July 30, 2004Read today’s legal news, law firm news and law research at LAWFUELAccounting and Auditing Enforcement Release No. 2068 / July 30, 2004
Securities and Exchange Commission v. Kenneth D. Rice, et al.,
Civil Action No. H-03-0905 (Harmon) (S.D. Tx.) (May 1, 2003) (Amended
Complaint)
The Securities and Exchange Commission (“Commission”) today settled civil
fraud charges filed against Kenneth D. Rice, former Chief Executive Officer
of Enron Broadband Services (“EBS”). The complaint, filed on May 1, 2003 in
the U.S. District Court in Houston, charged Rice and other executives from
EBS with fraud and insider trading. Without admitting or denying the
allegations in the Commission’s complaint, Rice has agreed to be enjoined
permanently from violating Section 10(b) of the Securities Exchange Act of
1934 and Exchange Act Rule 10b-5, and to be barred permanently from acting
as an officer or director of a public company. The Commission settled its
action in coordination with the Justice Department’s Enron Task Force, which
entered into a guilty plea with Rice on related criminal charges. In
resolving the parallel civil and criminal proceedings, Rice has agreed to
pay disgorgement and a civil penalty totaling more than $14.7 million and to
cooperate with the government’s continuing investigation.
As alleged in the Commission’s complaint, Rice and other EBS executives
engaged in a wide-ranging fraudulent scheme to, among other things, inflate
the value of Enron stock through a series of false and misleading statements
and the omission of material information in such public statements about the
technology, financial condition, performance and value of EBS. The false
and misleading statements by Rice and others were made in press releases
over a two-year period as well as in presentations and statements made at
Enron’s annual analyst conferences in January 2000 and 2001. As a result of
the false statements, Enron’s stock price was artificially inflated. Rice
then sold large amounts of Enron stock at the inflated levels, at a time
when he knew that the statements were false and misleading and when he was
in possession of material non-public information concerning the true status
of EBS’ technology and commercial success.
The Commission acknowledges the assistance of the Enron Task Force. The
Commission’s investigation is continuing. For additional information see
* SEC v. Kevin A. Howard, Michael W. Krautz, Kenneth D. Rice, Joseph
Hirko, Kevin P. Hannon, Rex T. Shelby, and F. Scott Yeager, – Litigation
Release 18122 (May 1, 2003)
