Paula Rieker, formerly the No. 2 investor relations officer at the bankrupt energy giant, also agreed to cooperate with the U.S. Justice Department’s Enron Task Force investigation and pay $499,000 to settle related civil charges.
Rieker, 49, pleaded guilty in a hearing before U.S. District Judge Melinda Harmon in Houston federal court. She faces up to 10 years in prison at sentencing.
In court, prosecutors Kathryn Ruemmler said Rieker illegally sold Enron stock on July 5, 2001, after learning that the company’s broadband division was going to report a second quarter loss of $102 million a week later.
That was far more than the $65 million full-year loss Enron had projected in January for the broadband unit, which — unbeknownst to investors — was facing major technical and financial challenges.
Rieker admitted she told her broker to exercise 18,380 Enron stock options and sell them immediately for a profit of $499,000 on July 5.
“It was wrong to sell my stock. I knew it was wrong at the time,” she told the judge.
As part of the criminal settlement, Rieker is repaying Enron a $130,000 retention bonus given to her after the company’s December 2001 bankruptcy.
Rieker forfeited her $499,000 stock profit to settle U.S. Securities and Exchange Commission anti-fraud charges, without admitting or denying civil wrongdoing. She also agreed to be barred from serving as an officer or director of a public company.
The SEC said Rieker failed to correct “false and misleading information” about Enron’s energy services and broadband divisions that was included in the company’s first and second quarter 2001 earnings presentations, which she helped prepare.
The losses at both units prompted financial fraud to hide their true conditions, prosecutors have charged in other cases.
Rieker worked directly with Enron’s top management, including former Chief Executive Jeff Skilling and former Chairman Ken Lay, in preparing the earnings releases and making investor presentations.
Skilling has pleaded not guilty to 35 counts of fraud, insider trading and misrepresenting Enron’s finances. Lay has not been charged with any crime and has denied any wrongdoing.