Bloomberg News

Dynegy's Olis Re-Sentencing Delayed as Loss Debated

January 04, 2006

A federal judge postponed the re- sentencing of Dynegy Inc. executive Jamie Olis after defense lawyers and prosecutors couldn't agree on how large a fraud he was responsible for.

U.S. District Judge Sim Lake asked lawyers for a date to hold a ``day and a half evidentiary hearing'' to determine the size of the loss that resulted from Project Alpha, a fraud Olis was convicted of engineering to disguise a $300 million loan as cash flow.

``Mr. Olis's sentencing will not occur tomorrow,'' Lake told lawyers today at a hearing in Houston. ``Please suggest a time when we can finally have a hearing and let Mr. Olis go about the rest of his life, subject to appeal.''

Olis was originally sentenced to 24 years in prison for orchestrating a fraud that prosecutors said cost Dynegy investors more than $100 million in stock market losses. The Fifth Circuit Court of Appeals threw out that sentence, saying the trial judge had miscalculated the loss and incorrectly applied sentencing guidelines that were only advisory, not mandatory.

The case was returned to Lake for re-sentencing. Olis's lawyer filed studies from several expert witnesses attacking the government's loss calculation without offering the judge an alternative loss figure.

``I have asked the judge for a sentence that is sufficient, but not more than necessary,'' said David Gerger, Olis's lawyer. Olis appeared at the hearing today in prison uniform and cuffs. He didn't speak.

Stipulated Loss

The judge encouraged the parties to act quickly, so Olis can be sentenced before the end of the month, when Lake is scheduled to preside over jury selection for the trial of former Enron Corp. chief executive officers Kenneth Lay and Jeffrey Skilling.

Lake urged the parties to ``think about stipulating to a loss'' that would forestall the need for an evidentiary hearing.

``The guidelines are fairly draconian for any loss over $1 million,'' Lake said. ``It is hard to see how it can be a loss of less than $1 million, but I don't want to prejudge the issue.''

Olis's codefendants, former Dynegy Vice President of Tax Gene Foster and former Accounting Director Helen Sharkey, will be sentenced tomorrow afternoon as scheduled. Each accepted a plea bargain and agreed to serve up to five years in prison for their roles in the Project Alpha fraud.

Each later asked the court to be sentenced to probation or home detention. The government recommended that Foster serve 2.5 years and Sharkey 18 months

The case is U.S. v. Olis, 04-20322, U.S. Court of Appeals for the Fifth Circuit (New Orleans).

To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com.

To contact the editor responsible for this story: Patrick Oster poster@bloomberg.net.


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