Ex-Enron official pleads guilty
Admits lying to analysts about Internet unit's prospects
chicagotribune.com
Associated Press
Published July 31, 2004
HOUSTON -- The man who once led Enron Corp.'s high-speed Internet unit pleaded guilty Friday to securities fraud and agreed to help federal prosecutors on other cases related to the energy giant's collapse.
Kenneth Rice, 45, faces up to 10 years in prison and a fine of up to $1 million. Sentencing was set for Jan. 31. The plea agreement with prosecutors also requires him to forfeit $13.7 million in cash and property that includes jewelry and a pair of exotic sports cars.
Rice was charged in 2003 with selling 1.2 million shares of Enron stock for more than $76 million while he knew Enron Broadband Services was failing. The more than 40 counts against him included fraud, conspiracy and other charges for participating in a scheme to tout Enron's broadband network as having capabilities it didn't have to impress analysts and inflate the company's stock.
According to the Justice Department, the unit never made a dime and was abandoned shortly after Enron's bankruptcy filing in December 2001.
The promotion for the broadband unit is noted in a separate indictment against former Enron Chief Executive Jeffrey Skilling, a major broadband cheerleader during Enron's halcyon days. As chief operating officer, Skilling, with Rice and others, praised the unit and its capabilities at January 2000 and January 2001 analyst meetings.
Ron Woods, one of Skilling's attorneys who attended Rice's plea hearing Friday, declined to comment, as did Rice's lawyers, Dan Cogdell and Bill Dolan.
In a statement filed with his cooperation agreement, Rice said he conspired to describe Enron's network control software as revolutionary and the network as up and running, when the software never matched the hype, and the network never became fully operational.
"The purpose in making these misrepresentations was to falsely portray to the investing public that EBS was a thriving telecommunications business that had successfully developed revolutionary software, which would, in turn, cause Enron's stock price to increase significantly," the statement said.
Rice's statement also said he and unidentified others made the claims to analysts at January 2000 and 2001 meetings. Enron's share price spiked to $90 in August 2000 as the company promoted the venture.
But Rice said the broadband unit struggled throughout 2000 and had higher losses in 2001 than publicly disclosed. From January 2000 through March 2001, the unit accounted for a minimum of $10 of Enron's stock price, the statement said.
U.S. District Judge Vanessa Gilmore allowed Rice to remain free on $3 million bond pending sentencing. |
