June 05, 2006
Split verdicts in the Enron Broadband retrials

Last year, the Enron federal task force failed to secure any convictions in the first trial of executives of the former Enron Broadband Services. Even though that case was considered stronger than some of the others they had to try, they got a mixture of acquittals and hung verdicts. Last week, the prosecutors did a little better, convicting one out of two defendants on all charges.

Kevin Howard, former Enron Broadband Services chief financial officer, was found guilty on all five counts in the indictment that accused both men of pushing through a bogus transaction in late 2000 strictly to help the division meet earnings goals.

Michael Krautz, a leading accountant in the division, was acquitted of all charges, making him only the second ex-Enron employee to be found not guilty by a jury.


The clean-cut Howard, dressed in a business suit and tie, left the courtroom stonefaced, declining through his attorneys to comment.

His attorneys vowed to appeal.

"We are surprised, we are disappointed - we don't think the evidence supported a guilty verdict," Howard's attorney Jim Lavine said. "We'll look to our next steps to appeal."

Howard faces up to 30 years in federal prison for his conviction on a single count of conspiracy, three counts of wire fraud, and for falsifying books and records.

Krautz was acquitted of the same charges.

Howard, a Houston resident, is free on $500,000 bail pending sentencing scheduled for Sept. 11, at 9:30 a.m., only hours before the sentencing of former Enron executives Jeff Skilling and Ken Lay in a courtroom next door before a different judge.


Some legal experts believe the acquittal of Krautz may actually take some of the steam out of a possible appeal by Lay and Skilling. Namely, it will make it tougher for them to argue they couldn't get a fair trial in Houston.

"I think it pulls the rug out from under any argument Lay or Skilling make about a change of venue," said Philip Hilder, a former prosecutor who represented government witness Sherron Watkins.

I never doubted that Skilling and Lay would get a fair trial. If this does undercut that argument, fine by me.

The government last year failed to win convictions against Howard, Krautz and three other former executives in the division in a trial that ended with a jumble of acquittals and nondecisions. The judge then separated the case into three trials to simplify it for jurors.

Former EBS executives Joe Hirko, Rex Shelby and Scott Yeager are awaiting retrial. Yeager's trial was scheduled for this week but has been put off indefinitely because of an appeal issue; Shelby and Hirko are scheduled to return to the courtroom in September.


Even with the acquittal of Krautz, some legal observers believe the conviction of Howard is enough to keep up the prosecution's momentum for trying the remaining defendants.

"Had the government bought the bagel on this one, they may have well have walked away from other broadband trials in the wake of the Lay and Skilling success," said Jacob Frenkel, the former senior counsel at the Securities and Exchange Commission's enforcement division, who has followed the cases.

"The fact that they won a conviction against the CFO, not withstanding the acquittal, will help the government maintain its vigor and resolve to prosecute the remaining broadband defendants."

So it's not over yet, though I daresay that pretty much everything else beyond return court dates by Skilling and Lay will be non-headline news most places. Also fine by me.

As usual, for an alternate view of the events, check out Tom Kirkendall.

Posted by Charles Kuffner on June 05, 2006 to Enronarama | TrackBack