Former Enron Broadband CEO sentenced

The former CEO of Enron Broadband is sentenced to more than two years in prison and ordered to turn over about $15 million.

Kenneth Rice, former chief executive officer of Enron Broadband Services (EBS), has been sentenced to 27 months in prison on securities fraud charges and ordered to turn over about US$15 million, the U.S. Department of Justice announced Monday.

The $15 million will go to victims of the fraud at Enron Corp., the Texas energy company that filed for bankruptcy in December 2001 before investigations revealed widespread accounting fraud. Rice and others at EBS, a unit of Enron, made a series of false statements about the products and business performance in order to mislead investors about the success of the company and inflate the price of Enron's stock, the DOJ said in a press release.

Rice was sentenced Monday by Judge Vanessa Gilmore at U.S. District Court for the Southern District of Texas in Houston. Rice pleaded guilty in July 2004 to a securities fraud charge and cooperated with the DOJ's investigation into the collapse of Enron.

While serving as CEO at EBS, Rice conspired with others to make false statements about the company's development of various software capabilities and its fiber-optic network, the DOJ said. Rice falsely portrayed EBS as a commercial and business success, and falsely claimed that network control software developed by EBS was "up and running," when in fact the software had not progressed beyond the internal development stage.

These misrepresentations, including a failure to disclose to the investing public that the company stood to sustain operating losses in 2001, contributed to a sharp rise in Enron's stock price, the DOJ said.

EBS entered a number of partnerships before Enron's collapse. In July 2000, Blockbuster Inc. announced that it struck an exclusive 20-year partnership with EBS to deliver video on demand by early 2001. Blockbuster began testing the service in February 2001.

Kevin Hannon, the former chief operating officer at EBS, was sentenced by Gilmore earlier this month to two years in prison, and fined $125,000. Hannon pleaded guilty in August 2004 to conspiracy to commit securities fraud and wire fraud.

To date, the federal Enron Task Force has brought criminal charges against 36 defendants, including 25 former Enron employees. Eighteen of those defendants have pleaded guilty or been found guilty after trial. The task force has seized more than $100 million in Enron cases.

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