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Ex-Enron investor relations chief pleads guilty to fraud charge

Associated Press

HOUSTON -- The former Enron Corp. executive who helped present the company's famously false financial reports to investors has pleaded guilty to a fraud charge for helping hide the energy trader's true fiscal state.

Former investor relations director Mark E. Koenig switched his plea to guilty on one count of aiding and abetting securities fraud, which carries up to 10 years in prison. He had pleaded innocent earlier Wednesday.

The Securities and Exchange Commission also filed a related civil action, and Koenig agreed to relinquish $1.49 million in forfeited assets and civil penalties and cooperate with government probes into Enron.

In his role, Koenig, 49, worked with former Enron founder Kenneth Lay and former CEO Jeffrey Skilling, serving as the company's main link to investors and analysts. He coordinated analyst presentations and oversaw the company's earnings announcements -- exercises that proved fraudulent after Enron collapsed into scandal in December 2001.

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Prosecutors said Koenig joined and knew of efforts by senior Enron managers to mislead investors about the company's real condition.

Lay, Skilling and former chief accounting officer Richard Causey face similar charges, and all three have pleaded innocent.

"By early 2001, I was aware that the presentation to the public of Enron's finances and business success by Enron senior management, including myself, intentionally concealed the true state of Enron," Koenig said in a statement filed with his cooperation agreement.

Specifically, federal prosecutors say Koenig knew the company masked losses by its defunct retail energy unit -- Enron Energy Services -- by folding it into the division that included the company's trading unit.

The government also alleges Koenig participated in misleading analysts about profits in Enron's former Internet unit, Enron Broadband Services, when that unit never earned a dime. Both units went bankrupt along with the parent.

Those allegations overlap with some of the pending charges against Lay, Skilling and Causey.

But of those three, Koenig's statement mentions only Skilling by name. Besides misleading analysts in the July 2001 conference call, he said he misled them about broadband earnings during conference calls in January and April 2001. That time frame is included in allegations against Skilling and Causey, but charges against Lay focus on the months between Skilling's abrupt resignation in mid-August 2001 through December that year.

Daniel Petrocelli, Skilling's lead trial attorney, said it wasn't surprising defendants were cutting deals "with all the pressure brought to bear on them" by the Justice Department and various agencies and politicians working with them.

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"The real test, though, is what these people can truthfully say when they have to raise their right hand and walk up to that witness stand and testify in front of a judge and jury," Petrocelli said.

The broadband allegations also overlap with pending charges against six former broadband executives slated for trial in October. The former CEO of the broadband unit, Kenneth Rice, pleaded guilty last month to securities fraud for touting Enron's broadband network as having capabilities it didn't have to impress analysts and inflate company stock.

Two of the six former executives are accused of faking $111 million in earnings for the broadband unit in late 2000 and early 2001 from a video-on-demand deal that flopped.

Koenig's plea came about three months after Enron's former No. 2 investor relations executive, Paula Rieker, pleaded guilty to an insider trading charge and agreed to cooperate with prosecutors.

Rieker answered to Koenig, and was responsible for preparing press releases about earnings and scripts for quarterly earnings conference calls.

Koenig joined Enron as company treasurer in 1985, when the company was formed by a merger of Houston Natural Gas and Omaha's InterNorth. He switched to investor relations seven years later. He resigned from Enron in May 2002.

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