Ken Rice, the former head of Enron?s broadband Internet business, became the 11th person to plead guilty to an Enron-related crime when he admitted to a single count of securities fraud this morning before U.S. District Judge Vanessa Gilmore in Houston.
The plea agreement requires Mr. Rice, who is 45, to cooperate with the government in ongoing investigations and trials and forfeit $13.7 million in cash and property. Mr. Rice faces a maximum 10 years in prison and a $1 million fine.
Mr. Rice faced charges of conspiracy, securities fraud, wire fraud, money laundering and insider trading in this multi-count indictment. Attorneys close to the case have been expecting Mr. Rice to reach a deal with prosecutors for several weeks. As a division head, Mr. Rice reported directly to former Enron CEO and COO Jeffrey Skilling, and may have had regular contact with former Enron Chairman Kenneth Lay as well. Both Messrs. Skilling and Lay have pled not guilty to a variety of Enron-related charges in another pending criminal case.
Mr. Rice’s plea deal centers on a Jan. 20, 2000 meeting with analysts where Rice and others at the company touted the current and future abilities of Enron?s broadband network. That same meeting was mentioned in the indictment against Mr. Skilling, which claims he made similarly false claims about the abilities of the network and the potential of the business. It?s certainly possible that Enron Task Force prosecutors will Rice as a witness in an attempt to corroborate the charges against Mr. Skilling.
According to the Enron Task Force, Mr. Rice sold 1.2 million shares of Enron stock for more than $76 million while he knew Enron Broadband Services was failing. The unit never generated a profit and was abandoned shortly after Enron’s bankruptcy filing in early December 2001. Mr. Rice quit the company in 2001 after his stock sale and several months before Enron went bankrupt. He had served as CEO of Enron’s trading unit — Enron Capital and Trade — from 1996 to 1999 before taking over the high profile broadband unit that Enron claimed was responsible for millions in profits. Enron’s share price spiked to $90 in August 2000 as Enron promoted the venture, among other ventures. Mr. Rice was indicted on April 29, 2003 — along with seven other former broadband employees — in a 218-count indictment that claimed the men lied about the value and capabilities of Enron?s internet business.
The remaining defendants in the Enron broadband case are Joe Hirko, another former broadband CEO; Kevin Hannon, former chief operating officer; Scott Yeager and Rex Shelby, former senior vice presidents; and Kevin Howard and Michael Krautz, former executives. Each one has pled not guilty to all charges. The trial of the case is scheduled to begin to begin Oct. 4. The first criminal trial involving former Enron executives will take place in the “Nigerian Barge case,” which is scheduled for trial beginning on August 16.