Former Enron Broadband Chief Financial Officer Pleads Guilty to Falsifying Books...

Former Enron Broadband Chief Financial Officer Pleads Guilty to Falsifying
Books and Records

WASHINGTON, June 1 /PRNewswire-USNewswire/ -- Kevin Howard, former chief
financial officer and vice president of finance for Enron Broadband Services
(EBS), Enron's failed telecommunications business, pleaded guilty today to
falsifying books and records, announced Assistant Attorney General Lanny A.
Breuer of the Criminal Division and Assistant Director Kenneth W. Kaiser of
the FBI's Criminal Investigative Division.

Kevin Howard, 46, of Houston, entered the guilty plea today before Judge
Vanessa Gilmore at U.S. District Court in Houston. Howard pleaded guilty to
one count of falsifying books and records. According to the terms of the plea
agreement, Howard faces a maximum sentence of up to 12 months of home
confinement at his sentencing, which will be scheduled at a later date.

According to the superseding indictment and the plea agreement, Howard
knowingly and willfully directly or indirectly caused Enron's Form 10K for the
year-ending 2000 to be falsified because it did not accurately and fairly
reflect, in reasonable detail, the transactions and dispositions of Enron's
assets.

In January 2000, Enron officially unveiled EBS to the public as Enron's newest
"core" business group and announced that EBS would report a loss of $60
million for the year 2000. According to court documents, by the fourth
quarter of 2000, EBS had failed to generate any significant revenue. Howard
admitted that he and others at EBS and Enron knew that absent a large
revenue-generating transaction, EBS would miss the announced target by a wide
margin. According to court documents, while EBS had little revenue, it had
entered into an agreement with Blockbuster to provide video on demand
services. This agreement had anticipated future revenue in the hundreds of
millions of dollars.

In an attempt to generate earnings sufficient to meet the earnings target,
Howard admitted that he and others at EBS structured a transaction known as
"Project Braveheart" designed to "monetize" or book a portion of the
anticipated hundreds of millions of dollars of future earnings from EBS's
agreement with Blockbuster in the fourth quarter of 2000.

Howard admitted that, in November 2000, he and others at EBS approached a
small video on demand (VOD) technology company and asked if the company would
be willing to be EBS's joint venture partner so that EBS could meet its
earnings target for the year 2000. According to the plea agreement, through
discussions with Howard and others at EBS, the VOD technology company
understood that it would not suffer financially in any way from participating
in Project Braveheart and that EBS was going to arrange for the company to be
bought out of the joint venture by a third party the next quarter. Howard
admitted he explained to the company that its participation in the joint
venture was simply a "bridge mechanism" to get EBS into the next quarter.
Based on these conversations, the company agreed to be the joint venture
partner.

Prior to the close of Project Braveheart, Howard admitted he learned that
Enron's auditors, Arthur Andersen, would probably not have agreed with EBS's
recognition of earnings from Project Braveheart if it had known that the VOD
technology company intended to exit the joint venture in the first quarter of
2001. Howard admitted that he knowingly and willfully failed to inform
Andersen or cause Andersen to be informed of the VOD technology company's
intentions. Similarly, Howard admitted that he knowingly and willfully failed
to inform the VOD technology company prior to the close of the transaction
that he had learned that the company could not be bought out in the first
quarter as originally discussed.

According to the plea agreement, Project Braveheart closed on Dec. 22, 2000,
and EBS subsequently sold a portion of its interest in the joint venture and
booked $53 million in earnings from this transaction in the fourth quarter of
2000. Project Braveheart enabled EBS to falsely record these earnings as
revenue in order to meet the $60 million loss goal and this false loss amount
was reported in Enron's 10K for the year 2000.

In November 2005, Howard was charged in a superseding indictment with
conspiracy to commit wire fraud and falsify books and records; wire fraud,
including honest services wire fraud; and falsifying books and records. In
May 2006, Howard was found guilty of the charges against him, but the
conviction was vacated prior to sentencing due to the Fifth Circuit Court of
Appeals' decision in United States v. Brown relating to honest services wire
fraud. Subsequently, the government removed the honest services wire fraud
charges from the superseding indictment and the case was set for re-trial,
with trial scheduled to begin today.

Charges against a number of EBS employees, including Howard, were initially
brought in March 2003 by the Enron Task Force, a team of federal prosecutors
and agents formed to investigate matters related to the collapse of Enron
Corp. All remaining Enron Task Force cases are now being handled by the
Criminal Division's Fraud Section, with investigatory assistance from the FBI.

This case is being prosecuted by Senior Trial Attorney Jonathan E. Lopez and
Trial Attorney Laura N. Perkins from the Criminal Division's Fraud Section.

SOURCE U.S. Department of Justice

U.S. Department of Justice, +1-202-514-2007, TDD +1-202-514-1888