Jerry Castleman and Kathleen Lynn

Houston, TX: (Aug-06-07) The US Securities and Exchange Commission (SEC) filed a lawsuit against Jerry Castleman and Kathleen Lynn, two former Enron Corp. executives, alleging that they helped the company manipulate earnings through the fraudulent sale of a Brazilian power project. The SEC claimed that Enron sold an interest in the Cuiaba power project to LJM Cayman, a partnership run at the time by Enron Chief Financial Officer Andrew Fastow, so the Houston-based energy company could record earnings from the unit's gas contracts. Enron needed the additional earnings to meet estimates for the second half of 1999. Castleman, an accountant, and Lynn participated in the stake sale which described the transaction as a sham because there was no true transfer of risk from Enron to the LJM partnership. The two also helped Enron unwind the sale as part of a side agreement with the partnership that was never disclosed to Enron's outside auditor. In a settlement reached, though neither Castleman or Lynn admitted nor denied guilt, Lynn agreed to pay a $30,000 civil penalty and Castleman will pay a $41,268 settlement, with all but $12,000 of that waived based on his financial condition. [HOUSTON CHRONICLE: ENRON INVESTORS]

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Published on Aug-7-07