Rice cooked at Enron trial
Former chief of the energy firm's broadband unit says he and then-CEO Skilling misled investors. Now at bat: Terry West
By Jessica Seid, CNNMoney.com staff writer

HOUSTON (CNNMoney.com) - Kenneth Rice, the former CEO of Enron's broadband unit, admitted Thursday he never discussed his discomfort about misleading analysts with Jeff Skilling, but remained adamant that Skilling was obfuscating on analyst calls.

Now on the stand in the trial of ex-Enron executives Ken Lay and Jeff Skilling is Terry West, an accountant at Enron who is currently reconciling accounts and working with the tax department to prepare returns. West described for the jury the process by which Enron's business units devised a plan and target figure for each year.

Kenneth Rice
Kenneth Rice

But "ultimately it would be Mr. Skilling who would decide what their target would be," she said.

Questioning Rice before he was excused mid-afternoon Thursday, defense attorney Mark Holscher tried to convince the jury that Rice had been, in fact, "optimistic" about all aspects of Enron Broadband Services (EBS) and did not conspire with Skilling to mislead analysts.

Holscher honed in on EBS's aggressive pursuit of Hollywood studios for premium movies for the video-on-demand business. EBS was a key part of Enron's growth story before the company collapsed in 2001.

He aimed to show the jury that Rice did believe Enron was better off after it terminated its agreement with Blockbuster (Research) to provide content.

On Wednesday, Holscher brought up the potential acquisition targets Rice had pursued in early 2001, which included Global Crossing and Sprint (Research). Holscher also referenced steps Rice took to bring in more qualified executives as well as pursue Hollywood studios for premium content for the video-on-demand business.

Holscher argued that Rice had been, in fact, bullish on the future of Enron's broadband unit and did not, with Skilling's approval, mislead analysts about the capabilities and future potential of the division.

"You never once told Jeff Skilling you were uncomfortable with any statement he made to analysts about EBS, is that right?" Holscher asked.

"Yes," Rice said, but later added "I knew Mr. Skilling and I had misled investors on a number of occasions about the prospects of EBS."

On re-direct, prosecutor Sean Berkowitz asked Rice if EBS made any money from the video-on-demand business.

"No we made no money from selling movies," Rice said.

Judge Sim Lake intervened to ask Rice how EBS had any revenue at all if that was the case. Rice told him that it was complicated, "I'm not really sure if I understand," Rice said.

Rice was indicted in May, 2003. A little over a year later, he agreed to cooperate with prosecutors in hope of securing a lighter prison sentence. He pleaded guilty to a single count of securities fraud, agreeing to pay nearly $15 million, and now faces up to 10 years in prison.

The government has said after Terry West, its next witnesses will be ex-Enron executives Paula Rieker and Wesley Colwell.

Rieker was second-in-command in investor relations under Mark Koenig, the first witness in this trial.

Colwell was an accountant for Enron's trading unit.

There will be no court Friday and Monday is a federal holiday.

Enron's bankruptcy was the largest in history at the time and was the first of a wave of business scandals that shook corporate America and led to the passage of tough new disclosure laws.

Enron was once the nation's seventh-largest company.

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Click here to read about Enron's "goofy" accounting. Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.