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5 Former Enron Workers Indicted

Grand jury returns sealed indictments in Broadband case

Apr 30, 2003 | Houston Chronicle At least five former Enron Broadband employees have been named in a sealed indictment filed in federal court Tuesday, sources say.

Enron Task Force prosecutors John Kroger and Ben Campbell, who have led the investigation into the bankrupt energy trader's Internet business, brought the grand jury before U.S. Magistrate Marcia Crone. Chronicle reporters were barred from the courtroom by court security.

Sources have previously indicated the specific charges would probably be largely in connection with statements made at a meeting with analysts in 2000 and could include insider trading, stock fraud and money laundering.

The government is also expected to seek a superseding indictment against former Chief Financial Officer Andrew Fastow this week, which could mean more charges, more defendants, or both. Fastow was first indicted nearly six months ago on 78 counts of fraud, money laundering and obstruction of justice, largely focusing on a series of side partnerships that benefited him and others.

The superseding indictment against Fastow may include charges related to LJM a partnership Fastow created to buy assets from Enron for accounting purposes as well a deal involving the 1999 sale of two floating power plants in Nigeria. The special grand jury investigating Enron has in recent months heard testimony from Merrill Lynch and Enron employees that apparently focused in part on LJM and the Nigerian power plants.

Fastow's co-defendants could include his wife, Lea, a former Enron finance employee whose name is on several of the seized bank accounts, and former Enron Treasurer Ben Glisan, who was cited by job title in the initial Fastow charges and was one of several employees to invest in Southampton, a private partnership that did a deal with Enron. Charges may also be brought against a former Enron employee who worked on the Nigerian barge deal.

The meeting at the heart of the government's broadband investigation took place Jan. 20, 2000, at the Four Seasons Hotel in downtown Houston. The company outlined bold plans to build a fiber-optic network to trade Internet bandwidth capacity and transmit movies, games and other applications that involve massive amounts of data.

Speakers that day included Enron's then-President Jeff Skilling, then-EBS co-Chief Executive Officers Joe Hirko and Ken Rice, and some engineering, sales and marketing employees. There is no indication that Skilling, who has been a possible target of the broadband investigation, was named in the sealed indictment.

The group made lengthy presentations about the capabilities of the system and the value of the business. Enron's stock price climbed 25 percent that day, beginning a rise to a record high of $90.56 that August.

In an indictment last month against two former Enron Broadband executives, Kevin Howard and Michael Krautz, the government mentions the January 2000 meeting specifically, saying " many of the representations made about Enron's network and software at the Jan. 20, 2000, analyst conference were false."

At least one of the men likely indicted did not speak at the January 2000 meeting, but as a senior executive in Broadband he would be expected to know details of its operations and performance.

Prosecutors have also focused on other broadband meetings with analysts.

The next meeting, in January 2001, highlighted a multibillion-dollar deal Enron Broadband had signed with Blockbuster Video the previous July. Enron management said the opportunity for the business was " ... much greater than we anticipated it would be a year or so ago."

Skilling and others repeatedly stressed that the division wouldn't be profitable for several years, but at the same time they claimed EBS should add about $40 to Enron's stock price.

The Howard and Krautz indictment notes that shortly before that meeting, in late December 2001, Enron was about to violate a condition of its Blockbuster deal that would have enabled the video company to terminate the agreement. EBS failed to meet that requirement but did not reveal that to the investing public. The deal was canceled three months later.

A February 2001 meeting with a smaller group of technology analysts conveyed many of the same messages as the earlier meetings, but they were delivered by a broader group of EBS executives.

While federal rules state that grand jury indictments shall be returned by jurors in open court, court security officers ordered Houston Chronicle reporters and other spectators out of the courtroom Tuesday when 16 members of the grand jury returned this indictment.

Though Enron prosecutors made an effort to reopen the courtroom, Crone did not order it opened.

Prosecutors generally seal indictments when there is a belief that one or more of the defendants may flee the jurisdiction before the arrests.

Despite the federal rule, some Houston-based magistrates clear and close their courtrooms during the return of grand jury indictments, especially when the charges are sealed.

Other Houston federal magistrates always have grand jurors return indictments in open court, asking the names of the accused not be read aloud if prosecutors have asked the indictment be sealed.

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