U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20866 / January 26, 2009
Accounting and Auditing Enforcement Release No. 2925 / January 26, 2009
SEC v. Jordan H. Mintz and Rex R. Rogers, Civil Action No. H-07-1027 (S.D. Tex.)
SEC Settles Civil Fraud Charges Against Two Former Enron In-House Attorneys
The Securities and Exchange Commission announced today that, on January 20, 2009, the U.S. District Court in Houston entered final judgments in the Commission's civil action against Jordan H. Mintz, a former Enron Vice President and General Counsel of Enron's Global Finance group, and Rex R. Rogers, Enron's former Vice President and Associate General Counsel. On March 28, 2007, the Commission charged Mintz and Rogers with, among other things, participating in a fraudulent scheme not to disclose Enron's related-party transactions with partnerships controlled by its Chief Financial Officer, Andrew Fastow, and compensation Fastow had received through those transactions. As part of the alleged scheme, Rogers further failed to disclose Enron's related-party transactions involving insider stock sales by its Chairman, Kenneth Lay.
The final judgments permanently enjoin Mintz and Rogers from violating Section 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 14(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5 and 14a-9 thereunder, as well as from aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. Mintz is also permanently enjoined from violating Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder, as well as from aiding and abetting violations of Section 13(b)(2)(A) of the Exchange Act. In addition, Rogers is permanently enjoined from aiding and abetting violations of Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3 thereunder.
The final judgments also order Mintz and Rogers each to pay $1 in disgorgement and a $25,000 civil money penalty. These amounts, totaling $50,002, will be deposited into the Court Registry Investment System for distribution to injured Enron investors under the "Fair Fund" provisions of the Sarbanes-Oxley Act of 2002.
Mintz and Rogers further consented to the entry of an Administrative Order, pursuant to Rule 102(e)(3)(i) of the Commission's Rules of Practice, suspending each attorney from appearing or practicing before the Commission for a period of two years.
In settlement of this action, Mintz and Rogers neither admitted nor denied the allegations of the Commission's complaint. Among other things, the complaint alleged the following: In 1999, Enron sold an interest in a troubled power project in Cuiaba, Brazil to a related party called LJM1, a partnership controlled by Fastow, to deconsolidate the project and recognize related earnings. Under accounting rules, deconsolidation and earnings recognition were inappropriate because Enron did not transfer the risks and rewards of ownership in light of a secret side agreement promising that LJM1 would not lose money on Cuiaba. Satisfying the side agreement, Mintz helped Enron repurchase Cuiaba from LJM1 in 2001. Mintz then delayed signing and closing of the Cuiaba buyback in an effort to avoid reporting related-party transactions in Enron's 2000 Proxy Statement and 2001 Second Quarter Form 10-Q. Moreover, Mintz and Rogers failed to disclose in Enron's 2000 Proxy Statement millions of dollars Fastow received through related-party transactions between LJM and Enron. Rogers further failed to disclose in Enron's 2000 Proxy Statement at least $16 million in insider stock sales by Chairman Kenneth Lay to repay his Enron line of credit during 2000, and aided and abetted Lay's failure to disclose in SEC Form 4 filings an additional $70 million in insider stock sales by Lay during 2001.
For more information, see Litigation Release No. 20058 (March 28, 2007)