Former Enron Executive Surrendered. A former Enron Corp. executive who once worked on software changes to improve the company’s nationwide telecommunications network surrendered to the FBI Wednesday on charges of fraud, money laundering, insider trading and conspiracy.
Rex T. Shelby, 51, was among five former Enron Broadband executives indicted last week for allegedly scheming to promote the network as having capabilities it didn’t have and selling millions of dollars in stock.
“We’re very disappointed that we got to this point,” said Shelby’s attorney Edwin Tomko, as he escorted his client into FBI Headquarters in Houston.
Tomko called charges against Shelby “far-fetched” and said his client would eventually be found not guilty.
“We realize we will get our day in court and we’ll take it,” he said.
The other four executives surrendered to federal agents and pleaded innocent to similar charges before U.S. Magistrate Marcia Crone on May 1. They were: Kenneth Rice, former chief executive of the broadband unit from July 1999-July 2001; Joseph Hirko, the unit’s chief executive from its inception in 1998 who shared those duties with Rice until July 2000; Kevin Hannon, chief operating officer of the unit from January 2000 through June 2001; and F. Scott Yeager, a vice president of strategic development in the unit, who prosecutors say in late 1998 proposed building the network.
Shelby, a former vice president of engineering operations for Enron Broadband, was allowed to postpone his surrender and court appearance because his father underwent surgery last week.
accounting tricks
The charges against Shelby and the other four executives were added to an indictment returned in March against two other former excutives on Enron’s Internet unit, Kevin Howard and Michael Krautz, who are accused of using accounting tricks to generate $111 million in fake earnings from a failed Internet movie-on-demand service with Blockbuster Inc.
Last week’s expanded indictment alleges Shelby, Rice, Hirko, Hannon and Yeager knew the network didn’t match the hype they gave it before analysts in January 2000 and 2001.
Analysts, in turn, supported the venture and Enron’s stock price rose to a high of $90 in August 2000. The five former executives indicted last week sold a cumulative $185.7 million in shares in 2000 and 2001.
Prosecutors say the unit actually lost money and the Blockbuster deal allowed it to appear to make earnings targets in late 2000 and early 2001. Enron talked Blockbuster into staying with the deal until it dissolved in March 2001 when the video company wanted out in 2000, but Rice told analysts in January 2001 Blockbuster was the unit’s “anchor” tenant, the indictment said.
Shelby joined Enron in 1998 when the energy company acquired his software company, Modulus Technologies. He left the company in November 2001, after the broadband unit had fizzled and less than three weeks before Enron went bankrupt in December.
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