One of the key prosecution witnesses whose testimony helped convict former Enron CEO Jeffrey Skilling and company founder Kenneth Lay was sentenced Monday to 27 months in prison.
It’s been nearly three years since Kenneth Rice, 48, the former chief of Enron Corp.’s high-speed Internet unit, pleaded guilty to securities fraud and agreed to help federal prosecutors on other cases related to the energy giant’s collapse. His sentencing was postponed as he cooperated with prosecutors.
Rice becomes the ninth ex-Enron executive to receive a jail term after pleading guilty to crimes.
Before sentencing, Rice apologized for his role in the corporate scandal that wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans.
“I’m sorry. I wasn’t raised that way and I’m ashamed of that,” he said, his voice breaking with emotion. “I’m committed to turning my life around.”
Rice, who also was fined $50,000, was allowed to remain free on bond until the Bureau of Prisons determines where he will do time. More than a dozen family members and friends from across the country attended the sentencing before U.S. District Judge Vanessa Gilmore, including his mother, brother and ex-wife. Some wept and embraced after the proceeding.
Assistant U.S. Attorney Ben Campbell said he was satisfied with the sentence. He had noted to the court Rice’s “candid testimony” in the trial of Skilling and Lay, who were convicted last year for their roles in the company’s collapse. In addition to that testimony, Rice was a key witness for eight days at the trial of five former colleagues at the Internet unit. Rice also met 63 times with prosecutors.
One of Rice’s attorneys, Dan Cogdell, said he had never seen such cooperation by a witness in his 25 years of practicing law. He said Rice had unquestionably accepted responsibility for his role in the fraud and had cooperated with prosecutors since the start of their investigation.
“He was laser accurate regardless of who it helped or who it hurt,” Cogdell said.
Skilling is serving a sentence of more than 24 years. Lay’s death in July from heart disease wiped out his convictions for conspiracy, fraud and other charges.
Rice had faced up to 10 years in prison and a fine of up to $1 million. As part of a plea agreement with prosecutors, he also forfeited $13.7 million in cash and property that included jewelry and an exotic sports car.
Rice was charged in 2003 with selling 1.2 million shares of Enron stock for more than $76 million while he knew Enron Broadband Services was failing. The more than 40 counts against him included fraud, conspiracy and other charges for participating in a scheme to tout Enron’s broadband network as having capabilities it didn’t possess to impress analysts and inflate the company’s stock.
According to the Justice Department, the unit never made a dime and was abandoned shortly after Enron’s bankruptcy filing in December 2001. Although Enron was primarily an energy trader, the broadband unit was created in 1998 as another growth engine during the dot-com boom.
At last year’s Skilling-Lay trial, Rice testified that Skilling led an effort in early 1999 to define Enron as a company with consistent growth because analysts who influence stock prices supported stability. Rice said Skilling told him Enron’s stock would get “whacked” if the market perceived Enron as a trading company.
In a statement filed with his cooperation agreement in 2004, Rice said he conspired to describe Enron’s network control software as revolutionary and the network as up and running when the software never matched the hype and the network never became fully operational.
Rice’s statement said he and unidentified others made the claims to analysts at January 2000 and 2001 meetings. Enron’s share price spiked to $90 in August 2000 as the company promoted the venture.
Rice quit the company in 2001 after his stock sale but months before Enron went bankrupt, prosecutors said. He had served as CEO of Enron’s trading unit, then called Enron Capital and Trade, from 1996 to 1999 before taking over Enron’s broadband unit.
Earlier this month, Kevin P. Hannon, another former broadband unit executive who cooperated with prosecutors, was sentenced to two years in prison.
Enron, once the nation’s seventh-largest company, entered bankruptcy proceedings in December 2001 after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable.