Kopper to give up $12m after admitting fraud

Criminal prosecutors yesterday scored their biggest victory yet in the Enron investigation, as a central figure in the off-balance sheet transactions that led to the US energy trading company's downfall pleaded guilty to two charges of money laundering and fraud.

Under a deal reached with Washington, Michael Kopper, the former head of Enron Global Finance and right-hand man of Andrew Fastow, Enron's former chief financial officer, will co-operate fully with federal investigators. The charges against him carry a maximum sentence of 15 years and a fine of $500,000 (£327,000).

But the severity of his final punishment will depend on the extent to which he enables prosecutors to catch even bigger fish – such as Mr Fastow, the former chief executive Jeffrey Skilling and Kenneth Lay, Enron's former chairman and a major financial backer of President George Bush. But Mr Lay's lawyers yesterday denied he knew Mr Kopper.

Yesterday, at a brief court hearing in Enron's home city of Houston, Mr Kopper was released on $5m bail, after agreeing to surrender $12m he admitted having illegally extracted from Enron. His conviction would be the first of a senior Enron executive in the eight-month inquiry since the company folded in December, and could be a watershed in the case.

Their submission yesterday listed three specific illegal transactions acknowledged by Mr Kopper, 37, relating to off-balance sheet partnerships called Radar, Chewco and Southampton.

In the case of Southampton, the government has already accused Mr Kopper and Mr Fastow of defrauding National Westminster Bank of $7.3m. Three Britons, former NatWest bankers, were charged of participating in the fraud in June.

According to an independent report on the débâcle published in February, Mr Fastow made some $30m out of partnership transactions at Enron's expense and Mr Kopper at least $12m, without informing the company. In Chewco and Radar, the two gave lucrative investment opportunities to friends that by law should have been offered to independent parties.

Mr Fastow, who refused to testify in congressional hearings earlier this year, was dismissed by Enron in October, a week after it revealed a $618m third-quarter 2001 loss, and a $1.2bn writedown in shareholder equity, as years of hidden debt and inflated profits could be kept secret no longer. Within six weeks Enron had filed what was then the biggest corporate bankruptcy in US history, the first of a string of accounting scandals which unnerved financial markets.

Mr Kopper left Enron several months before the collapse to run two other Fastow-created partnerships, LMJ and LMJ2, whose prime function – like Chewco – was to keep Enron debts off its main balance sheet.

Officials at Andersen, Enron's former auditing firm which was convicted of obstruction of justice in June, have said they learned early in November that Mr Kopper's domestic partner owned part of the 3 per cent of Chewco that should have been held wholly by investors unrelated to Enron.