Richard A. Causey

Richard A. Causey served as Enron’s Chief Accounting Officer and Executive Vice President from 1998 until the company’s collapse in December 2001. As the executive responsible for Enron’s accounting and financial reporting activities, Causey occupied a position of critical importance in the corporate hierarchy, sitting on the Executive Committee alongside Kenneth Lay, Jeffrey Skilling, and Andrew Fastow. The Department of Justice later characterized him as “a principal architect and operator of the scheme to manipulate Enron’s reported earnings” through the fraudulent Raptor hedging structures and other accounting manipulations.

On December 28, 2005, approximately two weeks before the scheduled trial of Kenneth Lay and Jeffrey Skilling, Causey pleaded guilty to securities fraud and admitted to conspiring with senior management to make false and misleading statements about Enron’s financial condition. He was sentenced on November 15, 2006, to 66 months in federal prison, one of the longest sentences handed down to any Enron executive. Unlike Ben Glisan, who went directly to prison without cooperating, Causey agreed to cooperate fully with the Enron Task Force, though his cooperation came too late to serve as a witness in the Lay-Skilling trial.

Causey does not have a personal PST email archive in the Enron corpus, likely because his communications were either not preserved or excluded from the FERC dataset given his central role in the criminal investigation. However, his name appears in 3,723 emails across 61 different employee mailboxes, documenting his involvement in accounting decisions, risk management oversight, and crisis management during the company’s final months.

Career at Enron

Rise to Chief Accounting Officer

Causey joined Enron after working at Arthur Andersen, the accounting firm that served as Enron’s external auditor. This background provided him with deep expertise in the accounting standards and auditing practices that were at the center of the fraud. His previous relationship with Andersen auditors, including engagement partner David Duncan, facilitated the close working relationship between Enron’s internal accounting function and its external auditors that characterized the company’s financial reporting process.

In 1998, Causey was elevated to the position of Chief Accounting Officer and Executive Vice President, placing him among the company’s most senior executives. This appointment gave him responsibility for all of Enron’s accounting and financial reporting activities, a scope that expanded as the company grew in complexity through the late 1990s.

Expanding Responsibilities

A corporate announcement dated July 26, 1999, from the Office of the Chairman clarified the breadth of Causey’s role: “With the expansion of our global businesses and the acceleration of our financial activities, Rick will focus on the leadership of Enron’s accounting and financial reporting activities, as well as overseeing risk management systems, Y2K preparations and our SAP implementation.” This assignment made Causey responsible not only for accounting judgments but also for the operational systems that tracked and reported the company’s financial position.

The scope of his oversight continued to grow. On January 17, 2000, Enron announced the creation of a global risk management operations function under Sally Beck’s direction, with Beck reporting directly to Causey. The announcement stated: “Recognizing Enron’s increasing worldwide presence in the wholesale energy business and the need to insure outstanding internal controls for all of our risk management activities, regardless of location, a global risk management operations function has been created under the direction of Sally W. Beck, Vice President. In this role, Sally will report to Rick Causey, Executive Vice President and Chief Accounting Officer.”

By July 2000, the Global Strategic Sourcing organization had also been moved to report directly to Causey, further consolidating oversight of critical operational functions under his authority.

Role in Special Purpose Entity Accounting

The Dual Function Problem

Causey’s position created a fundamental conflict in Enron’s governance structure. As Chief Accounting Officer, he was responsible for ensuring that the company’s financial statements complied with Generally Accepted Accounting Principles. Yet he was simultaneously expected to facilitate transactions that pushed the boundaries of accounting rules, working with Fastow’s Global Finance group to structure deals that achieved desired accounting outcomes regardless of their economic substance.

According to secondary sources, rather than serving as a check on dubious transactions, Causey “saw his job as facilitating Fastow’s transactions.” When Enron executives created off-the-books partnerships to hide debts and losses, Causey helped make the accounting work. Rather than serving as a check on dubious transactions, Causey helped facilitate them.

Special Projects and Retail/Broadband Accounting

A March 1, 2000, organizational announcement revealed Causey’s direct involvement in accounting initiatives that proved problematic: “Wanda Curry is joining the corporate accounting team working with Rick Causey on special projects including certain retail and broadband accounting initiatives.” Enron’s retail energy services division and broadband unit were among the business segments that generated significant accounting controversies, with mark-to-market valuations and revenue recognition practices later questioned by regulators.

