Risk & Compliance

Court Tosses Conviction of Ex-Enron Unit’s CFO

Kevin Howard, formerly of its broadband unit, suffered from prosecutors' flawed theory, says federal appeals court.
Stephen TaubFebruary 14, 2008

The conviction of a former Enron unit finance chief was thrown out by a federal appeals court.

The Associated Press reported that the Fifth U.S. Circuit Court of Appeals upheld a judge’s decision to toss the conviction of Kevin Howard for falsifying records at the one-time energy giant’s broadband unit. The court ruled that Howard’s conviction should be vacated because it was tied to a flawed legal theory used by prosecutors.

The AP noted that in January 2007, U.S. District Judge Vanessa Gilmore threw out five convictions against Howard, including falsifying records as well as others for fraud and conspiracy because of the faulty theory. She also ordered a new trial.

According to the report, prosecutors had asked the appeals court to uphold the records-falsification count, arguing that evidence presented at the trial had proved that charge. However, they conceded that the fraud and conspiracy counts should have been vacated.

Michael Krautz, the former senior director of transactional accounting of the Enron broadband unit, was found not guilty of the same charges. He had initially faced 30 years in prison.

In June 2006, the Houston Chronicle reported that two jurors and two alternates said that they felt pressured by fellow jurors to convict Howard. All four reportedly signed letters asserting that the trial of former Enron Chairman Kenneth Lay and former CEO Jeffrey Skilling — taking place in the courtroom next door — created a vindictive atmosphere.

One juror claimed she felt the goal was to “fry” Enron’s upper management, including Howard; another reportedly wrote that some jurors were bullied into swapping their guilty vote for Howard for a not-guilty vote for Krautz, the Chronicle stated at the time.

The ruling to vacate Howard’s conviction, however, ultimately stems from an August 2006 ruling by the Fifth Circuit that threw out most 2004 convictions against four former Merrill Lynch executives in a separate Enron case, the paper explained. During the trial, the issue was raised whether Merrill executives deprived Enron of their “honest services” because they participated in a sham deal to help Enron book bogus earnings. However, the appeals panel ruled that the honest services theory did not apply because the defendants’ actions were aligned with corporate goals and didn’t rob Enron of property or money.