Broadband Testimony May Aid Enron’s Skilling
Former Enron Corp. Chief Executive Jeffrey K. Skilling was startled when told that an Internet product he had touted to analysts was still in development, a former executive testified Tuesday at a criminal trial.
The testimony occurred at the trial of five former executives of Enron’s broadband division who are accused by prosecutors of deceiving investors about the company’s Internet capabilities. The testimony undermines charges against Skilling, who is not a defendant at the executives’ trial in Houston. He is accused of a larger fraud that includes activities of the division and will be tried in January.
John Bloomer, former Enron Broadband Services vice president of product development, testified Tuesday that Skilling became agitated at a management meeting in February 2000 when Enron’s software development chief told him that the broadband operating system, or BOS, which was crucial to the company’s success, was not ready. Two weeks earlier, Skilling had told analysts that the product was ready, prosecutors said.
“I’ve been hearing about this BOS thing for a long time,” Skilling said, according to Bloomer’s testimony under questioning by prosecutors. “I thought we already had it and it was delivered. Rex, what’s going on here?” Skilling “erupted” at the disclosure about the product from Rex Shelby, Enron Broadband’s chief software developer, Bloomer said.
Bloomer testified in the fourth week of the fraud and conspiracy trial of the five executives. Skilling is one of 24 unindicted alleged co-conspirators in the broadband case, which presents prosecutors with an opportunity to test evidence against him.
In previous testimony, former Enron Broadband Chief Executive Ken Rice, who is cooperating with prosecutors, told jurors that Skilling knew he was overstating the company’s technology and financial prospects to analysts as part of an effort to inflate Enron’s stock price.
At the 2000 meeting with analysts, Skilling said the fledgling Internet division was worth $20 billion to Enron’s market value.
Federal prosecutors and Daniel Petrocelli, Skilling’s lead lawyer, had no comment on the testimony.
The defendants in the Broadband case are: Joseph Hirko, former CEO of the unit; F. Scott Yeager, former senior vice president of business development; Shelby, former senior vice president of engineering and operations; Kevin Howard, former vice president of finance; and Michael Krautz, former senior accounting director.
Hirko, 48, Shelby, 53, and Yeager, 54, are charged with faking the company’s technological capabilities and are also accused of insider trading and money laundering regarding their Enron stock holdings. Howard, 42, and Krautz, 36, are charged with falsifying revenue to inflate profitability.
