A former Enron Corp. executive pleaded guilty Monday to falsifying the books at the company’s failed broadband unit, declining to face a third trial in his long-standing case.
Kevin Howard, 46, pleaded guilty to one count of falsifying books and records. Jury selection in his second retrial had been scheduled to begin later in the day.
Under a plea agreement, Howard could receive up to 12 months of home confinement when he is sentenced on Nov. 2.
“More than six years after the government charged Mr. Howard they offered a reasonable resolution to the case, which Mr. Howard readily accepted,” Howard’s attorney, Barry Pollack, said Monday. “The case involved a single transaction from which Mr. Howard received no personal benefit. It made little sense to continue to pursue the matter almost a decade after that transaction occurred.”
In a news release, the Justice Department said Howard admitted to manufacturing earnings for the failing broadband unit in late 2000 by selling an interest in future revenue of a video-on-demand venture that never made a profit. Prosecutors said the deal, “Project Braveheart,” was a sham because investors were promised to be bought out at a premium, making the sale a disguised loan.
Howard, who had been the unit’s finance chief, and four other broadband executives were first tried in 2005. Their trial ended in a hung jury.
Howard and former in-house accountant Michael Krautz were retried in 2006. Howard was convicted while Krautz was acquitted.
In January 2007, U.S. District Judge Vanessa Gilmore in Houston threw out Howard’s falsifying records conviction as well as four others for fraud and conspiracy, ruling prosecutors had used a faulty legal theory.
Under the theory, known as “honest services,” prosecutors said Enron employees or others with whom it did business were bound to serve honestly and not put their interests ahead of the company’s. If they failed to do so, they deprived the company of “honest services” and committed a crime.
The 5th U.S. Circuit Court of Appeals first ruled the theory was flawed in August 2006 when it reversed most of the convictions against four former Merrill Lynch executives. They were accused of helping engineer Enron’s 1999 sale of mobile power plants to their brokerage to help the energy trader appear to meet earnings targets.
The appeals court said the executives did only what Enron wanted them to do and did not profit at its expense.
In the Howard case, prosecutors alleged he deprived Enron and its shareholders of his honest services by using the sham deal to fake earnings, contributing to the fraud that eventually led to the company’s downfall in 2001. Howard’s attorneys argued his actions were done to promote the broadband unit.
A federal appeals court in February 2008 upheld Gilmore’s decision to throw out Howard’s convictions.
Of the three other broadband executives first tried with Howard in 2005, Joseph Hirko pleaded guilty in October 2008 and is set to be sentenced in September.
The retrials of the two others — F. Scott Yeager and Rex Shelby — are on hold pending Yeager’s appeal, which is before the U.S. Supreme Court.
