Witness tells of deception

first_img Rice pleaded guilty in July 2004 of securities fraud, turned over $13.7 million in cash and property – including a Ferrari and a Colorado vacation home – and agreed to help prosecutors in Enron-related cases. The government can recommend a sentence more lenient than the 10-year maximum for securities fraud if prosecutors are pleased with his help. Rice’s net worth was about $25 million when he was indicted in May 2003. He told jurors Thursday he was able to keep about $10 million after striking a plea deal with prosecutors. Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces seven counts of fraud and conspiracy related to the months after he replaced Skilling as Enron’s chief executive officer. Both men sold millions in Enron stock before the company crumbled, but only Skilling is charged with improper stock sales. Lay’s name barely surfaced in testimony Thursday. One of his lawyers, Chip Lewis, asked Rice only whether Lay and Enron board members should have expected Rice’s presentation to them on May 1, 2001, to be “anything less than candid.” “No,” Rice replied. Rice was followed on the stand by Terry West, an accountant at what is left of Enron and the former director of corporate planning who joined the company in 1981, when it was a relatively small pipeline business known as Houston Natural Gas. She explained for jurors the process Enron followed to develop its annual spending and earning plans to meet corporate goals of 15 percent yearly gains in earnings per share. Enron became the nation’s seventh-largest company. As usual, the trial was in recess today, and courts are among some federal, state and local agencies that will take a Presidents Day holiday on Monday. The government’s next witnesses, beginning Tuesday, were to include Paula Rieker, Enron’s former No. 2 executive in investor relations. She also served as corporate secretary, dealing directly with Lay and the company’s directors, in the months before Enron failed. In May 2004 Rieker pleaded guilty to insider trading for selling shares in mid-2001 upon learning that Enron’s broadband unit lost more money than publicly disclosed. After Rieker, prosecutors expect to call Wes Colwell, former chief accounting officer for Enron’s trading unit. Colwell in October 2003 agreed to pay $500,000 to settle Securities and Exchange Commission allegations of manipulating earnings by using trading profits to offset massive losses in Enron’s retail energy unit. 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! AD Quality Auto 360p 720p 1080p Top articles1/5READ MORECasino Insider: Here’s a look at San Manuel’s new high limit rooms, Asian restaurant In January 2001, Rice told Wall Street analysts who influenced the company’s stock price that the business was well-positioned for strong, long-term financial performance. In reality, however, EBS was spending $100 million per quarter and generating little revenue and business, he said. He told the board, after making what he said were some 13 drafts of his presentation, that his unit was successful, that its broadband network was substantially complete, that there was an “excellent deal flow” in trading activities and that EBS helped Enron overall keep a strong position in the market. “What I presented to board was inconsistent with what was going on at EBS,” said Rice, who is among 16 ex-Enron executives who have pleaded guilty to charges stemming from the government’s investigation of the energy company’s swift tumble into bankruptcy proceedings in December 2001. But as he has done throughout his three days of testimony, Rice stopped short of saying Skilling lied to investors about the condition of Enron. When Holscher asked if Rice had ever expressed concerns to “your friend” Skilling about any of those misleading statements, Rice replied: “I don’t know if I did.” He described Skilling as very hard working and said he considered Enron worse off when Skilling abruptly resigned in August 2001, less than four months before Enron imploded. HOUSTON – Kenneth Rice, who was chief of Enron Corp.’s struggling broadband unit, testified Thursday that his boss, Jeffrey Skilling, directed him to paint a rosy, misleading picture for the Enron board of directors that was in line with false statements Rice said he already made to financial analysts in 2001. “I knew that Mr. Skilling and I had misled investors on a number of occasions on the prospects of our business within EBS,” Rice said under questioning by Skilling attorney Mark Holscher. But Rice, the former chief executive of Enron Broadband Services or EBS, said in his third day on the stand at the fraud and conspiracy trial of Skilling and founder Kenneth Lay that he had no documents and “only my recollection” to back up a conversation he had with Skilling, Enron’s chief executive, as he prepared for a May 2001 meeting of the company’s board. “What I took from meeting with Mr. Skilling was he wanted me to put a presentation together that was more consistent with the analyst conference and less direct on some of the challenges we were facing at EBS,” Rice said. last_img read more