Former managing director of investor relations for Enron Paula Rieker pleaded guilty yesterday to one felony count of insider trading, and made a deal to work with prosecutors.
Rieker, 49, pleaded guilty to one felony count and admitted she made a profit of nearly $500,000 on a July 2001 sale of stock.She traded the stock after she learned of a midyear $102 million loss in the company's Internet business, twice the expected loss for the whole year in that division.
"I was wrong to sell the stock. But I did. I knew it was wrong at the time," Rieker told U.S. District Judge Melinda Harmon.
Enron Task Force prosecutor Kathryn Ruemmler said Rieker sold the stock the very same day she learned about the unexpectedly high losses of the Internet division.
"Ms. Rieker breached her duties of confidentiality, trust and loyalty to Enron," Ruemmler said in court.
Rieker will forfeit the stock profit and a six-figure Enron bonus she received after the bankruptcy. She could eventually be sentenced to a maximum of 10 years in prison and a $1 million fine.
But if she helps the government, prosecutors could ask for a much lighter sentence.
Rieker could be important to the government's cases. Her primary job was to prepare earnings releases and write the scripts for conference calls to analysts.
She was basically the No. 2 person in investor relations in 2001 and involved in many of the public communications that prosecutors claim were fraudulent and are key to the criminal charges already filed against former CEO Jeff Skilling.
At the end of 2001, Rieker became secretary to the board of directors, replacing Rebecca Carter, who is now married to Skilling. Thus she was present for board meetings in the last desperate weeks before Enron's bankruptcy, a time when chairman Ken Lay resumed the CEO position.
She also took particular interest in the company's Internet business. Two of the lawyers representing former Internet division officials accused of fraud attended Rieker's plea appearance Wednesday, curious about what her plea deal will mean for the broadband trial.
"She was strategically placed and will know if there were deliberate miscommunications to the investing public and who directed her to gave out such information," said Philip Hilder, who represents an array of witnesses in the Enron cases. He said she will know who in upper management insisted on a certain spin.
Other lawyers involved in the case said Skilling seems a particularly likely target of Rieker's testimony.