Department of Justice Seal Department of Justice
FRIDAY, JULY 30, 2004
(202) 514-2008
TDD (202) 514-1888


WASHINGTON, D.C. - Deputy Attorney General James Comey, Assistant Attorney General Christopher A. Wray of the Criminal Division, Enron Task Force Director Andrew Weissmann, and Assistant Director Chris Swecker of the Federal Bureau of Investigation announced today that Kenneth Rice, a former Chief Executive Officer of Enron Broadband Services (“EBS”), a unit of now-defunct Enron Corp., has pleaded guilty to securities fraud. As part of his plea agreement, Rice has agreed to cooperate fully with the government’s ongoing criminal investigation into the collapse of Enron.

Rice, 45, of Houston, Texas, entered the guilty plea today before Judge Vanessa Gilmore at U.S. District Court in Houston, Texas. Rice pleaded guilty to one count of securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78(ff) and 15 C.F.R. §§ 240.10b-5 and 240.10b5-1. Rice is the lead defendant in an indictment pending before Judge Gilmore, which charged seven former Enron executives with a range of criminal conduct arising out of activities in EBS. The case is scheduled for trial before Judge Gilmore on October 4, 2004.

“Today's guilty plea is another sign that our efforts to clean up corruption in the boardroom have not stopped. More importantly, we have obtained an additional $14 million in ill-gotten gains that will go back to the victims of the Enron fraud. This plea ensures that Rice is held accountable for his criminal conduct, advances the Enron investigations and prosecutions, and serves to compensate those who were victimized,” said Deputy Attorney General James Comey.

Rice faces a maximum sentence of 10 years in prison and a fine of $1 million or twice the loss at his sentencing. As part of his plea, Rice has agreed to the forfeiture of approximately $13.7 million to be used to compensate victims of the Enron fraud. Rice also agreed with the Securities and Exchange Commission to pay an additional fine of $1 million.

The indictment and plea documents signed by Rice state that while at EBS, Rice and others made a series of false statements about the products, services and business performance of EBS in order to mislead investors and others about the success of the company and to inflate artificially the price of Enron stock. As part of his plea agreement, Rice admitted that while serving as EBS’s CEO, he conspired with others to portray falsely the success of EBS to the investing public by, among other things, making false statements about the company’s development of various software capabilities and its fiber-optic network, including at analyst conferences in 2000 and 2001. Rice admitted that he and others falsely portrayed EBS as a commercial and business success and falsely claimed that EBS had developed a revolutionary network control software known as the “Broadband Operating System” or “BOS”and that the BOS was “up and running” on the EBS network. In fact, as Rice admitted, the BOS software had not progressed beyond the internal development stage. Rice also failed to disclose to the investing public that the company stood to sustain operating losses in 2001 and that it lacked a sustainable customer and commercial base. These misrepresentations contributed to a sharp rise in Enron’s stock price.

Enron, at one time the seventh-ranked company in the United States with stock trading as high as $80 per share in August 1999, filed for bankruptcy protection on Dec. 2, 2001 and its stock became virtually worthless.

The investigation into Enron’s collapse is being conducted by the Enron Task Force, a team of federal prosecutors supervised by the Justice Department’s Criminal Division and agents from the FBI and the IRS Criminal Investigative Division. The Task Force has also coordinated with and received considerable assistance from the Securities and Exchange Commission. The Enron Task Force is part of President Bush’s Corporate Fraud Task Force, created in July 2002 to investigate allegations of fraud and corruption in U.S. corporations.

Thirty-one defendants have been charged in connection with the work of the Enron Task Force, and with the plea today, twelve defendants have so far been convicted. The total forfeiture funds seized to date for victims is over $161 million. The Task Force investigation is continuing.