FORMER ENRON CHIEF EXECUTIVE OFFICER JEFFREY K. SKILLING CHARGED WITH CONSPIRACY, SECURITIES FRAUD, INSIDER TRADING

WASHINGTON, D.C. - Deputy Attorney General James B. Comey, Assistant Attorney General Christopher A. Wray of the Criminal Division, Federal Bureau of Investigation Director Robert Mueller, and Enron Task Force Director Leslie R. Caldwell announced today that a federal grand jury in Houston has indicted former Enron Corp. Chief Executive Officer Jeffrey K. Skilling on charges of conspiracy, securities fraud, wire fraud and insider trading.

A superseding indictment returned by the grand jury in Houston yesterday charges Skilling, 50, with conspiracy to commit securities fraud, 20 counts of securities fraud, four counts of wire fraud and ten counts of insider trading. Former Enron Chief Accounting Officer Richard Causey, who was originally indicted last month, was also charged in the superseding indictment with conspiracy to commit securities fraud, 20 counts of securities fraud, eight counts of wire fraud, and two counts of insider trading.

Skilling surrendered this morning to agents of the Federal Bureau of Investigation in Houston, after the indictment was unsealed. Skilling had an initial appearance this morning before Magistrate Judge Frances Stacy.

“This indictment marks an important milestone in the life of the President’s Corporate Fraud Task Force,” said Deputy Attorney General James B. Comey, who heads the Task Force. “The indictment alleges that Jeffrey Skilling and other Enron executives concocted a massive, complex scheme to give shareholders and the investing public the false appearance of financial strength and security at a time when Enron was, in fact, failing. Our investigators were able to cut through the maze of paperwork and financial trickery to get to the bottom of the scheme and charge Skilling, once the top executive at Enron, with fraud and other crimes that contributed to Enron’s collapse.”

“The indictment of Enron’s CEO shows that we will follow the evidence wherever it leads - even to the top of the corporate ladder,” said Assistant Attorney General Christopher Wray of the Criminal Division. “No corporate executive - not even the CEO - is above the law. The Department of Justice and our Task Force partners will work tirelessly to hold accountable all those who participate in corporate fraud, no matter how devious the scheme, and no matter how highly placed the perpetrators.”

“The FBI continues to investigate allegations of fraud, particularly with regard to corporations that victimize innocent investors,” said FBI Director Robert Mueller. “The Enron’s Task Force’s probe and today’s indictment represents both a substantial step for justice and strong continued action on the part of the FBI’s Corporate Fraud Initiative.”

The indictment alleges that, between at least 1999 and 2001, Skilling, Causey and other Enron executives engaged in a wide-ranging scheme to deceive the investing public, the SEC, credit rating agencies and others about the true performance of Enron’s businesses. The scheme was allegedly designed to make it appear that Enron was growing at a healthy and predictable rate, consistent with analysts’ published expectations, that Enron did not have significant write-offs or debt and was worthy of investment-grade credit rating, that Enron was comprised of a number of successful business units, and that the company had an appropriate cash flow. It had the effect of inflating artificially Enron’s stock price, which increased from approximately $30 per share in early 1998 to over $80 per share in January 2001.

As a part of the scheme, Skilling and Causey allegedly set unrealistic and unattainable earnings goals for Enron, based on analysts’ expectations rather than on actual or reasonably achievable business results. When, as expected within the company, Enron consistently fell short of those goals, Skilling, Causey and others allegedly orchestrated a series of accounting gimmicks designed to make up the shortfall between actual and predicted results. Enron then announced publicly that it had met or exceeded analysts’ expectations when, as Skilling and Causey allegedly knew, it made its numbers only by engaging in fraud. The indictment also alleges that Skilling and Causey made false and misleading representations about Enron’s finances and business operations to analysts, at press conferences, in SEC filings and elsewhere.

Skilling, Causey and other executives and senior managers allegedly employed a variety of fraudulent devices, including:

- The concealment of massive energy trading profits made during the California energy crisis by placing the profits in fraudulent reserve accounts created for that purpose;

- The concealment of large losses and failures in Enron’s two highly-touted new businesses, Enron Energy Services (“EES”) and Enron Broadband Services (“EBS”), by manipulating Enron’s “segment reporting” and using its reserved energy trading earnings to hide EES’s losses, and by manipulating expense accounting to hide the extent of EBS’s losses;

- The manufacturing of earnings by falsely touting Enron’s EBS business in order to drive up Enron’s stock price, then misleadingly presenting earnings from the resulting increase in Enron’s share price as recurring earnings from energy operations;

- The manufacturing of earnings and artificially improving Enron’s balance sheet by fraudulently overvaluing assets in Enron’s merchant investment portfolio;

- The structuring of financial transactions in a misleading manner in order to achieve earnings objectives, avoid booking of large losses in asset values, and conceal debt, including the fraudulent use of a purportedly third-party investment entity that in fact was not truly independent from Enron and which was used only to achieve Enron’s financial reporting objective and to enrich Enron executives and senior managers; and

- The structuring of financial transactions in a misleading manner in order to conceal the amount of Enron’s debt and to create the false appearance of greater cash flows, such as disguising multi-billion dollar loans to Enron from large banks as energy trading transactions.

The indictment alleges that, through a combination of these fraudulent accounting devices and their misleading public statements, Skilling, Causey and others were able to create and maintain the illusion that Enron was a successful company when, in fact, it was failing.

The indictment further alleges that Skilling, Causey and other executives and senior managers received millions of dollars in salary, bonuses and the sale of stock even as they conspired to fraudulently manipulate the company’s earnings. Skilling allegedly received approximately $200 million from the sale of Enron stock options and restricted stock between 1998 and 2001, and was paid more than $8 million in salary and bonuses. Insider trading charges contained in the indictment allege that from April 2000 to September 2001, Skilling sold shares of Enron stock generating more than $63 million while possessing material, non-public information about the company. This includes the sale of 500,000 shares of Enron stock, generating more than $15 million, on Sept. 17, 2001, approximately four weeks after Skilling abruptly resigned from Enron. The indictment alleges that Causey also engaged in insider trading to generate more than $10 million in the sale of stock from January 2000 to October 2000.

The indictment seeks forfeiture of more than $66 million from Skilling and $6 million from Causey.

If convicted of all the charges in the indictment, Skilling faces a maximum sentence of 325 years in prison and hundreds of millions of dollars in fines, and Causey faces a maximum of 265 years and hundreds of millions of dollars in fines. The indictment is viewable at <http://www.usdoj.gov/dag/cftf/cases_d_g.htm>.

Criminal indictments are only charges and not evidence of guilt. A defendant is presumed to be innocent unless and until proven guilty.

The investigation into Enron’s collapse is being conducted by the Enron Task Force, a team of federal prosecutors supervised by the Justice Department’s Criminal Division and agents from the FBI and the IRS Criminal Investigations Division. The Task Force also has coordinated with and received considerable assistance from the Securities and Exchange Commission. The Enron Task Force is part of President Bush’s Corporate Fraud Task Force, created in July 2002 to investigate allegations of fraud and corruption at U.S. corporations.

Twenty-nine defendants have been charged to date, including 20 former Enron executives. Nine defendants have been convicted to date, including Andrew Fastow, the former CFO, former Enron Treasurer Ben F. Glisan, Jr., former Enron North America and EES Chief Executive Officer David Delainey, and former Enron Global Finance Managing Director Michael Kopper. To date, the Enron Task Force has restrained more than $95 million in proceeds derived from criminal activity. The Task Force investigation is continuing.

Superseding indictment

###

04-099