Federal prosecutors probing the collapse of Enron Corp. have expanded their investigation of its former chief executive, Jeffrey Skilling, to focus on the role he and other executives played in the company’s failed foray into the telecommunications business, people familiar with the matter told Friday’s Wall Street Journal.
While Enron made its name trading and supplying energy, the Houston company also created a splash in the late 1990s by launching a business in high-speed telecommunications, or broadband. Up to now, prosecutors have concentrated mainly on activities within the energy operation related to off-balance-sheet partnerships run by Andrew Fastow, Enron’s former chief financial officer and Michael Kopper, one of his key aides. Those partnerships helped Enron improperly report hundreds of millions of dollars of profit and conceal huge amounts of debt.
Disclosure of those transactions helped force Enron to seek bankruptcy-court protection last December.
Mr. Kopper pleaded guilty earlier this year to criminal charges related to his work at Enron. Mr. Fastow has been charged in a 78-count indictment filed in Houston federal court, alleging fraud, money laundering and conspiracy. He has denied wrongdoing and awaits trial.
The broadband probe is focusing on several areas, say people familiar with the matter. Prosecutors are looking at sales and exchanges of network capacity that Enron made with other telecommunications companies to see whether these transactions improperly inflated profits. They are also probing the company’s optimistic claims about the broadband business and the timing of stock sales by executives.
An attorney for Mr. Skilling declined to comment on the broadband probe. Mr. Skilling has consistently said that he did nothing wrong at Enron and that he is cooperating with authorities. Wall Street Journal Staff Reporters Rebecca Smith and John R. Emshwiller contributed to this report.