The assignment of dedicated staff to work with Causey on these “special projects” suggests a hands-on approach to accounting decisions in the company’s most aggressively valued business units.

The Raptor Structures

Oversight and Approval

The Raptor structures represented Causey’s most consequential accounting decisions. These four special purpose entities, created in partnership with Fastow’s LJM2 fund between April and December 2000, were designed to hedge Enron’s merchant investment portfolio through off-balance-sheet arrangements. Causey, as Chief Accounting Officer, was responsible for determining whether these structures complied with accounting rules that governed when entities could be excluded from consolidation.

The DOJ indictment alleged that Causey was central to the Raptor fraud. According to the charging documents, he allegedly entered into undisclosed side agreements with CFO Andrew Fastow, guaranteed that LJM would receive returns for providing fictitious “outside” funding, concealed that LJM’s funding was not genuinely at risk, and failed to properly account for these structures on Enron’s balance sheet. The structures allowed Enron to avoid recognizing hundreds of millions of dollars in losses from declining merchant investments.

Daily Position Reports

Email evidence confirms that Causey received regular position reports tracking the Raptor vehicles alongside other senior executives. These reports, distributed to Fastow, Causey, Rick Buy (Chief Risk Officer), and Ben Glisan (Treasurer), documented the credit capacity of each Raptor structure and flagged when losses threatened to exceed that capacity. The distribution pattern placed Causey at the center of the group monitoring these problematic structures.

Managing the Raptor Collapse

When the Raptor structures collapsed in early October 2001, Causey was directly involved in managing the aftermath. On October 3, 2001, Rick Buy sent an email to Causey and Ben Glisan with the subject “Raptor Debris,” asking: “Now that Raptor is blown up, should we begin valuation efforts of assets and include in merchant portfolio.” Causey responded the same day: “I think that all investments that were hedged in Raptor are on the MPR and are being monitored and reported against. Is this true? Ron, will you take the lead in making sure we have a smooth transition on this?”

Causey ensured that assets previously hidden within the structures were properly monitored as they returned to Enron’s books.

Relationship with Arthur Andersen

The Auditor Connection

Causey’s relationship with Arthur Andersen was unusually close, reflecting both his professional background and the intertwined nature of auditor-client relations at Enron. David Duncan, Arthur Andersen’s engagement partner for Enron, had been Causey’s colleague when Causey worked at the firm. This prior relationship may have contributed to the lack of auditor skepticism that characterized Andersen’s review of Enron’s accounting practices.

According to secondary sources, Duncan “favorably reviewed the work of Rick Causey, Enron’s chief accounting officer and Duncan’s former colleague at Andersen.” The personal connection between the auditor responsible for certifying Enron’s financial statements and the executive responsible for preparing them created obvious conflicts of interest.

Professional Standards Concerns

When Arthur Andersen partner Gary Bass raised objections to the Raptor special purpose entities, Causey’s response was hostile rather than receptive. According to reports, Gary Goolsby, a global risk partner at Andersen, informed Bass that “Enron’s then-chief accounting officer, Rick Causey, considered him to be ‘caustic, cynical toward their transactions’” when Bass objected to the Raptor structures. This characterization suggests that Causey viewed skeptical auditors as obstacles rather than partners in ensuring accurate financial reporting.

October 2001 Crisis Communications

During the October 2001 crisis, Arthur Andersen personnel were directly involved in operational discussions with Causey and other senior executives. An October 2, 2001, email from Rick Buy addressed to Causey, Sally Beck, and other executives included Arthur Andersen auditors Thomas Bauer and John Sorrells in the distribution regarding “Operational Risk Management.” The inclusion of Andersen personnel in internal operational discussions illustrates the extent to which the auditor-client boundary had eroded.

The Third Quarter 2001 Crisis

Board of Directors Engagement

As Enron’s problems escalated in October 2001, Causey became increasingly visible in crisis management activities. He attended critical Board of Directors meetings during this period, including sessions addressing Project Southwood (related to SPE unwinding) and the third quarter earnings announcement.

