The U.S. Securities and Exchange Commission filed a complaint on Wednesday against Rex Rogers, the former associate general counsel at Enron, and Jordan Mintz, the former general counsel for Enron’s finance group, with civil violations of securities laws because of omitting or fudging regulatory filing disclosures.
The SEC alleges that Mintz engaged in fraud by arranging the murky disclosure of Enron’s repurchasing of a power plant in Brazil from an LJM partnership that was run by former Enron finance chief Andrew Fastow. The SEC claims that Mintz knew that LJM had bought the plant with the understanding that it would sell it back to Enron and that this wiped out the sale’s legitimacy.
Mintz is also accused of delaying the closure of the resale for a number of months until after Fastow had sold his interest in LJM Partnerships so that Enron wouldn’t have to reveal that the deal was done with an Enron officer. Rogers is also being charged with not disclosing all the details of this deal.
The Commission also says that Rogers did not properly or fully disclose to investors the information that former Enron chairperson Ken Lay had resold over $86 million in Enron stock to Enron in 2000 and 2001 to pay back company loans. Rogers allegedly was the person who supervised the content of Enron’s SEC filings.
Enron’s Board had given Lay permission to acquire from Enron up to $4 million on more than one occasion and pay those loans back with company stock. Lay paid back $16 million in stock in 2000 and over $70 million in shares in 2001. At this time, Enron was falling into bankruptcy.
Although stock sales back to the company were supposed to be disclosed, Rogers approved a proxy statement saying only that Lay’s $4 million credit line was fully paid. The SEC says that each sale involving Lay should have been disclosed.
During his conspiracy and fraud trial last year, Lay testified that Rogers had advised him regarding these disclosures. Lay passed away last July, less than two months after being found guilty of fraud and conspiracy on multiple counts.
According to former Enron prosecutor John Hueston, the Enron board was shocked when they found out about the sales.
The SEC says that the attorneys used their legal expertise to “aid and abet” the massive fraud by Enron. Lawyers for both men say that their clients are not guilty of the alleged violations.
The SEC is seeking, as punishment, prohibition against serving as an officer in a publicly traded company, as well as fines. If convicted, the Texas Bar Association could also impose penalties on the two men.
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SEC goes after lawyers, Chron.com, March 29, 2007
SEC Charges Two Former Enron In-House Lawyers With Securities Fraud And Related Violations, SEC.gov, March 28, 2007
The Enron Trials, An Enron Chronology, USA Today, January 30, 2006