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Former Enron executives receive lighter than expected jail terms

(Bloomberg) — Enron Corp. former executives Michael Kopper and Mark Koenig were sentenced to far shorter prison terms than they agreed to in pleading guilty, as a judge rewarded their cooperation in prosecuting their bosses for fraud.US District Judge Ewing Werlein sentenced Kopper, 41, a former finance officer, to three years and one month today in Houston. Koenig, 51, onetime investor relations chief, received an 18-month sentence. Each was fined $50,000. In pleading guilty, Kopper agreed to accept a 15-year term and Koenig agreed to 10 years. Prosecutors asked for leniency.

"Simply put, Mr. Kopper's assistance was invaluable to the government's efforts to get to the bottom of what happened at Enron and to charge culpable individuals," Assistant US Attorney Kathryn Ruemmler wrote in a court filing.

Houston federal judges have rewarded several former Enron executives with lighter sentences than they agreed to when pleading guilty, and sometimes lighter than prosecutors wanted.

Andrew Fastow, former chief financial officer who created illicit partnerships at the heart of the fraud, was sentenced to six years instead of the 10 he originally agreed to. Prosecutors said they might appeal.

Richard Causey, onetime chief accounting officer, was sentenced to 5 [1/2] years, 18 months less than he agreed to and a year less than the government asked.

In the past five months, seven other former executives of Houston-based Enron, including former Chief Executive Officer Jeffrey Skilling, were sentenced. Terms ranged from Skilling's 24 years to probation for lower-ranked managers. Former Chairman Kenneth Lay, convicted with Skilling, died before being sentenced, and his conviction was erased.

"If Andy Fastow is the mastermind and he ended up with six years, there needs to be some parity between defendants," Kirby Behre, a former prosecutor who co-wrote a book on sentencing, said after yesterday's hearing.

Kopper was the first Enron executive to accept a plea bargain. He agreed to cooperate with the government in August 2002, less than a year after Enron's collapse.

Kopper's early assistance "shaved months" off the investigation, leading to charges against at least 20 other people, Ruemmler wrote in a letter requesting leniency.

"His most significant and direct contribution was he led to the charging of Mr. Fastow," Ruemmler told Werlein at the hearing. "The significance of that really cannot be overstated."

In a voice shaking with emotion, Kopper told Werlein he felt "deep sadness, shame and regret" for deceiving Enron's shareholders and employees.

"We took their trust, and we just threw it away," Kopper said. "I am horrified I contributed to the pain these people have suffered."

Ruemmler said Koenig reviewed thousands of documents and hours of tapes to help find lies by Enron's top managers. She called him "truly one of the tragic figures at Enron."

"I personally believe he was an honest person who succumbed to business pressures, the environment of management and the culture of the company, and he made some very, very grave errors," she told the judge. "He's been the first person to tell the world how serious those errors were."

Werlein watched both men testify against their former bosses. The judge presided over a trial involving the sham sale of Nigerian power barges at which Kopper testified. And Werlein was a courtroom spectator during part of Koenig's eight days of testimony at Skilling's trial.

"I've not heard of judges doing that before," said Joel Androphy, a Houston lawyer who attended much of the trial. "But the only way for him to do it fairly was to see both of them testify."

The sentences were longer thWerlein noted that Fastow received a 40 percent shorter sentence than federal guidelines called for. The judge asked the prosecutor if that was generous enough for Kopper and Koenig. Ruemmler said it wasn't, without making a specific recommendation.

"I definitely did not make the right choices in my last years at Enron," Koenig told the judge before the sentence. "I'm not looking forward to it, but I will accept your decision."

The judge told Kopper the sentence had to reflect the seriousness of the offence, promote respect for law and punish him for stealing millions of dollars from Enron.

Kopper and Koenig played integral roles in a fraud that allowed Enron to hide billions in debt and deceive investors about the company's true financial health. More than 5,000 jobs and $1 billion in employee pensions were erased when Enron filed bankruptcy in December 2001.

Kopper worked in Enron's Global Finance division as Fastow's deputy before leaving to run the CFO's off-books partnerships.

He pleaded guilty to two conspiracy counts, agreeing to forfeit $8 million and surrender claims to another $4 million in dispute.

Kopper testified in an Enron-related trial that he and his domestic partner, William Dodson, jointly stole $16.5 million from Enron through Fastow's side de als. Dodson hasn't been prosecuted and retains roughly $9 million of the illegal proceeds, Kopper testified.

Koenig, as head of investor relations, was Enron's main link to investment analysts. He pleaded guilty to one count of aiding and abetting securities fraud, agreeing to forfeit $1.5 million. His plea included settling claims by the US Securities and Exchange Commission that he spread false information to investors.

Koenig approved earnings releases and wrote scripts for analyst presentations and conference calls where Enron's performance and expectations were discussed in detail.

"He helped create the impression that it was unimaginable for such a collection of honourable and distinguished people to be perpetrating such a massive fraud," said Christopher Bebel, a Houston lawyer who has tracked the Enron cases.

Koenig testified at Skilling's trial that on numerous occasions he heard Skilling misrepresent Enron's results and operations to analysts. He said Skilling twice manipulated quarterly earnings at the last minute to beat Wall Street expectations.