Former Enron official settles with SEC— WillCooperate



Former Enron official settles

Accountant will assist with probe

Copyright 2003 Houston Chronicle

WASHINGTON -- The former chief accounting officer for
Enron Wholesale Services has agreed to pay $500,000 to
settle charges he manipulated the one-time energy
giant's earnings.

Wesley H. Colwell also agreed to cooperate with ongoing
probes by the Securities & Exchange Commission and
Justice Department into Enron's colossal collapse.

As the top accountant in Enron's wholesale trading
division, Colwell could become a key witness in the
criminal probes of some of Enron's top former

"What better person to make the government's criminal
case than a key soldier," said Jacob Frenkel, a former
SEC lawyer and one-time federal prosecutor.

The SEC accused Colwell of engaging in a "wide-ranging
scheme to defraud by manipulating Enron's publicly
reported earnings."

"This scheme included the misuse of reserve accounts,
concealment of losses, inflation of asset values and
deliberate use of improper accounting treatment for
transactions," the commission said.

The SEC, for instance, accused Colwell, 43, a former
partner at the discredited accounting firm Arthur
Andersen, of smoothing out the volatility in Enron's
energy trading business by helping hide $400 million
worth of trading profits rung up in the second half of
2000, when California was struggling with an
electricity crisis.

Those extra trading earnings were placed in a reserve
innocuously dubbed "Schedule C," the SEC said. And when
the company needed a quick earnings boost just before
the end, Colwell and others released $200 million from
Schedule C.

Regulators also alleged Colwell:

· Helped mask $1 billion worth of losses in Enron's
retail energy business in 2001, by merging the
operations' books with those of the wholesale trading

· Inflated the value of Mariner Energy, an oil and gas
producer, by $100 million to reach the company's
earnings objective. After Enron landed in bankruptcy
court, auditors insisted upon a $257 million write-down
of Mariner.

· Was instrumental in Enron's decision to avoid a $1.4
billion write-down on the value of Houston Pipeline
Co., despite knowing the subsidiary's value was far
below the recorded value in the company's statements.

Under the settlement, Colwell neither confirmed nor
denied the charges in the SEC's civil complaint. By
agreeing to cooperate in the investigation, he has
spared himself the threat of criminal charges.

"He is not being criminally prosecuted in light of his
cooperation," said Leslie Caldwell, director of the
Justice Department's Enron Task Force.

Colwell's $500,000 fine represents only about a third
of his total Enron compensation for 2001. His
compensation package included a $600,000 retention
bonus he received to keep him on board after the
company filed for bankruptcy court protection.

Colwell left the company in January 2002 -- one month
after the bankruptcy filing -- to join UBS Warburg
Energy Services LLC, which has purchased Enron's
trading business.

Before joining Enron, Colwell was a partner in
Andersen's Houston office.

Enron hired him away to head its transaction support
group, whose tasks included developing Byzantine
financing for complicated off-the-books partnerships,
said Sherron Watkins, ex-Enron vice president and
co-author of Power Failure: The Inside Story of the
Collapse of Enron.

"He was at the heart of that stuff," said Watkins, who
wrote a famous memo to Key Lay warning that the company
could implode in a wave of accounting scandals.

As the top accountant for first Enron North America and
then Enron Wholesale Services, he also had frequent
dealings with Rick Causey, the chief accounting officer
for Enron Corp.

Causey has not been charged with any criminal

Like Colwell, Causey had also worked at Andersen, the
once huge accounting firm that imploded because of its
connections to the Enron scandal.

Colwell did not return a telephone call to his home.
Attorneys for Colwell and Causey could not be reached
for immediate comment.

Chronicle reporters Mary Flood and Eric Berger
contributed to this story.




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