UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

Plaintiff Securities and Exchange Commission (the "Commission") for its Complaint alleges as follows:

SUMMARY

1. The defendant, Richard A. Causey, the former Chief Accounting Officer of Enron, together with other Enron executives and senior managers, engaged in a wide-ranging scheme to defraud in violation of the federal securities laws by manipulating Enron's publicly reported financial results and making false and misleading statements about Enron's businesses.

2. The Commission requests that this Court permanently enjoin Causey from violating the federal securities laws cited herein, prohibit him permanently and unconditionally from acting as an officer or director of any issuer of securities that has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 ("Exchange Act") or that is required to file reports pursuant to Section 15(d) of such Act, order him to disgorge all ill-gotten gains, to pay civil penalties, to have the amount of such penalties added to and becomepart of a disgorgement fund for the benefit of the victims of Causey's unlawful conduct, and order such other and further relief as the Court may deem appropriate.

JURISDICTION AND VENUE

3. The Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), and 27 of the Exchange Act [15 U.S.C. §§ 78u(d) and (e) and 78aa].

4. Venue lies in this District pursuant to Section 27 of the Exchange Act [15 U.S.C. § 78aa] because certain acts or transactions constituting the violations occurred in this District.

5. In connection with the acts, practices, and courses of business alleged herein, Causey, directly or indirectly, made use of the means and instruments of transportation and communication in interstate commerce, and of the mails and of the facilities of a national securities exchange.

6. Causey, unless restrained and enjoined by this Court, will continue to engage in transactions, acts, practices, and courses of business as set forth in this Complaint or in similar illegal acts and practices.

DEFENDANT

7. Richard A. Causey was a certified public accountant and was an employee or outside advisor of Enron from 1991 through early 2002. From 1986 to 1991, while an employee of the accounting firm Arthur Andersen LLP ("Andersen"), Causey sold audit services to Enron on behalf of Andersen, which served as Enron's outside auditor. In 1991, Enron hired Causey as Assistant Controller of Enron Gas Services Group. From 1992 to 1997, Causey served in various positions in a business unit known as Enron Capital and Trade, including as Vice-President and Managing Director. In 1998, Causey was made Chief Accounting Officer ("CAO") of Enron andan Executive Vice-President. As Enron's CAO from 1998 through December 2001, Causey was a principal manager of Enron's accounting practices. Causey reported to Enron's Chairman/Chief Executive Officer ("CEO") and its Chief Operating Officer ("COO")/CEO. Enron's Chairman/CEO, its COO/CEO, its Chief Financial Officer ("CFO") Andrew S. Fastow, and Causey were the principal managers of Enron's finances. Causey also was a principal manager of Enron's disclosures and representations to the investing public. He signed Enron's annual reports on Form 10-K and its quarterly reports on Form 10-Q.

ENTITIES AND OTHER PERSONS INVOLVED

8. Enron Corp. is an Oregon corporation with its principal place of business in Houston, Texas. During the relevant time period, the common stock of Enron was registered with the Commission pursuant to Section 12(b) of the Exchange Act and traded on the New York Stock Exchange. Because it was a public company, Enron and its directors, officers, and employees were required to comply with federal securities laws, including rules and regulations requiring the filing of true and accurate financial information. Enron's stock price was influenced by factors such as its reported financial information, credit rating, and its ability to meet revenue and earnings targets and forecasts. Investors considered this information important in making investment decisions. Likewise, the information was important to credit rating agencies and influenced the investment grade ratings for Enron's debt, ratings critical to Enron's ongoing business operations and ability to secure loans. During the time that Causey engaged in the fraudulent conduct alleged herein, Enron raised millions in the public debt and equity markets. Among other operations, Enron was the nation's largest natural gas and electric marketer with reported annual revenue of more than $150 billion. Enron rose to number sevenon the Fortune 500 list of companies. By December 2, 2001, when it filed for bankruptcy, Enron's stock price had dropped in less than a year from more than $80 per share to less than $1.

FACTUAL ALLEGATIONS

Enron's Scheme To Manipulate Its Reported Financial Results

9. From at least 1999 through late 2001, Causey, together with other Enron executives and senior managers, engaged in a wide-ranging scheme, through a variety of devices, to deceive the investing public about the actual performance and profitability of Enron's businesses by manipulating Enron's publicly reported financial results and making false and misleading public representations about Enron's financial results and the performance of its various business units.

