Breaking news and expert analysis on legal and compliance issues
January 16, 2013
By Amanda Maine, J.D.
Kevin Howard, who served as CFO and vice president of finance for Enron subsidiary Enron Broadband Services, has been suspended from appearing or practicing before the SEC as an accountant. The suspension follows a final judgment against Howard, who on January 4 was permanently enjoined from violating certain federal securities laws. The final judgment from the U.S. District Court for the Southern District of Texas also prohibited Howard from serving as an officer or director of an SEC-registered public company and ordered him to pay a $65,000 civil money penalty.
The Commission's complaint and order, to which Howard consented, alleged that Howard did not inform Arthur Andersen, then Enron's outside auditor, about the true nature of a scheme known as "Project Braveheart." The Commission alleged that, under the scheme, a long-term agreement with Blockbuster, Inc. to develop and provide video-on-demand services, which monetized certain assets resulting in the immediate recognition of earnings, was a sham arrangement with no economic substance. Howard formed a purported joint venture and sold an interest in the joint venture based on the value of future revenues from the agreement to a third party, according to the Commission.
The Commission also alleged that Howard was aware that the joint venture partner never intended to participate as a partner and that its equity was not at risk because Enron guaranteed the entity a short-term take out at a specified rate of return. According to the Commission, Howard made false and misleading statements about the transaction to Andersen. As a result of Project Braveheart, Enron Broadband Services recognized a total of $108 million in earnings, which enabled the company to meet its earnings targets.
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