Enron Epilogue: Insider Trading Department

Sometimes, crime does pay. At least insider trading might net you a packet, even if you're caught. As long as you don't admit it. Just ask Lou Pai.

The Securities and Exchange Commission announced a settlement Tuesday that requires the former Enron executive to forfeit $31.5 million for alleged insider trading; that's a fraction of the interest alone that he earned on his questionable stock sales.

Upon resigning from his position as chairman and chief executive of Enron Energy Services in May 2001, Pai sold shares and options to reap an estimated $200 million. Six months later, the company collapsed, costing less-well-informed shareholders billions of dollars.

According to the settlement, Pai did not acknowledge guilt but promised not to violate S.E.C. rules in the future.

Pai's lawyer, Roger Zuckerman said in a statement, "More than seven years after the sale of his stock, Mr. Pai is pleased to conclude negotiations with the S.E.C. with no admission of wrongdoing."

A Chinese immigrant who ironically worked for the S.E.C. as an economist before joining Enron in 1986, Pai cut a colorful figure on the company's trading floor. He once suggested that an underling throw away his copy of Steven Covey's The Seven Habits of Highly Effective People and buy Sun-tzu's The Art of War.

Pai was also known for running up $1,000 tabs at strip clubs. He left his first wife for an exotic dancer, whom he later married.

Fredric D. Firestone, associate director of the S.E.C.'s enforcement division, said the settlement "represents one of the largest financial settlements with an individual for insider trading in the history of the S.E.C.'s enforcement program."

If you do the math, though, a modest 5 percent annual return on $200 million is $70 million over seven years, more than twice what Pai will pay the S.E.C. Court documents show that his post-Enron business activities, including a large land deal in Colorado, have probably earned him more than 5 percent annually.

by Kate Murphy