Ex-Enron Unit Execs Arrested for Fraud
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WASHINGTON (Reuters) - Federal authorities arrested two Enron Corp. (Other OTC:ENRNQ - news) officials on fraud charges on Wednesday, accusing them of inflating the now-bankrupt company's earnings by $111 million in 2000 and 2001.
The U.S. Justice Department (news - web sites) accused Kevin Howard, the former chief financial officer of Enron Broadband Services Inc., and Michael Krautz, the unit's former senior director of accounting, of fraudulently recording earnings involving a deal with Blockbuster Inc. (NYSE:BBI - news) to provide video-on-demand.
The two men still work at the company, although an Enron spokeswoman declined to identify where.
Howard and Krautz are charged with securities and wire fraud, conspiracy and making false statements to federal authorities, the Justice Department said.
"Today's complaint charges these defendants with a significant fraud against Enron's investors compounded by lies they told to our investigators," Deputy Attorney General Larry Thompson, the head of the Corporate Fraud Task Force, said in a statement.
The Securities and Exchange Commission (news - web sites) also filed civil charges against the two men, seeking disgorgement of ill-gotten grains and to bar them from holding office at a publicly traded company.
"We will review the criminal complaint and we will take appropriate action," Enron spokeswoman Karen Denne said when asked about the various accusations.
Enron and Blockbuster signed a 20-year deal in April 2000 to stream video films to customers' homes. Howard, Krautz and unidentified others created a joint venture to implement the Blockbuster deal.
They then sold a portion of that venture and its expected revenue stream to an investment structure created and funded by the Canadian Imperial Bank of Commerce (Toronto:CM.TO - news). This arrangement allowed Enron to record $53 million in revenue in the fourth quarter of 2000 and $58 million in the first quarter of 2001, the Justice Department said.
However, Enron never received any revenue from the deal and the contract was terminated on March 9, 2001, the government said. |
