Monday, 26 August, 2002, 17:06 GMT 18:06 UK
Lawsuit may benefit Enron investors
When Michael Kopper, the managing director of Enron's Global finance arm, pleaded guilty to both fraud and money laundering charges last week he agreed to hand over $12m, now destined for creditors.
At first glance $12m might seem a huge sum.
But commentators wryly speculate that Mr Kopper could often make this much in just one day.
They say his involvement in allegedly fraudulent trades at the failed energy company probably netted him many millions more.
Life savings lost
Tens of thousands of investors are thought to have lost their life savings, which were invested in Enron's shares in the stock market.
30,000 employees also lost their jobs and pensions.
They could all benefit from a lawsuit which US prosecutors plan to pursue.
Professor Gerald Treece, at the South Texas College of Law in Houston, said he believes the government intends to go after all Mr Koppers' assets.
"So the financial problem for Mr Kopper is outstanding," he said.
"I think he is trading off the fact that it's going to cost him a lot more than $12m, versus the fact that he's hoping not to have to go to prison for very long."
There is an expectation too that prosecutors will reach a similar plea bargain with Enron's former chief financial officer Andrew Fastow.
In recent days, the US Justice Department asked a federal judge to freeze about $23m of funds controlled by Mr Fastow and other company executives.
But the agreement reached with Michael Kopper was a significant breakthrough.
For the first time investigators had found someone from the top management team willing to own up to the suspected massive fraud that took place at the company.
He has now pledged to co-operate with investigators as they try to build up evidence against the other Enron executives.
US deputy attorney general Larry Thompson described Mr Kopper's admission of guilt as "a significant milestone" in the Enron investigation.
"We have secured the cooperation of an important witness," he said.
"Mr Kopper has accepted responsibility for his role in these offences, and has agreed to forfeit $12m to satisfy both this plea and a related Securities and Exchange Commission complaint."
Building a case
Enron remains the scandal that symbolises the disgrace of corporate America.
It was one of the nation's top ten firms and was once worth more than $60bn.
But it's downfall came fast after discrepancies were uncovered in its accounts.
Lawyer Ron Kilgard, who represents some of the employees who are suing for compensation, thinks this latest guilty plea will also be helpful to the case that he's putting together.
"There are several aspects of Mr Kopper's plea that are helpful," he said.
"He was very familiar with the Special Purpose Entities - the SPEs - that Enron used to hide debt."
"And he's a close personal friend, as well as a business associate, of Mr Fastow."
"What this means is that, with his cooperation, the knowledge of the company problems at Enron and the company misconduct will be easier to establish."
"And that means that the failure to take action with respect to the employees, and the failure to act on the folly of having retirement savings based on company stock, will be that much easier to establish."
But despite his plea, Michael Kopper is still a free man - he's out on bail for $5m.
However, Professor Treece thinks Mr Kopper, and other Enron executives, will eventually face financial ruin.
"I think the Justice Department's actions, both criminal and civil forfeiture, are going to be devastating against these people," he said.
"And it's going to turn each of these characters lower in the food chain, one upon the other."
"Additionally, something that has not caught the media's attention is a wave of lawsuits, filed by investors and employees. I'm one of those people that believes that the money is going to be, at least in part, returned to investors and shareholders."
"This case has such international attention that there are not many places these guys can hide the money. I'm relatively optimistic - not dollar for dollar for the investors and shareholders, but certainly something's going to come out of this ill-gotten gain by the insiders that's going to be returned to people who have a better entitlement to it."
Enron's former chairman Kenneth Lay has been keeping a very low profile of late.
He has made cameo appearances on US late night talk shows, but has refused to utter a word.
Professor Treece believes a full-scale trial, in which all the top executives, including the Mr Lay, will be compelled to attend is not that far off.
"First of all, this task force took on Arthur Andersen - they got a conviction against Arthur Andersen," he said.
"They now have a guilty plea from a person in the chain of command of the Enron insiders."
"What you see is the government building their case, one brick at a time, to the extent that there are going to be certain people higher up who are not going to be offered plea bargains."
"I bet he [Mr Lay] is going to have a jury trial before it's over," Professor Treece said.
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