HOUSTON - A former Enron executive pleaded guilty Thursday to insider trading, acknowledging he was in on a scheme by senior management to manipulate the company's earnings to meet or exceed Wall Street's expectations.
Dave Delainey, former chief of Enron Energy Services, agreed to cooperate with federal prosecutors. He left Enron in March 2002.
His indictment, handed up Wednesday and unsealed Thursday, alleges he sold $4.25 million worth of stock while knowing the company was raiding the reserves of its Enron North America subsidiary and disguising the money as income.
"I was aware of material non-public information," Delainey softly told U.S. District Judge Kenneth Hoyt during a hearing in Houston.
Delainey agreed to pay the $4.25 million to the Justice Department. In a separate deal, he agreed to pay $3.74 million to the Securities and Exchange Commission. Delainey, who was freed on his own recognizance, could be sentenced to up to 10 years in prison.
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 percent 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.
"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.
The indictment did not identify the other managers, and federal prosecutor Sam Buell of the Justice Department's Enron Task Force declined to name them.
"Enron company executives engaged in widespread and pervasive fraud to manipulate the company's earnings results," Buell said. "The events of today show the truth will come out about Enron and its collapse."
During the fourth quarter of 2000, when prosecutors allege Enron called upon Enron North America to come up with $200 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 2001, have not been charged. Fastow is awaiting trial.
Delainey's Washington-based lawyer, John Dowd, declined to comment.
Delainey, a 38-year-old Canadian citizen, had been chief executive of Enron North America before becoming head of Enron Energy Services in February 2001. The indictment says he illegally sold shares from January 2000 to November 2001.
Copyright 2003 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.