Jamie Olis, a Korean-American who overcame a difficult childhood and economic struggles to become vice president of finance at Dynegy Inc., was sentenced to 24 years in prison for his part on a $300 million fraud at the company.
Dynegy, a Houston-based natural gas and power company, had attempted to acquire Enron, but called off the purchase just before Enron's collapse in 2001.
Under new federal sentencing guidelines, Olis must serve about 85 percent of his term and federal prisoners are not eligible for parole. He is the father of a newborn daughter. U.S. District Judge Sim Lake sentenced Olis, 38, after hearing arguments for leniency on behalf of the first-time offender, Bloomberg reported.
"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 received a harsher sentence than his co-defendants who were also charged in the fraud. Gene Foster and Helen Sharkey pleaded guilty in exchange for five-year prison terms, saving the government the time and expense of a trial, and both await formal sentencing, Bloomberg reported.
Olis was convicted of conspiracy, securities fraud, mail fraud and wire fraud related to his part 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, Bloomberg reported, adding the fraudulent accounting entries allowed the company to show inflated operating results. Testimony at his trial showed that he also lied to Dynegy's auditors about the transactions.
A pre-sentencing report had showed Olis as being entirely responsible for the entire $100 million decline in the company's stock value between June 2001 and December 2002, Bloomberg reported. The new sentencing guidelines, which went into effect in 2001, compel judges to take victim loss into consideration. In this case, the victims include shareholders.
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, Bloomberg reported. The report pins the 97.83 percent decline in the company'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."
In court papers, Olis's attorneys stated that he made $40,000 personally for his role in Project Alpha. His salary was $162,000, with a bonus of $110,000 in 2001, according to court papers. He also sold about $200,000 worth of Dynegy stock for an undisclosed profit that same year, court papers show.
His lawyers questioned the constitutionality of the new sentencing guidelines, which "effectively quadruple"' the sentence he would have received under the earlier sentencing guidelines, which were in effect at the time Olis committed his crime, Bloomberg reported.