10. The scheme's objectives were, among other things, to produce reported earnings that steadily grew by approximately 15 to 20 percent every year; to meet or exceed, without fail, the published expectations of industry analysts forecasting Enron's reported earnings-per-share results; to avoid publicly reporting any large "write-downs" or losses; to persuade investors that Enron's future profitability would continue to grow; and to deceive lenders, rating agencies, and the investing public about the true magnitude of Enron's debt and other obligations and the true condition of Enron's cash flow.

11. In order to achieve their objectives, Enron's executives and senior managers, including Causey, imposed annual and quarterly earnings targets ("budget targets") on each of the company's business units. These budget targets were derived from earnings-per-share goals rather than on forecasts derived from the projected earnings likely to be generated by the company's various commercial operations. When the budget targets were not met through resultsfrom business operations, they were achieved through the use of various earning "levers," many of which included fraudulent devices, including but not limited to those described below. Enron's executives and senior managers, including Causey, frequently misled and caused others to mislead Enron's outside auditors about the use of these devices.

12. Causey was a principal architect and operator of the scheme to manipulate Enron's reported earnings. He participated in the decisions about where budget targets were set and what demands were placed on each Enron business unit both to meet each unit's own budget targets and to produce additional earnings to cover differences between the projected earnings of Enron's business units and the company's overall budget target. This difference, which at times constituted hundreds of millions of dollars, was referred to within Enron variously as the "gap," "stretch" or "overview." From time to time, Causey and others increased budget targets at or near the end of the quarter, and at times even after the close of the quarter, in order to achieve a revised earnings-per-share objective in comparison to the expectations of equity analysts.

13. For a time, the scheme to inflate artificially the share price of Enron's stock and to maintain Enron's credit rating at investment grade succeeded. In early 1998, Enron's stock traded at approximately $30 per share. By January 2001, even after a stock split in August 1999, Enron's stock was trading at over $80 per share and Enron had become the seventh-ranked company in the United States, according to the leading index of the "Fortune 500." Until late 2001, Enron maintained an investment grade credit rating. At the same time, rising stock prices led to enrichment of Causey and Enron's other senior managers in the form of salary, bonuses, grants of artificially appreciating stock and stock options, and prestige within their professions and communities. During the relevant time period, Causey sold millions of dollars worth ofEnron stock, netting millions in profits, and made more than $3 million in salary and bonuses.

14. The devices employed in furtherance of this fraudulent scheme included but were not limited to:

a. manufacturing earnings through fraudulent sales and improving its financial statements through over-valuation of assets and avoidance of losses through the use of fraudulent devices designed to "hedge," or lock-in, asset values;

b. structuring financial transactions using various accounting techniques in order to achieve earnings objectives, avoid booking of large losses from reductions in asset values, conceal debt, and create the appearance of greater cash flows;

c. concealing losses in the earnings of Enron's individual "business segments" through fraudulent manipulation of "segment reporting," that is, the manner in which Enron recorded and reported the earnings of its various businesses, and improper use of reserve accounts to mask losses in one segment with earnings in another;

d. fraudulently manipulating reserve accounts to mask volatility in earnings by concealing earnings during highly profitable periods and using the reserved earnings during later periods in order to achieve desired earning results; and

e. providing false and misleading descriptions of Enron's business performance and its financial results, which had been engineered to appear more successful than they in fact were, in conferences with Wall Street investment analysts, press releases, media statements, and other forms of communication with the investing public.

15. The manner and means by which Causey and others used these fraudulent devices included but were not limited to those described below.

Manufacturing Earnings by Fraudulently Manipulating Asset Values

16. Enron executives and senior managers, including Causey, engaged in a pattern of fraudulent conduct designed to generate earnings needed to meet budget targets by artificially increasing the book value of certain assets in Enron's large "merchant asset portfolio." This portfolio included many energy-related businesses that were not publicly traded and, therefore, were valued by Enron according to its own internal accounting "models." Enron at times manipulated these models in order to produce results desired to meet budget targets. For example, in the fourth quarter of 2000, under the direction of Causey and others, Enron personnel fraudulently increased the value of one of the largest of Enron's merchant assets, Mariner Energy, by $100 million in order to help close a budget gap.

Use of SPEs to Manipulate Reported Financial Results

17. Enron heavily used Special Purpose Entities ("SPEs") to achieve "off-balance-sheet" accounting treatment of assets and business activities and thereby present itself more attractively as measured by criteria favored by Wall Street investment analysts, credit rating agencies, and others. By 1999, Enron was increasingly dependent on transactions with SPEs to meet its financial reporting goals. In June 1999, in order to have an off-balance-sheet SPE to which Enron could readily and repeatedly turn to achieve its desired financial reporting results, Enron's Board of Directors (the "Board") agreed to permit CFO Fastow to create and serve as the managing partner of a new SPE named LJM Cayman, L.P. The Board later approved Fastow's participation in another even larger SPE named LJM2 Co-Investment, L.P. (the LJM entities are collectively referred to as "LJM" unless otherwise noted). LJM's business activity principally involved transactions with Enron and Enron affiliates. Causey and others sought and obtainedthe approval of the Board to conduct such transactions, which transactions were designed to manipulate Enron's reported financial results.

