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Last year, former midlevel executive Jamie Olis received a 24-year sentence without parole for his part in a sham transaction.
Stephen Taub, CFO.com | US
April 19, 2005
Dynegy Inc. will pay $468 million as part of an agreement to settle a class-action lawsuit stemming from its accounting treatment and disclosures associated with a 2001 structured natural gas transaction known as "Project Alpha."
The settlement includes $150 million to be covered by Dynegy's director and officer insurance policies, a $250 million cash payment, and the issuance of $68 million in common stock to the regents of the University of California, which represented the class. The Houston-based energy company will also elect two new board members from a list of candidates supplied by the regents, reported Reuters.
In addition, Dynegy agreed to settle related litigation with two individuals by paying an additional $5 million in attorney fees and expenses and by making governance changes, according to the wire service.
By entering into these settlement agreements, said chairman, president, and chief executive officer Bruce A. Williamson, in a statement, Dynegy was "taking responsibility for the resolution of issues associated with a past era for the company."
"Project Alpha" involved a $300 million loan that was disguised as cash flow from a five-year natural-gas contract. According to Reuters, Dynegy had to reclassify the loan as debt, restate 2001 earnings downward by 12 percent, and pay a $3 million fine to the Securities and Exchange Commission. Total investor losses — which began with a stock drop of more than 50 percent after Dynegy disclosed the initial SEC probe — were in the billions of dollars, the wire service added.
Last year, former midlevel executive Jamie Olis received a 24-year sentence without parole for his part in a sham transaction. His former boss, Gene Shannon Foster, and a former Dynegy accountant, Helen Christine Sharkey, each pleaded guilty to one count of conspiracy. When Olis decided to take his chances at trial, Foster testified against him.
U.S. District Judge Sim Lake, who passed sentence on Olis, will preside over next January's Enron case involving Kenneth Lay, Jeffrey Skilling, and former chief accounting officer Richard Causey.