Ex-Official From Enron Pleads Guilty
The New York Times
July 31, 2004
By THE ASSOCIATED PRESS
HOUSTON, July 30 (AP) - Kenneth D. Rice, the former head of Enron's
high-speed Internet unit, pleaded guilty Friday to one count of
securities fraud and agreed to cooperate with federal prosecutors
pursuing other cases related to the company's collapse.
Mr. 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 two sports cars.
Mr. 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
promote Enron's broadband network as having capabilities it did not
have to impress analysts and inflate the company's stock.
According to the Justice Department, the unit never made money
and was abandoned shortly after Enron's bankruptcy filing in December
2001.
The promotion for the broadband unit is noted in a separate pending
indictment against Jeffrey K. Skilling, the former Enron chief
executive. As chief operating officer, Mr. Skilling praised the unit
and its capabilities with Mr. Rice and others at analyst meetings in
January 2000 and January 2001.
Ron Woods, one of Mr. Skilling's lawyers who attended Mr. Rice's plea
hearing Friday, declined comment, as did Mr. Rice's lawyers, Dan
Cogdell and Bill Dolan.
In a statement filed with his cooperation agreement, Mr. Rice said
he had 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 E.B.S. 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.
Mr. Rice's statement also said he and unidentified others had 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.
Included in the $13.7 million in cash and property Mr. Rice agreed
to forfeit is a vacation home in Telluride, Colo.; a platinum, diamond and
sapphire necklace and bracelet set that he bought for his wife,
Teresa, in June 2000; a 1995 Ferrari; and a 1999 Shelby coupe.
United States District Judge Vanessa D. Gilmore allowed Mr. Rice
to remain free on $3 million bond pending sentencing.
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