"Raptor" Hedges

18. Beginning in the spring of 2000, Enron and LJM engaged in a series of financial transactions with four SPEs called Raptor I, Raptor II, Raptor III and Raptor IV (collectively referred to as the "Raptors"). Causey, Fastow, Enron Treasurer Ben F. Glisan, Jr., and others used the Raptors to manipulate fraudulently Enron's reported financial results. Raptor I was designed to protect Enron from having to report publicly in its financial results decreases in value in large portions of its energy merchant asset portfolio and technology investments by allowing Enron to hedge the value of those investments with an allegedly independent third party created by Enron, known as Talon.

19. The Raptor I structure, however, was invalid under applicable accounting rules because Talon was not independent from Enron, and LJM's investment in Talon was not at risk. Causey and Fastow had an oral side deal, reached in or about the summer of 2000, that LJM2 would receive its initial investment in Talon plus a profit of $11 million from Enron, all prior to Talon engaging in any of the hedging transactions for which it was created. As a quid pro quo for this payment to LJM2, Fastow agreed with Causey that Enron employees could use Raptor I to manipulate Enron's financial statements, including by allowing Enron employees, without negotiation or due diligence on behalf of LJM2, to select the values at which the Enron assets were hedged with Talon.

20. The side deal between Causey and Fastow was satisfied by Causey, Fastow, Glisan, and others manufacturing a transaction between Enron and Talon that generated a $41million payment to LJM2. In or about September 2000, Causey and others caused Enron to purchase a "put" on its own stock from an entity involved in the "Raptor" structure, which had no business purpose for Enron but ensured that LJM2 received, without risk, the complete return of its $30 million investment in the first "Raptor" structure, together with a profit of $11 million on that investment. After satisfying the conditions of the side deal by providing LJM2 with a guaranteed return on its investment, Enron began to use Raptor I to hedge the value of Enron's assets. Enron employees manipulated the book values of Enron assets, many of which were expected to decline in value, before they were hedged, knowing that the Raptor I structure ensured that Enron would not suffer the financial reporting consequences of subsequent, and anticipated, declines in the value of those assets. In or about September 2000, Causey and Fastow further used Raptor I fraudulently to promote Enron's financial position by back-dating the effective date of the Raptor hedge to Enron's advantage, capturing the all-time high stock value of one of the Enron assets, stock in a company named AVICI, at a time when they knew that value already had declined.

Manufacturing Earnings and Concealing Debt through Purported Sales to LJM

21. In addition to the fraudulent "Raptor" hedging device, Causey and other Enron senior managers used LJM to conduct other transactions in order to achieve financial reporting objectives, usually purported asset sales that yielded reported income and cash flow and moved poorly performing assets and debt off Enron's balance sheet. These transactions were not arm's-length and could not have been accomplished by using legitimate independent counter-parties. In numerous instances, these transactions were accomplished through another undisclosed side agreement between Causey and Fastow that LJM would be guaranteed against loss in certain ofits transactions with Enron, and that other losses to LJM would be made up through other transactions with Enron.

Concealing EES Failures

22. In presentations to the investing public, Enron's executives and senior managers heavily emphasized the performance and potential of Enron Broadband Services ("EBS") together with Enron Energy Services ("EES") as major reasons for past and projected increases in the value of Enron's stock, attributing as much as half of Enron's total stock value to those two business units. Causey and others further concealed massive losses in EES's business through fraudulently manipulating Enron's "business segment reporting." This was accomplished at the close of the first quarter of 2001 through a "reorganization" of Enron's business segments that Enron explained deceptively as solely meant to improve efficiency. In fact, the reorganization was designed to conceal EES's problems. Enron, with the approval of Causey and others, hid those problems from the investing public by moving large portions of EES's business - where Causey and others knew at the time of the change hundreds of millions of dollars in losses would have to be recorded - into Enron's Enron North America ("ENA") business segment. As Causey and others knew, ENA would have ample earnings, including in the large reserve accounts described below, to ensure that ENA could book the huge losses that in fact were attributable to EES while at the same time continuing to meet Enron's budget targets.