On October 15, 2001, Paula Rieker, Enron’s deputy corporate secretary, emailed Ken Lay: “Both Jeff McMahon (deal timing) and Rick Causey (goodwill) are ready” for a Board meeting on Project Southwood. The following day, October 16, 2001, a meeting was held in Greg Whalley’s office with “Koenig, Mark; Whalley, Greg; Glisan, Ben; Fastow, Andrew; McMahon, Jeffrey; Bowen Jr., Raymond; Causey, Richard; Buy, Rick; Lay, Kenneth” to discuss the Project Southwood presentation to the Board.

Investor Communications

Causey participated in conference calls with investors and analysts as the crisis deepened. Calendar entries from October 2001 document his involvement:

These entries show Causey at the center of the communications strategy during the period when Enron was making public statements later alleged to be fraudulent.

Criminal Prosecution

Indictment

On January 22, 2004, Richard Causey was indicted on six counts, including five counts of securities fraud and one count of conspiracy to commit securities fraud. The indictment alleged that Causey “fraudulently manipulate[d] Enron’s publicly reported financial results and artificially inflate[d] its stock price” and was “a principal architect and operator of the scheme to manipulate Enron’s reported earnings.”

The maximum penalty if convicted on all counts was 55 years in prison and $5.25 million in fines. Causey was originally scheduled to stand trial alongside Kenneth Lay and Jeffrey Skilling in January 2006.

Guilty Plea

On December 28, 2005, approximately two weeks before the scheduled trial, Causey appeared before Judge Sim Lake of the U.S. District Court for the Southern District of Texas and pleaded guilty to securities fraud. In his plea, Causey acknowledged conspiring with senior management to “make false and misleading statements in Enron’s filings with the Securities and Exchange Commission (SEC) – and in analyst calls” regarding the company’s financial condition. He also admitted to participating in efforts to deceive investors through false public statements and omitted material facts about Enron’s actual financial performance.

As part of the plea agreement, Causey agreed to forfeit $1.25 million, pay a $25,000 fine, and surrender all deferred compensation claims from Enron. He also agreed to cooperate fully with the Enron Task Force, though his late plea meant his cooperation would not be useful for the Lay-Skilling trial that began in January 2006.

Sentencing

On November 15, 2006, Judge Lake sentenced Causey to 66 months (five and a half years) in federal prison. The Department of Justice press release announcing the sentence noted: “Former Enron Chief Accounting Officer Richard Causey Sentenced to 66 Months in Prison for Securities Fraud.”

The base sentence under federal guidelines was seven years, with potential reduction of up to two years for “full, complete and truthful cooperation” with the Enron Task Force. The 66-month sentence reflected credit for cooperation while still representing one of the longer prison terms among Enron executives who pleaded guilty rather than went to trial.

Causey began serving his sentence at a federal prison in Bastrop, Texas, in 2007.

Legal Status

Richard Causey pleaded guilty on December 28, 2005, to securities fraud in connection with his role as Enron’s Chief Accounting Officer. He admitted to conspiring with senior management to make false statements to the SEC and mislead investors about Enron’s financial condition. He was sentenced on November 15, 2006, to 66 months in federal prison, forfeited $1.25 million, and paid a $25,000 fine. As part of his plea agreement, he agreed to cooperate with the Enron Task Force and surrendered all deferred compensation claims against Enron.

Timeline

See Also

• Andrew Fastow — CFO who orchestrated the LJM partnerships and Raptor structures with Causey’s accounting approval
• Raptor Structures — The SPE hedging vehicles whose accounting treatment Causey approved
• Arthur Andersen — External auditor where Causey previously worked and which approved Enron’s accounting
• Ben Glisan — Treasurer who worked with Causey on SPE oversight and also pleaded guilty
• Ken Lay — Chairman and CEO convicted at trial
• Jeff Skilling — CEO convicted at trial alongside Lay
• LJM Partnerships — Fastow’s private equity funds used in fraudulent transactions

References

This article draws on 3,723 mentions of Causey across 61 employee mailboxes in the Enron corpus, spanning 1999 to 2001. While Causey does not have a preserved personal email archive in the corpus, references to him in others’ emails document his role in accounting decisions, Executive Committee participation, and crisis management during the company’s final months. Secondary sources include U.S. Department of Justice press releases regarding his indictment (January 22, 2004), guilty plea (December 28, 2005), and sentencing (November 15, 2006). All criminal prosecution facts were verified against DOJ records.