For the second time, two former executives from Enron Corp.'s defunct broadband unit will soon await a jury's verdict on whether they conspired to break accounting rules so the energy giant could book bogus earnings.
As another federal jury in Houston deliberated a third day in the fraud and conspiracy trial of former Enron chiefs Kenneth Lay and Jeffrey Skilling, the fates of onetime broadband unit finance chief Kevin Howard and in-house accountant Michael Krautz were to be put in their own panel's hands in the fourth week of their trial.
Howard and Krautz are the first two of five former Enron broadband executives to be retried after their first case ended in a hung jury last year.
Attorneys on both sides presented the eight-woman, four-man jury with lengthy closing arguments throughout the day Monday. The broadband panel was expected to begin deliberating Tuesday.
In the broadband case, the government contends that Howard and Krautz conspired to manufacture earnings for the failing broadband unit in late 2000 by selling an interest in future revenue of a video-on-demand venture that never made a profit.
Prosecutors alleged the deal, "Project Braveheart," was a sham because investors were promised to be bought out at a premium, making the sale a disguised loan.
"Kevin Howard and Michael Krautz came up with this fraudulent scheme, this sham transaction that never meant anything," prosecutor Jonathan Lopez told jurors.
The defendants counter that while a buyback may have been discussed, it didn't happen and the deal was legitimate. The investors were not bought out and lost their money along with other creditors when Enron spiraled into bankruptcy protection in December 2001.
"Business would grind to a halt if you take the government's view that just because there's a discussion of options, someone's committing a crime," Howard lawyer Jim Lavine said.
Krautz attorney Barry Pollack said Krautz informed everyone involved in the deal of applicable accounting rules "and that the rules needed to be followed."
The first broadband trial began in April 2005 and focused mostly on three other executives accused of overhyping capabilities of Enron's broadband network and operating software. The government contended their aim was to dazzle Wall Street analysts and enrich themselves by selling inflated stock.
The Braveheart issue accounted for about two weeks of the three-month case.
In this month's trial that started in the courtroom next door to the Lay-Skilling case with jury selection on May 2, Howard and Krautz faced one count each of conspiracy and false books and records and three counts of wire fraud.
Of the other three defendants, former vice president Scott Yeager's May 30 retrial on charges of insider trading and money laundering has been postponed indefinitely pending an appeal. Joseph Hirko, former broadband unit CEO, and Rex Shelby, former senior vice president, face retrial Sept. 5 for conspiracy, fraud and insider trading.