Concealing EBS Failures

23. As Enron's executives and senior managers well knew, EBS was also a failed business that was losing large amounts of money. However, Enron's senior managers took stepsto ensure that EBS's financial results did not publicly reveal its failure. For example, during late 2000, Enron structured a series of one-time financial transactions in EBS that were designed to manufacture earnings that Enron used to present the false impression that EBS was close to generating positive operating profits. Even with these one-time earnings, EBS still was facing much larger than expected losses during the first quarter of 2001. In order to ensure that EBS did not record in the first quarter of 2001 losses that exceeded Enron's annual budget target for EBS, and in order to achieve the financial result dictated by Causey for the first quarter 2001, Causey and others fraudulently manipulated, and caused to be fraudulently manipulated, EBS's expenses for the first quarter of 2001.

Manipulating Reserves to Conceal Earnings Volatility and Losses

24. During 2000 and 2001, the profitability of Enron's wholesale energy trading business, primarily based in its ENA business unit, dramatically increased for reasons including rapidly rising energy prices in the western United States, especially in California. This sudden and large increase in trading profits, which exceeded $1 billion, threatened to undermine Enron's description and presentation of itself as the dominant "intermediator" in the energy markets, rather than as a speculative (and therefore risky) trading company whose stock would trade at a much lower price-to-earnings ratio. In order to mask these earnings and preserve them for later use, Causey and others fraudulently created and used reserve accounts within ENA both to conceal the extent of ENA's trading profits and, as set forth above, to avoid reporting large losses in other areas of its business.

False and Misleading Representations to Investing Public

25. In furtherance of the scheme to manipulate Enron's financial results and inflate its stock price, Causey and others participated in presenting false and misleading statements about Enron's financial results, the performance of its businesses and the manner in which its stock was and should be valued. These statements were disseminated to the investing public in the form of conferences, conference calls, press releases, interviews, and statements to members of the media. They included, but were not limited to:

a. On January 22, 2001, a national quarterly Enron conference call with Wall Street analysts, in which false and misleading statements were made about Enron's wholesale and retail energy trading businesses, its telecommunications business, and the condition of its business;

b. On January 25, 2001, an annual conference in Houston with Wall Street investment analysts, at which false and misleading presentations were made about Enron's retail energy trading business, its telecommunications businesses, the value of Enron's stock and the bases for Enron's stock value, and the condition of Enron's business;

c. On March 23, 2001, a national Enron conference call with Wall Street analysts, held for the purpose of dispelling concerns about Enron's falling stock price, in which false and misleading statements were made about Enron's retail energy trading businesses, its telecommunications business, and the condition of Enron's business;

d. On April 17, 2001, a national quarterly Enron conference call with Wall Street analysts, in which false and misleading statements were made about Enron's wholesale and retail energy trading businesses, its telecommunications business, and the condition of itsbusiness;

e. On July 12, 2001, a national quarterly Enron conference call with Wall Street analysts, in which false and misleading statements were made about Enron's retail energy trading businesses, its telecommunications business, and the condition of Enron's business; and

f. On October 16, 2001, a national quarterly Enron conference call with Wall Street analysts, in which false and misleading statements were made about the condition of Enron's business and losses recorded by Enron.

False and Misleading Filings With The SEC

26. In furtherance of the scheme to manipulate Enron's financial results and inflate its stock price, Causey and others filed and caused to be filed with the SEC false and misleading annual and quarterly reports of Enron, including: Form 10-Q for the Third Quarter 2000 (filed on or about November 14, 2000); Form 10-K for Fiscal Year 2000 (filed on or about April 2, 2001); Form 10-Q for the First Quarter 2001 (filed on or about May 15, 2001); and Form 10-Q for the Second Quarter 2001 (filed on or about August 14, 2001). These reports, among other things, contained materially false and misleading financial statements that overstated Enron's actual revenues and earnings, and understated Enron's actual debt and expenses. In addition, in furtherance of the scheme, Causey and others misrepresented, concealed, and hid, and caused to be misrepresented, concealed, and hidden, the purposes and acts done in furtherance of the scheme, including by providing false, misleading, and inaccurate information and making false representations to, among others, Enron's outside auditors, Enron's lenders, various rating agencies, and the SEC.

Collapse of Scheme

27. On August 14, 2001, Enron's COO/CEO unexpectedly resigned. Enron's stock price, which had been declining since January 2001, fell sharply. On October 16, 2001, Enron announced a loss of $618 million for the third quarter of 2001. Enron's stock price again declined sharply. On October 29 and November 1, 2001, the two leading credit rating agencies downgraded Enron's credit rating. On November 8, 2001, Enron announced its intention to restate its financial statements for 1997 through 2000 and the first and second quarters of 2001 to reduce previously reported net income by an aggregate of $586 million. On November 21, 2001, Enron's credit rating was downgraded to "junk" status. On December 2, 2001, Enron filed for bankruptcy, making its stock, which less than a year earlier had been trading at over $80 per share, virtually worthless.

