2 Ex-Enron Broadband Execs Plead Innocent
By KRISTEN HAYS
HOUSTON (AP) — Two former midlevel Enron executives pleaded innocent Wednesday to charges related to an alleged scheme that generated $111 million in fake earnings with the bankrupt energy company’s failed attempt to start an Internet movie-on-demand service.
Kevin Howard, 40, and Michael Krautz, 34, are charged with securities fraud, wire fraud, conspiracy and lying to the FBI regarding reported profits from Houston-based Enron’s deal with the video rental chain Blockbuster Inc. (BBI)
The deal fell apart in 2001 about a year after being unveiled with much fanfare.
U.S. Magistrate Judge Marcia Crone scheduled a pretrial hearing for May 27 and a four- to five-week trial to begin June 2, but attorneys said the trial likely would be postponed until the fall given the multitude of documents to peruse while preparing their defense.
“We’re looking forward to getting the government’s evidence and seeing their case,” said Krautz’s attorney, Barry Pollack. “We think that they have completely misunderstood the facts in the case and more particularly, Mr. Krautz’s role.”
“We just started the long road to, hopefully, Kevin’s vindication and ultimate acquittal,” said Howard’s attorney, Jim Lavine.
Howard and Krautz left the federal courthouse in Houston without comment. Both were indicted last week on the charges and are free on $500,000 bond.
If convicted on all 18 counts, each faces up to 95 years in prison and fines of more than $5 million.
The charges stem from allegations of the men’s actions when they worked for Enron’s defunct broadband unit. Howard was the unit’s vice president of finance from August 1999 through September 2001, and Krautz was its senior director of transactional accounting from August 1999 through October 2001.
Prosecutors say Enron secretly promised profits from the deal to outside investors. Those pledges were omitted from transaction documents and hidden from Enron’s accountant, Arthur Andersen LLP.
The video-on-demand deal was announced in April 2000 and disintegrated 11 months later when Dallas-based Blockbuster pulled out. But prosecutors say Enron claimed $111 million in profits from the venture in 2000 and 2001 when no revenue was generated.
Unlike thousands of other Enron employees laid off when Enron went bankrupt in December 2001, Howard and Krautz kept jobs with the company in other departments. Hours after the criminal complaint was unsealed March 12, an Enron spokeswoman said they were “no longer with the company.”
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