U.S. District Judge Vanessa Gilmore in Houston has thrown out five convictions against Kevin Howard, the former vice president of finance for Enron Broadband Services (EBS), for his alleged role in a scheme to mislead investors about the Enron Corp. subsidiary's finances.
Following a mistrial in 2005, Howard was retried and convicted last year on one count of conspiracy, three counts of wire fraud and one count of falsifying books and records (see Daily GPI, June 1, 2006). Co-defendant Michael Krautz, another former EBS executive who was also retried, was acquitted on the same charges. Howard and Krautz were originally tried in 2005 with three other former executives (see Daily GPI, April 15, 2005).
Last November, government prosecutors conceded that four of Howard's five convictions should be dismissed because they would likely not stand up on appeal. However, prosecutors argued that a fifth count of falsifying books and records should be upheld. In response, Howard's defense team said that the prosecution's theory had tainted all five of the convictions. Gilmore, who had presided over the trials, agreed.
Gilmore's order in part affirmed a ruling last year by the Fifth U.S. Circuit Court of Appeals. In another Enron-related case, the appeals court overturned most of the 2004 convictions of four former Merrill Lynch & Co. executives (see Daily GPI, April 22, 2005). In that trial, the government alleged the defendants had deprived Enron of their "honest services" because they participated in a fraudulent deal to falsify earnings. However, the circuit court ruled the honest services theory was not applicable because the defendants' actions did not rob Enron of money or property.
The government also had argued that Howard had deprived Enron of his honest services. However, Gilmore wrote that Howard took no money or property when he helped complete a transaction to sell future EBS profits in a video-on-demand deal with Blockbuster so that Enron could immediately book earnings. The Blockbuster deal was never completed.
Gilmore dismissed the fifth conviction of falsifying books and records because an instruction she had given the jurors at his trial, which was at the government's request, was tied to the tainted conspiracy count.
The government still retains the right to retry Howard a third time. A Justice Department spokesman said the government was reviewing its options.
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