FOR IMMEDIATE RELEASE WEDNESDAY, AUGUST 25, 2004 WWW.USDOJ.GOV CRM (202) 514-2008 TDD (202) 514-1888 WASHINGTON, D.C. - Assistant Attorney General Christopher A. Wray of the Criminal Division, Enron Task Force Director Andrew Weissmann, and Assistant Director Chris Swecker of the Federal Bureau of Investigation announced today that Mark Koenig, former Director of Investor Relations and Executive Vice President at Enron Corp., has pleaded guilty to securities fraud in connection with his employment at Enron. As part of his plea agreement, Koenig has agreed to cooperate fully and truthfully with the governments ongoing criminal investigation of the collapse of Enron.
Koenig, 49, of Kingwood, Texas, entered the guilty plea today before Judge Ewing Werlein in United States District Court in Houston, Texas. Koenig pleaded guilty to participating with Enron senior management, including defendants Kenneth Lay, Jeffrey Skilling, and Richard Causey, in a scheme to commit securities fraud, in violation of 15 U.S.C. 78j(b) and 78ff. If he abides by the terms of his plea agreement, Koenig faces the statutory maximum sentence of 10 years in prison and a fine of $1 million, or twice the gain, at his sentencing, which will be scheduled by the court at a later date. As part of his plea, Koenig agreed to pay approximately $1.5 million through forfeiture and imposition of a fine. Koenigs principal deputy, Paula Rieker, pleaded guilty in May 2004 to insider trading.
Todays guilty plea reinforces the important message that corporate leaders will be held accountable for misleading investors, said Assistant Attorney General Wray. We will continue our ongoing efforts to fight corporate corruption. As described in the information to which he pleaded guilty and in his plea agreement, Koenig admitted that he was aware that Enrons publicly reported financial results and filings with the SEC did not truthfully present Enrons financial position, results from operations, and cash flow of the company and omitted facts necessary to make the disclosures and statements truthful and not misleading.
Specifically, Koenig admitted that statements made by him and others relating to the performance of two of Enrons core businesses, Enron Broadband Services (EBS) and Enron Energy Services (EES), were false and misleading. Certain of those false and misleading statements are outlined below: (a) In 2000 and 2001, EBS was promoted by Enron senior management as a major contributor to the value of Enrons stock. In support of Enron managements claims that EBS continued to be successful and a significant positive factor contributing to Enrons stock price, Koenig admitted that he misled securities analysts during two conference calls, one on Jan. 22, 2001 and another on Apr. 17, 2001. Koenig admitted that he and other members of Enron management sought to minimize the importance of certain transactions so that Enron senior management and others could continue to portray EBS as a growing and successful business unit, and thereby support artificially the share price of Enron stock.
(b) In 2000 and 2001, EES was also promoted by Enron management as a growth business and a major contributor to the value of Enrons stock. Koenig admitted that in the first quarter of 2001, he learned that EES was confronting substantial losses. To avoid revealing those losses to the investing public, portions of EESs business were moved into another business unit, Enron Wholesale. This reorganization was falsely described by Enron management and in Enrons public filings with the SEC as done solely to increase efficiency - which he and others knew was not true. In addition, Koenig admitted that he and others continued to describe EES as a success, intentionally omitting to disclose to the public any reference to EESs losses which had been concealed by the reorganization.
To date, 32 defendants have been charged in connection with the work of the Enron Task Force, including 23 former Enron executives. With the plea today, 14 defendants have so far been convicted. The Enron Task Force has obtained more than $162 million in forfeiture for restitution to victims.
Enron, at one time the seventh-ranked company in the United States with stock trading as high as $80 per share in August 1999, filed for bankruptcy protection on Dec. 2, 2001 and its stock became virtually worthless.
The investigation into Enrons collapse is being conducted by the Enron Task Force, a team of federal prosecutors supervised by the Justice Departments Criminal Division and agents from the FBI and the Internal Revenue Service Criminal Investigations Division. The Enron Task Force also has coordinated with and received considerable assistance from the Securities and Exchange Commission. The Enron Task Force is part of the Presidents Corporate Fraud Task Force, created in July 2002 to investigate allegations of fraud and corruption at U.S. corporations.
The Enron Task Force investigation is continuing. 04-581
Source: US Department of Justice
