SEC Enforcement Action: Commission Settles Fraud Charges Against Kenneth Rice Former CEO Enron Broadband Services

SEC NEWS DIGEST
Issue 2004-147 August 2, 2004

On July 30, the Commission settled civil fraud charges filed against
Kenneth D. Rice, former Chief Executive Officer of Enron Broadband
Services (EBS). The complaint, filed on May 1, 2003, in the U.S.
District Court in Houston, charged Rice and other executives from EBS
with fraud and insider trading. Without admitting or denying the
allegations in the Commission's complaint, Rice has agreed to be
enjoined permanently from violating Section 10(b) of the Securities
Exchange Act of 1934 and Exchange Act Rule 10b-5, and to be barred
permanently from acting as an officer or director of a public company.
The Commission settled its action in coordination with the Justice
Department's Enron Task Force, which entered into a guilty plea with
Rice on related criminal charges. In resolving the parallel civil and
criminal proceedings, Rice has agreed to pay disgorgement and a civil
penalty totaling more than $14.7 million and to cooperate with the
government's continuing investigation.

As alleged in the Commission's complaint, Rice and other EBS executives
engaged in a wide-ranging fraudulent scheme to, among other things,
inflate the value of Enron stock through a series of false and
misleading statements and the omission of material information in such
public statements about the technology, financial condition, performance
and value of EBS. The false and misleading statements by Rice and
others were made in press releases over a two-year period as well as in
presentations and statements made at Enron's annual analyst conferences
in January 2000 and 2001. As a result of the false statements, Enron's
stock price was artificially inflated. Rice then sold large amounts of
Enron stock at the inflated levels, at a time when he knew that the
statements were false and misleading and when he was in possession of
material non-public information concerning the true status of EBS'
technology and commercial success.

The Commission acknowledges the assistance of the Enron Task Force. The
Commission's investigation is continuing. [SEC v. Kenneth D. Rice, et
al., Civil Action No. H-03-0905 (Harmon) (S.D. Tx.)] (LR-18815; AAE Rel.
2068)