The former managing director of Enron Corp.’s investor relations department, Paula Rieker, pleaded guilty last week to one felony count of insider trading and agreed to cooperate with the Justice Department’s ongoing investigation. In addition, Rieker agreed to pay nearly $500,000 to the Securities and Exchange Commission (SEC) to settle separate charges concerning the profit she made on the sale of Enron stock a few months before the company declared bankruptcy in December 2001.

The Justice Department’s Enron Task Force charged Rieker with one criminal count for knowing about significant losses within Enron’s emerging broadband business and assisting in providing false and misleading information to the public in early- to mid-2001. The single felony charge carries a maximum penalty of 10 years in prison and a $1 million fine. She is scheduled to be sentenced this summer.

Task Force Prosecutor Kathy Ruemmler said that Rieker, 49, had “breached her duties of confidentiality, trust and loyalty to Enron.” As managing director of investor relations, Rieker was “actively involved in the compilation and drafting of Enron’s first and second quarter 2001 earnings releases,” as well as conference call scripts for Enron executives, according to the SEC.

In the SEC case, Rieker allegedly exercised options to buy more than 18,000 shares of Enron in July 2001, then sold the shares on the open market for almost $49.80 each, earning $629,000 before taxes. One week later Enron issued an earnings release, which Rieker was responsible for, that detailed a $102 million loss within its broadband unit, which in turn caused its stock to fall. By selling her shares ahead of the earnings statement, the SEC alleged that Rieker avoided losses of nearly $18,200.

The SEC’s civil case revolved around a charge that Rieker violated the anti-fraud provisions of federal securities laws. She neither admitted nor denied the allegations, but agreed to never again serve as an officer or director of a public company. Rieker agreed to pay the SEC the amount she would have lost in her Enron stock sale, $18,200, plus pay the SEC a penalty of $18,000. She also will pay back the amount she earned from the stock sale after taxes, which totaled approximately $463,000.

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