CLAIMS FOR RELIEF

FIRST CLAIM
Violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)]
and Exchange Act Rule 10b-5 [17 C.F.R. § 240.10b-5]

28. Paragraphs 1 through 27 are realleged and incorporated by reference herein.

29. As set forth more fully above, Causey, directly or indirectly, by use of the means or instrumentalities of interstate commerce, or by the use of the mails and of the facilities of a national securities exchange, in connection with the purchase or sale of securities: has employed devices, schemes, or artifices to defraud, has made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or has engaged in acts, practices, or

courses of business which operate or would operate as a fraud or deceit upon any person.

30. By reason of the foregoing, Causey violated and aided and abetted violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

SECOND CLAIM
Violations of Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Exchange Act Rules 12b-20, 13a-1, & 13a-13
[17 C.F.R. §§ 240.12b-20, 240.13a-1, 240.13a-13]

31. Paragraphs 1 through 30 are realleged and incorporated by reference herein.

32. By engaging in the conduct described above, Causey knowingly and substantially caused Enron to file a materially false and misleading annual report on Form 10-K and materially false and misleading quarterly reports on Form 10-Q with the Commission.

33. By reason of the foregoing, Causey aided and abetted violations by Enron of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder.

THIRD CLAIM
Violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(2)(B)]
and Exchange Act Rule 13b2-1 [17 C.F.R. § 240.13b2-1]

34. Paragraphs 1 through 33 are realleged and incorporated by reference herein.

35. By engaging in the conduct described above, Causey aided and abetted Enron's failures to make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflected Enron's transactions and dispositions of its assets, in violation of Section

13(b)(2)(A) of the Exchange Act, and further aided and abetted failures to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that Enron's corporate transactions were executed in accordance with management's authorization and in a manner to permit the preparation of financial statements in conformity with generally accepted accounting principles in violation of Section 13(b)(2)(B) of the Exchange Act.

36. By engaging in the conduct described above, Causey, directly or indirectly, falsified and caused to be falsified Enron's books, records, and accounts subject to Section 13(b)(2)(A) of the Exchange Act in violation of Rule 13b2-1 thereunder.

37. By reason of the foregoing, Causey aided and abetted violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and violated Rule 13b2-1 thereunder.

FOURTH CLAIM
Violations of Section 13(b)(5) of the Exchange Act
[15 U.S.C. § 78m(b)(5)]

38. Paragraphs 1 through 37 are realleged and incorporated by reference herein.

39. By engaging in the conduct described above, Causey knowingly circumvented or knowingly failed to implement a system of internal financial controls at Enron, and knowingly falsified books, records, and accounts of Enron.

40. By reason of the foregoing, defendant Causey violated and aided and abetted violations of Section 13(b)(5) of the Exchange Act.

FIFTH CLAIM
Violations of Exchange Act Rule 13b2-2 [17 C.F.R. § 240.13b2-2]

41. Paragraphs 1 through 40 are realleged and incorporated by reference herein.

42. By engaging in the conduct described above, Causey, directly or indirectly, made or caused to be made false and misleading statements or omitted or caused others to omit to state

material facts necessary in order to make statements made, in light of the circumstances under which such statements were made, not misleading to Enron's independent accountants and Enron's auditors in connection with audits and examinations of Enron's required financial statements and in connection with the preparation and filing of documents and reports required to be filed with the Commission, in violation of Exchange Act Rule 13b2-2.

43. By reason of the foregoing, defendant Causey violated and aided and abetted violations of the Exchange Act Rule 13b2-2.

JURY DEMAND

44. The Commission demands a jury in this matter.

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that this Court:

A. Grant a Permanent Injunction restraining and enjoining Causey from violating the statutory provisions set forth herein; prohibiting him permanently and unconditionally from acting as an officer or director of any issuer of securities that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of such Act; and ordering him to pay disgorgement of illegal gains, and civil penalties;

B. Pursuant to Section 308 of the Sarbanes-Oxley Act of 2002, enter an order providing that the amount of civil penalties ordered against Causey be added to and become part of a disgorgement fund for the benefit of the victims of the violations alleged herein; and

C. Grant such other and additional relief as this Court may deem just and proper.

Of Counsel:
Douglas B. Paul
Kurt G. Gresenz