HOUSTON – The former No. 2 executive in Enron Corp. investor relations pleaded guilty to an insider trading charge Wednesday for cashing out stock options after learning about bad news for Enron’s highly touted broadband unit.
Paula Rieker agreed to cooperate with the Justice Department’s continuing investigation and turn over to the government $499,333 in profits from her illegal stock sales.
She also agreed to return to Enron $130,000 in retention bonuses she received since the energy company went bankrupt in a sea of scandal in 2001.
All employees who received such bonuses had to sign papers saying they haven’t illegally traded stock and cannot be identified as defendants in lawsuits related to the company’s implosion.
“It was wrong to sell my stock, but I did,” Rieker told U.S. District Judge Melinda Harmon. “I knew it was wrong at the time.”
Rieker also settled a civil complaint filed by the Securities and Exchange Commission that said she provided “substantial assistance to Enron executives and senior managers in the dissemination of false and misleading information to the public about Enron business units in analyst calls and earnings releases.”
Prosecutors allege that on July 5, 2001, Rieker exercised options to buy more than 18,000 shares of Enron stock at $15.51 per share, then sold them on the open market at $49.77. She made $629,000 on the transaction, court papers said.
Rieker allegedly acted after learning internally that the company’s broadband unit lost more than $95 million in the second quarter 2001. The company had said earlier in the year that the unit would lose about $65 million throughout 2001.
Enron Broadband Services never posted a profit and went bankrupt along with Enron in December 2001.
“Rieker learned that the guidance Enron had provided the financial markets regarding EBS’ anticipated losses was flawed and that EBS would likely be required to report greater losses than it had previously reported,” court papers said.
Associated Press
Paula Rieker hurries to a waiting car as she leaves the federal courthouse in Houston Wednesday.
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