U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20159 / June 20, 2007
Accounting and Auditing Enforcement Release No. 2619 / June 20, 2007
SEC v. Jeffrey McMahon, Civil Action No. H-07-2051 (SDTX) (June 20, 2007)
SEC Charges Former Enron Executive Jeffrey McMahon With Violating Federal Securities Laws
Defendant Barred From Serving as Officer or Director of Public Company and Ordered to Pay $300,000
The Securities and Exchange Commission today charged former Enron Treasurer and Chief Financial Officer Jeffrey McMahon with violating the antifraud provisions of the federal securities laws and with aiding and abetting Enron's violations of the reporting and record keeping provisions. McMahon simultaneously settled with the Commission without admitting or denying the allegations in the Complaint. As part of the settlement agreement, which is subject to the approval of the U.S. District Court, McMahon has agreed to a permanent injunction and to be barred from acting as an officer or director of a public company for five years. In addition, McMahon will pay disgorgement and prejudgment interest in the amount of $150,000 and a civil penalty of $150,000.
Specifically, the Commission's Complaint alleges that McMahon participated in a fraudulent transaction involving the "sale" of an interest in Nigerian power generating barges to Merrill Lynch that allowed Enron to improperly report $12 million in earnings in the fourth quarter of 1999. Enron never should have recorded profits from this purported sale because the risks and rewards of ownership in the barges never passed to Merrill Lynch due to an oral side agreement made by McMahon and others. The Complaint also alleges that while serving as Enron's Treasurer from April 1998 through March 2000, McMahon made false and misleading statements to the national credit rating agencies regarding Enron's financial position and cash flow. The Complaint alleges that the false and misleading statements included statements about Enron's cash flow from operations that failed to disclose that a portion of such cash flow was a result of structured financings and debt-like obligations that had nothing to do with Enron's operations or trading business. In addition, the Complaint alleges that McMahon made additional false and misleading statements to the rating agencies after he became Enron's Chief Financial Officer on October 24, 2001 through Enron's bankruptcy filing in December 2001.
McMahon has agreed to be enjoined permanently from violating Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5 and 13b2-1, and from aiding and abetting the violation of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1 and 13a-13.
In settlement of this action, McMahon also consented to the entry of an Administrative Order, pursuant to Rule 102(e) of the Commission's Rules of Practice, suspending him from appearing or practicing before the Commission as an accountant, with a right to reapply after three years.