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Former Enron executive Michael Kopper to plead guilty

Deborah Charles and C Bryson Hull in Washington/Houston

Former Enron Corp executive Michael Kopper is set to plead guilty on Wednesday and become the first employee to admit a criminal role in the energy giant's failure, sources close to the investigation said on Tuesday.

Kopper, the chief lieutenant to disgraced former Chief Financial Officer Andrew Fastow, will plead guilty to two charges of conspiring to commit wire fraud and money laundering and surrender $12 million in "criminally derived" assets, the sources said.

The 37-year-old Kopper will cooperate with prosecutors, the sources said. With his plea, federal prosecutors leading the sprawling investigation into Houston-based Enron have snared a high-ranking insider in a position to testify against Fastow and possibly other executives above him.

The plea may also alleviate public and congressional pressure to produce results in the long-running investigation. Although US investigators have made several high-profile arrests of top executives of other companies accused of corporate wrongdoing, they had yet to charge anyone connected to Enron, which collapsed into bankruptcy on Dec 2.

The deal marks a major shift in the strength of the government's case, said former federal prosecutor Robert Mintz.

"Here the government is taking the traditional route of applying tremendous pressure to individuals and striking deals with carefully selected insiders who will lead them through the byzantine transactions," said Mintz, who now leads the white-collar criminal defense practice at the law firm of McCarter & English in Newark, New Jersey.

FALLING STAR

Kopper was considered a hot shot in the company's Enron Global Equity division, where he became Fastow's top aide in managing numerous off-balance-sheet partnerships that eventually helped destroy Enron.

It was widely expected that someone close to Fastow would face charges before the former CFO -- or any of the company's other senior officials -- were charged.

Enron filed for bankruptcy on Dec 2, wiping out thousands of jobs and billions of dollars in equity, shaking investor confidence and triggering investigations by the Securities and Exchange Commission, the US Congress, and the Justice Department.

Lawyers were uncertain whether the SEC would also file charges along with the Justice Department.

Kopper's attorneys did not return calls seeking comment. A Justice Department spokesman would not comment. Kopper himself on Feb 7 invoked his Fifth Amendment right against self-incrimination when he appeared before a Congressional committee.

The Powers Report, an internal investigation by Enron directors, blamed Fastow for creating and managing the off-balance-sheet partnerships. But it made clear that Kopper was right beside him in negotiating the complicated transactions that brought windfalls to both of them and other employees.

Kopper was believed to have earned about $12 million from the secret partnerships, on whose behalf he often negotiated when in discussions with Enron.

Fastow did much the same, working both sides of the deals until Enron decided he could no longer be the general partner of a key off-balance-sheet partnership, LJM II. The partnerships eventually led to a $630 million earnings restatement that sent Enron spiraling to a rapid doom.

In one partnership, known as "Chewco," Kopper earned $10 million from Enron for a $125,000 investment. He also was instrumental in a partnership named "Southampton Place," named for the swanky area of Houston where he and Fastow lived.

That deal led to June 27 fraud charges against three British bankers who worked the deal and are accused of siphoning off $7.3 million belonging to their employer, Greenwich NatWest None is in custody yet.

Fastow sold his interest in LJM to Kopper in July 2001, which allowed Enron to avert -- temporarily -- the problem of having a top executive running an outside partnership rife with conflicts of interest. Kopper left Enron at the same time to run LJM, which he since lost control in legal battles.

Kopper joined Enron in 1994.

(Additional reporting by Kevin Drawbaugh in Washington)

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