Retrial of Enron Internet Executives Set to Begin

The first of three retrials stemming from last year’s three-month trial of five former Enron Corp. broadband executives that ended with a hung jury is slated to begin Tuesday next door to the continuing fraud and conspiracy case of company founder Kenneth L. Lay and former Chief Executive Jeffrey K. Skilling.

Lawyers for the broadband defendants, former unit Chief Financial Officer Kevin Howard and in-house accountant Michael Krautz, last year expressed concern that they might have trouble selecting a fair jury amid the heavy publicity generated by the Lay and Skilling case.

But U.S. District Judge Vanessa Gilmore, who presided over the initial trial, was unsympathetic. Jury selection is to start Tuesday morning, followed by opening statements.

Howard and Krautz each face one count of conspiracy and falsifying books and records and three counts of wire fraud for allegedly faking $111 million in earnings in the fourth quarter of 2000 and the first quarter of 2001. The charges are tied to a video-on-demand deal that flopped.

They had faced 15 counts of fraud and conspiracy in last year’s trial, and the deadlocked jury failed to reach verdicts on any of those charges. The government re-indicted both men on fewer counts in November.

They remain accused of participating in the alleged sham.

In what is known as a “monetization,” they took a 20-year agreement that Enron struck with Dallas-based Blockbuster Inc. in March 2000 and sold future revenue from the venture to book immediate earnings. The government contends the deal, dubbed Project Braveheart, was a sham because Howard and Krautz knew Enron had promised to return the buyer’s investment and an additional premium, wiping out the sale’s legitimacy.

The video-on-demand venture never earned a profit and the partnership with Blockbuster ended in March 2001.