Risk & Compliance

Former Dynegy CFO Settles SEC Fraud Charges

The ex-finance chief, who allegedly was involved in the company's "Project Alpha," is slapped with a fine and a five-year ban from serving as a cor...
Sarah JohnsonOctober 2, 2007

Five years after settling its $300 million accounting fraud case against Dynegy, the Securities and Exchange Commission has settled a related complaint against the energy company’s former CFO Robert Doty and two of his ex-coworkers.

According to the SEC, Doty was involved in the decision-making surrounding a 2001 structured natural gas transaction known internally as Project Alpha. The executives are accused of allowing a loan to be disguised as operating cash flow. The result: Dynegy’s gap between its reported net income and cash flow from operations was minimized, allowing the company to take an invalid tax break of $79 million. The SEC also alleges that Doty was involved in the decision to hide from investors Project Alpha’s “unique, non-commercial pricing characteristics.”

Doty, who worked at Dynegy for 10 years, has agreed to pay the SEC $375,000 and is prohibited from serving as an officer or director of a public company for five years. The SEC has also forbidden him from practicing as an accountant and from committing or causing future violations of the antifraud, internal control, and record-keeping provisions of the federal securities laws. Doty, whoresigned from Dynegy in 2002, has not admitted or denied the commission’s allegations. His attorney did not immediately return CFO.com’s request for comment.

Doty’s former coworkers who were named in the SEC’s most recent settlement received lesser penalties. Also not admitting or denying the allegations, Gene Foster, a former vice president of taxation, and Helen Sharkey, a former manager in Dynegy’s deal structure group, have agreed to be enjoined from future violations of the securities laws’ antifraud and internal control provisions. They are also barred form practicing before the Commission as accountants.

The SEC had accused Foster and Sharkey of ignoring the advice of Dynegy’s external auditor and concealing information from the firm. After pleading guilty to one criminal count of conspiracy in 2003, Foster and Sharkey received prison sentences of 15 months and 30 days, respectively.

The commission has dropped its case against another former Dynegy executive, Jamie Olis, who is serving a six-year prison term for his role in the Project Alpha scheme while he served as a vice president of finance at Dynegy. He had pushed the SEC to pay for his attorney fees and costs in its suit against him, a motion that was denied last month. The SEC has issued an administrative order permanently suspending Olis from appearing or practicing before it.