Former Enron Broadband Exec Gets 27-Month Sentence

HOUSTON (AP) _ The former chief of Enron Corp.'s high-speed Internet unit, who turned government witness and testified in the trial of former Enron CEO Jeffrey Skilling and company founder Kenneth

Monday, June 18th 2007, 1:22 pm

By: News On 6

HOUSTON (AP) _ The former chief of Enron Corp.'s high-speed Internet unit, who turned government witness and testified in the trial of former Enron CEO Jeffrey Skilling and company founder Kenneth Lay, was sentenced Monday to 27 months in prison.

It's been nearly three years since Kenneth Rice, 48, pleaded guilty to securities fraud and agreed to help federal prosecutors on other cases related to the energy giant's collapse. His sentencing was postponed as he cooperated with prosecutors.

Before sentencing, Rice apologized for his role in the corporate scandal.

``I'm sorry. I wasn't raised that way and I'm ashamed of that,'' he said, beginning to cry. ``I'm committed to turning my life around.''

Lay and Skilling were convicted last year for their roles in the company's collapse, which wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans.

Skilling is serving a sentence of more than 24 years. Lay's convictions for conspiracy, fraud and other charges were wiped out with his July death from heart disease.

Rice had faced up to 10 years in prison and a fine of up to $1 million. The plea agreement with prosecutors also required him to forfeit $13.7 million in cash and property that included jewelry and a pair of exotic sports cars.

Rice was charged in 2003 with selling 1.2 million shares of Enron stock for more than $76 million while he knew Enron Broadband Services was failing. The more than 40 counts against him included fraud, conspiracy and other charges for participating in a scheme to tout Enron's broadband network as having capabilities it didn't possess to impress analysts and inflate the company's stock.

According to the Justice Department, the unit never made a dime and was abandoned shortly after Enron's bankruptcy filing in December 2001. Although Enron was primarily an energy trader, the broadband unit was created in 1998 as another growth engine during the dot-com boom.

At last year's Skilling-Lay trial, Rice testified that Skilling led an effort in early 1999 to define Enron as a company with consistent growth because analysts who influence stock prices supported stability. Rice said Skilling told him Enron's stock would get ``whacked'' if the market perceived Enron as a trading company.

In a statement filed with his cooperation agreement in 2004, Rice said he conspired to describe Enron's network control software as revolutionary and the network as up and running. The software never matched the hype and the network never became fully operational.

``The purpose in making these misrepresentations was to falsely portray to the investing public that EBS was a thriving telecommunications business that had successfully developed revolutionary software which would, in turn, cause Enron's stock price to increase significantly,'' the statement said.

Rice's statement also said he and unidentified others made the claims to analysts at January 2000 and 2001 meetings. Enron's share price spiked to $90 in August 2000 as the company promoted the venture.

Rice quit the company in 2001 after his stock sale but months before Enron went bankrupt, prosecutors said. He had served as CEO of Enron's trading unit, then called Enron Capital and Trade, from 1996 to 1999 before taking over Enron's broadband unit.

Earlier this month, Kevin P. Hannon, another former broadband unit executive who cooperated with prosecutors, was sentenced to two years in prison.

Enron, once the nation's seventh-largest company, entered bankruptcy proceedings in December 2001 after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable.