A former top boss at Enron’s Internet unit testified in court Tuesday that his former co-chief executive lied to analysts in a key presentation that sent the energy company’s share price soaring in 2000.
Kenneth Rice, the former co-chief executive of Enron Broadband Services in his third day of testimony in the trial of five of his former colleagues, said claims made by co-CEO Joseph Hirko to analysts were not true and were designed to mislead investors.
Prosecutors showed a video of the Jan. 20, 2000, analyst meeting to jurors, where Rice, Hirko, former Enron CEO Jeff Skilling and others touted the software and computer systems they claimed would allow the company to control broadband Internet traffic.
“Is this something that will exist in five years? No, this is something that exists today,” Hirko told the analysts’ meeting in the video.
Under questioning from federal prosecutor Ben Campbell, Rice, appearing as part of a plea agreement, said both he and Hirko knew those claims were false.
“It did not exist,” he said. “We did not have a software layer capable of doing those things.”
Enron’s stock price jumped nearly $20 in the run-up to the January analysts meeting, and added another $13 the day of the presentation, largely from the hype the company was generating about its Internet business, Rice said.
On trial with Hirko for conspiracy and fraud are fellow EBS technology executives Rex Shelby and Scott Yeager and former EBS finance executives Kevin Howard and Michael Krautz. Hirko, Shelby and Yeager are also charged with insider trading and money laundering. All five pleaded not guilty.
Tuesday’s testimony focused heavily on the analyst meeting, which also featured a speech from Sun Microsystems Chairman Scott McNealy praising Enron’s Internet strategy. McNealy attended the meeting at the urging of Skilling after Enron agreed to buy several thousand servers from the network computer maker.
McNealy’s appearance was designed to help convince the analysts that Enron had partnered with tech sector heavyweights, Rice said. “In effect, we were getting the good housekeeping seal of approval,” he said.
In his testimony on Monday, Rice described disarray at EBS, which was scrambling to overcome huge technical problems.
Rice said Enron executives, under the direction of Skilling, pushed hard to have the unit valued at $20 billion in a bid to drive the company’s flagging stock price up.
Rice, who has not yet been sentenced for his role at the company, said that valuation boosted his own portfolio of Enron stock by about $25 million.
Skilling is facing a separate trial in 2005, along with former Enron Chairman Kenneth Lay and former Chief Accounting Officer Richard Causey.
