TELECOM Digest OnLine - Sorted: Enron Execs Next in Line for Trial, Punishment


Enron Execs Next in Line for Trial, Punishment


News Wire (newswire@telecom-digest.org)
Wed, 13 Jul 2005 13:01:31 -0500

Trial of ex-Enron Net execs nears end

Prosecutors in the trial of five former executives of Enron Corp.'s
failed Internet business wrapped up their arguments on Tuesday,
accusing them of lying about the unit's health and hiding its massive
losses.

"Their goal? To pump up Enron's stock price and line their own
pockets," Assistant U.S. Attorney Ben Campbell told the jury in
closing arguments of a the trial that has lasted more than 2-1/2
months.

On trial for fraud and conspiracy are Enron Broadband Services' (EBS)
former Co-Chief Executive Joe Hirko, ex-technology executives Rex
Shelby and Scott Yeager, and ex-finance executives Kevin Howard and
Michael Krautz.

EBS' core software packages were touted to Wall Street but never
worked properly and failed to generate much income for the company,
Campbell said. That prompted executives to engage in accounting fraud
to help cover up millions in losses.

"All of them had goals to play in this scheme to portray EBS as
something it was not," he said.

During weeks of often tedious testimony, the government showed footage
from a January 2000 analysts conference of Hirko and former Enron
Corp. Chief Executive Officer Jeffrey Skilling describing the
capability of EBS' software to control traffic on Enron's high-speed
Internet network.

Enron's stock jumped nearly $20 in the run-up to that analyst meeting
as the company promoted its Internet business, and it rallied another
$13 the day of the presentation.

Defense lawyers have contended that EBS managers did in fact
successfully roll out several Internet services and honestly believed
their network was operational, although it was still being developed.

In closing arguments, a lawyer for Hirko pointed to a video that
prosecutors showed the court earlier in the trial that was never
actually viewed by analysts at the January 2000 analysts conference.

"To this day, Mr. Campbell clings to (the video) like a life raft,
even though they know it was never played" to analysts, Hirko's
lawyer, David Angeli, told the jury.

Prosecutors admitted their error, but said the video, which showed
Shelby touting EBS software that had not been deployed, was evidence
that the executives were out to mislead investors.

EBS lost hundreds of millions of dollars before Enron Corp. shut it
down in July 2001, just months before the energy company collapsed
into bankruptcy amid its own accounting scandal.

Skilling is not on trial in the EBS case, although he will face
charges related to that business and other criminal counts when he
goes on trial with former Enron Chairman Kenneth Lay in January 2006.

In addition to the conspiracy and fraud counts, Hirko, Shelby and
Yeager are charged with insider trading and money laundering.

In addition to their salaries, Hirko and Yeager were given $30 million
in Enron stock options, while Shelby was awarded $7.5 million.

Copyright 2005 Reuters Limited.

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