Risk & Compliance

Enron Official Offers Plea

Telecom executive agrees to cooperate with federal investigators.
Ed ZwirnSeptember 2, 2004

The Securities and Exchange Commission ordered Kevin Hannon, the former chief operating officer of Enron Broadband Services (EBS), to pay disgorgements and civil penalties of $3.2 million, according to a settlement announced yesterday.

Hannon has also agreed “to cooperate with the government’s continuing investigation,” according to the SEC announcement. The commission’s complaint, filed on May 1, 2003, in U.S. District Court in Houston, charged Hannon and other executives from EBS with fraud and insider trading.

Without admitting or denying the allegations in the commission’s complaint, Hannon has agreed to be enjoined permanently from violating antifraud provisions of the Securities Exchange Act of 1934 and to be barred permanently from acting as an officer or director of a public company.

The SEC alleged that Hannon 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 alleged false and misleading statements by Hannon 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, according to the commission.

Because of the statements, “Enron’s stock price was artificially inflated,” the SEC said. “Hannon 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’s technology and commercial success.”