SEC fines Enron subsidiary exec

The former chief executive of Enron Energy Services, Lou Pai, has paid out
more than $30m to settle insider trading charges brought by the SEC.

The US watchdog went after Pai for selling hundreds of thousands of Enron
shares ‘on the basis of material, nonpublic information.’

According to the SEC, Pai sold the shares on finding that the Enron
subsidiary had taken substantial losses, but before the stock market was
informed.

‘By selling his shares in May and June 2001 before the collapse of Enron’s
share price, Pai avoided millions of dollars of losses,’ the SEC said.

Enron’s stock price averaged approximately $53.78 per share during the time
of Pai’s sales, but closed at $0.40 on December 3, 2001 – the day after Enron
filed for Chapter 11 bankruptcy protection.

Pai has neither admitted nor denied the charges and instead reached a
settlement under SEC terms in which he has agreed to pay a $1.6m (£809,600)
fine.

He has also agreed to pay $30m in disgorgement of his gains as well as other
fees relating to the alleged improper trade of stocks.

The charges against Pai come seven years after the energy giant collapsed in
2001.

The disaster exposed one of the largest accounting scandals in US corporate
history.

SEC enforcement chief Linda Thomsen said the organisation has never relented
in pursuing fraud committed by Enron executives.

‘I am pleased that today’s settlement will add another $25.5m to the Enron
Fair Fund for the benefit of injured investors,’ she said.

Pai has been given a five-year ban from working as an executive or director
of a public company.

Enron’s former chief executive, Jeffrey Skilling, is serving a 24-year jail
sentence.
Enron chairman Kenneth Lay, was found guilty of fraud and banking violations,
but died in 2006 of apparent heart failure before he was sentenced.

Further reading:

SEC
Litigation release