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US: Split verdict in Enron broadband retrial

by Kristen HayesAssociated Press
June 1st, 2006

Of two former Enron Corp. broadband executives to be retried on fraud and conspiracy charges in the wake of a hung jury last year, one faces prison and the other is free.

Jurors on Wednesday convicted former broadband unit finance chief Kevin Howard of five counts of fraud, conspiracy and falsifying records while the panel acquitted former in-house accountant Michael Krautz of the same charges after a monthlong trial.

Their case took place next door to the courtroom where six days earlier another Houston-area jury convicted Enron founder Kenneth Lay and former Enron Chief Executive Jeffrey Skilling of fraud, conspiracy and other charges in one of the biggest business scandals in U.S. history.

Both wiped tears from their eyes, one shocked, the other relieved. Howard shook Krautz's hand.

"I feel very sorry for Kevin and his family," Krautz said of Howard, who declined comment. "I do not feel like they got the justice they deserved."

"That said, me and my family are thrilled," he said, choked with emotion.

Lay and Skilling were convicted of conspiring to run a massive fraud through repeated lies to investors and employees about Enron's financial strength. The company careened into bankruptcy proceedings in December 2001.

Howard and Krautz were accused of participating in a small piece of that overall fraud in a scheme to manufacture earnings for Enron's flailing broadband unit in late 2000. Dubbed "Project Braveheart," the deal involved selling an interest in future revenue of a video-on-demand venture that disintegrated a few months later.

Howard, 43, closed his eyes as U.S. District Judge Vanessa Gilmore announced the decision by the panel of eight women and four men. His family members blanched and wept.

Then she got to Krautz, 37, who contained his emotion and then wept with his family as the judge said "not guilty" five times.

Howard faces a maximum of 25 years in prison; five years for each count. Jim Lavine, one of his attorneys, said he would appeal.

"We are surprised. We're disappointed. We don't think the evidence supported a guilty verdict," he said.

Lead prosecutor Van Vincent declined to say whether he was disappointed at the split verdict.

Jurors left the courthouse without comment.

Gilmore scheduled Howard's sentencing for Sept. 11, the same date Lay and Skilling are to be sentenced.

Howard and Krautz were the first of five broadband executives to be retried in separate cases after the first trial of the entire group ended in a hung jury last year. Although Enron was primarily an energy trader, the broadband unit was created in 1998 as another growth engine during the dot-com boom.

The government alleged that Braveheart was a loan disguised as a sale because Enron promised to buy out investors at a premium.

Both men testified, as they did in their first trial, that the deal was legitimate. Investors were not bought out and lost their money along with other creditors when Enron collapsed.

The first broadband trial began in April 2005 and focused mostly on three other executives accused of overhyping capabilities of Enron's broadband network and operating software. That jury gave up after four days of deliberations. The five defendants were later split into three separate cases and re-indicted on fewer counts.

Howard and Krautz were charged with one count each of conspiracy, another of falsifying records and three counts of wire fraud.

They were fired in March 2003, the day their indictment became public.

Of the other three defendants, former vice president Scott Yeager's May 30 retrial on charges of insider trading and money laundering has been postponed indefinitely pending an appeal. Joseph Hirko, former broadband unit CEO, and Rex Shelby, former senior vice president, face retrial Sept. 5 for conspiracy, fraud and insider trading.

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