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Judge scraps work requirement for Enron broadband defendants

Monday, September 29, 2003

By PAM EASTON
Associated Press Writer

HOUSTON (AP) - A federal judge on Monday ruled that seven former executives of Enron Corp.'s failed broadband unit no longer have to seek full-time employment to remain free on bond.

U.S. District Judge Vanessa Gilmore removed the requirement from each of the former executives bond after defense attorney Ed Tomko told her he was concerned his client, former Enron vice president Rex Shelby, might unintentionally violate bond by seeking a job through former Enron co-workers who could end up becoming witnesses in the case against him without his knowledge.

"These people have worked together for a long time," Tomko said. "We don't know who the witnesses are. ... What I don't want is for anyone to stumble over this order."

Gilmore agreed and removed the work requirement, which is common in federal bond arrangements.

"These people are going to be socializing together. They are going to be hanging out together," Gilmore said, warning all attorneys for each of the seven to make clear to their clients that they should not be discussing the case. "Tell them to tread very carefully. Sometimes bonds get revoked."

The seven former executives are charged with faking earnings and touting capabilities the unit didn't have to help inflate the company's stock price. They were slated to be arraigned a second time on Monday, but Gilmore allowed them to enter their innocent pleas in writing, Tomko said.

Only one of the seven faces an additional charge in a superseding indictment unsealed last week that replaces an indictment unsealed in May.

In the revised indictment, former broadband chief operating officer Kevin Hannon faces a new count of securities fraud in addition to one count each of insider trading, money laundering and conspiracy.

The overall amount of charges against the seven remains unchanged at 218 counts because Hannon's new charges were added to a count already filed against one of the other defendants, former broadband chief executive Kenneth Rice. No new defendants were added.

Two of the executives, Kevin Howard and Michael Krautz, were indicted in March on charges of wire fraud, securities fraud, conspiracy and lying to the FBI. Prosecutors allege they used accounting tricks to generate $111 million in fake earnings in late 2000 and early 2001 from a movie-on-demand deal with Blockbuster Inc. that flopped.

The five other executives were added to a first superseding indictment unsealed May 1 charging them with conspiracy, wire fraud, securities fraud, money laundering and insider trading. In addition to Hannon and Rice, they are former broadband chief executive Joseph Hirko; and former vice presidents F. Scott Yeager and Shelby.

All seven have pleaded innocent and are free on bond.

The broadband case is set to go to trial on April 5, a date which Gilmore said she would be willing to move once more.

"If I move it today, that is the last time I'll move it," Gilmore told attorneys, who appeared in court without their clients Monday. "Do you want me to move it today? I'm only moving it one more time. That's a hint."

Attorneys opted to wait to request a trial delay until the case's next scheduled pretrial hearing on Dec. 1.

Prosecutors allege Rice, Hirko, Hannon, Yeager and Shelby knew Enron's fiber-optic network couldn't do what the company told analysts it could do in January 2000 and 2001. Analyst enthusiasm for the venture helped hike Enron's share price to its high of $90 per share in August 2000.

The insider trading charges refer to more than $185 million the five executives sold in Enron stock in 2000 and 2001. Of that amount, $36 million is frozen.

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