Ex-Dynegy finance exec gets 24 years for fraud

HOUSTON — A former vice president of finance at Dynegy was sentenced to 24 years in prison for his role in a $300 million accounting fraud at the natural-gas and power company.

Jamie Olis must serve about 20 years under federal sentencing rules after maximum time off for good behavior. U.S. District Judge Sim Lake sentenced Olis, 38, after hearing 30 minutes of arguments for leniency on behalf of the first-time offender. Federal prisoners are not eligible for parole.

"I take no pleasure in sentencing you to 292 months, but my job is to follow the law," Lake said. "The jury found you guilty of a serious crime. Sometimes good people commit bad acts. I hope you will be able to salvage some of your life and some of your family's life."

Olis' sentence, which includes a $25,000 fine, is harsher than others recently charged with accounting fraud. His co-defendants Gene Foster and Helen Sharkey pleaded guilty in exchange for five-year prison terms. Enron's former Chief Financial Officer Andrew Fastow pleaded guilty in exchange for a 10-year prison sentence.

Olis' conviction for conspiracy, securities fraud, mail fraud and wire fraud was based on his participation in Project Alpha, a code name for a complex accounting transaction that he conceived with colleagues to disguise a $300 million loan as cash flow. The accounting entries permitted Dynegy to report inflated operating results. Olis lied to Dynegy's auditors about the transaction, testimony at his trial showed.

Braced for sentence

Enron filed for bankruptcy protection in December 2001 after admitting it had hidden debt in off-the-books partnerships. Dynegy proposed an acquisition of Enron in 2001. It backed out shortly before Enron's bankruptcy filing.

Lake's courtroom was packed with Olis supporters After the sentence, Olis, who was not immediately taken into custody, met with supporters in the hallway, consoling those who were in tears.

"We'll be all right," he said in an interview, himself in tears.

Olis has 45 to 60 days to turn himself in after the Federal Bureau of Prisons gives him an exact date, his lawyer Terry Yates said. Olis will serve his time at a prison in Bastrop, Texas.

Olis had braced himself for the prospect of a prison sentence of as much as 30 years after the government's pre-sentencing report, his lawyers said. The January report described Olis as being responsible for the entire $105 million decline in the value of Dynegy stock between June 2001 and December 2002.

Federal sentencing guidelines, adopted in late 2001, require judges to consider the loss to victims, including shareholders. The judge chose the most lenient sentence of the range suggested in federal guidelines.

Olis' attorney David Gerger, who also represents Fastow, argued in court papers that the government was wrong to pin the entire stock loss on Olis. A report by Bala Dharan, a Rice University professor who is an authority on corporate accounting and the stock market, found other causes for the stock-price decline.

Dharan's study blames the 97.83 percent drop in Dynegy's stock price in 2000 and 2001 on "several concurrent and confounding causal factors," including: "The Enron scandal, which accelerated in late 2001; Dynegy's disastrous bid to acquire Enron in November 2001 and the market's loss of faith in Dynegy's top management that resulted; and the enormous effect of credit downgrades, which increased costs and slashed trading volumes, which in turn contributed to the collapse of the entire energy trading sector."

Objections raised

In other objections filed to the pre-sentencing report, Olis' lawyers stressed the human considerations, such as Olis' ability to overcome his hardscrabble beginnings as a penniless Korean-American immigrant who was often the subject of child abuse by a stepfather and racial insults by classmates.

Olis has no previous criminal record. He has a 6-month-old daughter, and his wife is pregnant.

"I worked hard at Dynegy," Olis told Lake. "All my life I made work such a priority. Now with the birth of my daughter I realize how misplaced those priorities are."

The lead Prosecutor Jimmy Sledge, after acknowledging Olis' rise from poverty to success at Dynegy, said the former executive surrendered his integrity.

"He put his own interests above the interest of the shareholders who made it possible for him to overcome his start in life," he said.

The defense rested without calling a single witness.

Olis' salary was $162,000, with a bonus of $110,000 in 2001, according to court papers. He earned no more than $40,000 in personal profit as a result of Project Alpha accounting, his lawyers argued.

Gerger said the new guidelines "effectively quadruple" the sentence that Olis would have faced under guidelines in effect at the time Olis committed his crime.

"What you saw today was a witch hunt," Gerger said. "His boss knew and approved what he did. This sends a dangerous message. If it can happen to Jamie Olis, it can happen to anyone."