Editorial

Enron deal is good news for investors

For anyone facing criminal charges in a case with the magnitude of the Enron Corp. financial fiasco, a deal consisting of guilty pleas and the forfeiture of millions of ill-gained dollars plus cooperation in the government's ongoing investigation may look pretty good. Plea bargains tend to give criminals an opportunity to negotiate their penalties rather than face the ire of judges and juries.

Using its plea-bargain lever, the Justice Department pried a deal from one Enron executive that may become the first domino to fall in this complicated and vexing case. Michael Kopper pleaded guilty this week to charges of conspiracy to commit wire fraud and money laundering. He also will give up $12 million in illegal profits. He faces up to 15 years in prison, although prosecutors may decide to be more lenient in return for his cooperation.

The Kopper deal is the first major break in the Enron case since the giant energy-trading company filed for bankruptcy last December. With Kopper's pledge to help investigators unravel the maze of Enron-sponsored partnerships, the government's case has been substantially strengthened. Other Enron officials may choose to follow Kopper's lead.

The various partnerships allowed Enron to shift enormous amounts of debt and liabilities off its books, leaving the appearance that the company was profitable. Indeed, the company attracted investors because it was able to misstate its profit by more than $1 billion.

As a result of this shifty bookkeeping, Enron's auditing firm, Arthur Andersen, has been left in shambles. The company already has been convicted of shredding documents to thwart a Securities and Exchange Commission investigation.

Thanks to information produced in the Kopper plea agreement, the government is seeking to seize more than $22 million from bank accounts representing gains from illegal deals organized by Kopper and Andrew S. Fastow, Enron's former financial officer. So far, Fastow has not been indicted.

A bit of good news for Enron investors, who have seen their holdings evaporate in the company's collapse, was the government's announcement that funds seized from former Enron officials will be used to repay the defrauded investors. So far, the government expects to get the $12 million for Kopper plus $22.1 million from bank accounts owned by other Enron executives.

The breakthrough this week in prosecuting the Enron case should help restore investors' confidence. Rigorous prosecution plus new financial reporting requirements -- CEOs must assume personal responsibility for the financial reporting of their companies -- are positive steps.

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