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Ex-Enron executive pleads guilty to conspiracy

By Carrie Johnson
The Washington Post

AP, 2003 Former Enron executive Kevin P. Hannon, 44, faces up to five years in prison.

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The chief operating officer of Enron's failed Internet unit pleaded guilty yesterday to a single criminal conspiracy charge and agreed to cooperate with the government, as prosecutors continued to build their case against the Houston energy company's top leaders.

Kevin P. Hannon, 44, knowingly misrepresented the health of the fledgling Internet business in 2000 and 2001 "to justify representations by senior management" and "to maintain the improperly inflated price of Enron stock," according to his plea agreement.

Hannon faces up to five years in prison on the conspiracy to commit securities fraud charge. As part of the plea deal, he agreed to forfeit his claim on $8 million in back pay. Hannon also settled civil charges lodged by the Securities and Exchange Commission by turning over $2.2 million in assets and paying a $1 million penalty. The SEC barred Hannon from ever again serving as an officer or director of a public company.

Enron poured more than $1 billion into developing its Broadband Services unit and former Chief Executive Jeffrey Skilling touted it highly in analyst conferences during the height of the Internet boom. But prosecutors now claim that with accounting trickery removed, the broadband division never turned a profit.

Yesterday's plea agreement centers in part on a Jan. 25, 2001, analysts' conference in which Hannon and others — including Skilling — portrayed Enron Broadband Services as a "commercial and business success," according to court papers. In reality, Hannon said, the unit had failed to draw a strong customer base and to develop a sustainable revenue stream.

His Washington-based lawyer, Reid Figel, did not return calls.

Skilling has pleaded not guilty to nearly three dozen fraud and conspiracy charges. Longtime Chairman Kenneth Lay, who took over day-to-day control of Enron after Skilling abruptly resigned in August 2001, has pleaded not guilty to 11 conspiracy, bank-fraud and false-statement charges.

Hannon's plea follows a deal struck last month by his one-time boss, former broadband Chief Executive Kenneth Rice, who pleaded guilty to one count of securities fraud and agreed to cooperate with the Justice Department's Enron Task Force.

"I don't care how many people the task force pressures into taking deals to induce their cooperation," said Daniel Petrocelli, lead trial counsel for Skilling. "It doesn't change the fact that Jeff Skilling is completely innocent.... "
 
Pipelines going on the block today

HOUSTON — Bankrupt Enron's most prized remaining assets — its domestic natural-gas pipelines — will be on the block in a quiet auction today.

Bids for CrossCountry Energy, which holds Enron's whole or part interest in three domestic natural-gas pipelines, will be considered at an auction at the New York offices of Enron's main bankruptcy lawyers, Weil, Gotshal & Manges, said Enron spokeswoman Jennifer Lowney. When the auction closes, the company will choose a winning bid to present to U.S. Bankruptcy Judge Arthur Gonzalez for approval at a Sept. 9 hearing.

So far, Enron has publicly acknowledged two bidders interested in CrossCountry.

NuCoastal, a company run by Texas billionaire and Coastal founder Oscar Wyatt Jr., offered $2.2 billion in May.

Then in June, a joint venture of Southern Union and GE Commercial Finance Energy Financial Services offered $2.3 billion. Both offers include $430 million in assumed debt.

The CrossCountry sale is part of Houston-based Enron's plan to emerge from one of the most expensive and complicated bankruptcies in history.

The reorganization plan, approved by Gonzalez in July, also assumes Enron will sell Portland General Electric, its Pacific Northwest utility, to an investment group backed by Texas Pacific Group for $1.25 billion in cash and $1.1 billion in assumed debt, as announced last year.

If those sales close later this year as expected, all that will be left of the scandal-ridden company that once claimed $100 billion in revenues and pioneered trading operations beyond energy will be Prisma Energy International, Inc., a smattering of pipeline and power assets in 14 countries. The Enron name will disappear.

Associated Press