The Enron Executives: Joseph Hirko

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[I'm starting a new series of Enron biographies. I begin with the Broadband Three, specifically Joe Hirko.]

At age 38, Joseph Hirko was the youngest CFO of an electric utility (Portland General Electric) anywhere in the country. His solid understanding of business and his ability to inspire others made him a popular, well-liked executive. A friend who remembers him from Portland General says that Joe was the epitome of calm command. “He’s the kind of guy who, if he was on fire, would calmly ask someone to bring him a glass of water,” the friend says. Understatement might have been his way, but his work product always overperformed. Like many of his future colleagues at Enron, Joe Hirko was ambitious and obsessive about his work. While he was CFO, he headed up a tiny new venture in the company called FirstPoint Communications, which was building a fiber-optics network.

When Enron bought PGE in 1997, Hirko thought it was a good time to expand the fiber-optic network, which was making money. This idea would become one of the three business units at Enron Broadband Services.

While at EBS, Joe Hirko was co-CEO, splitting responsibilities with Ken Rice. He was well-liked at EBS, just as he was at Portland General. He was a conscientious leader, and one person who knew him at EBS says that he was more involved in the daily tasks than Ken Rice. For instance, he held weekly status meetings to ensure everyone was meeting objectives. He reviewed marketing/sales reports, tended to organizational and personnel issues, handled financial problems, and reviewed the collateral that left the EBS office, including press releases.

Under Hirko’s leadership, EBS was able to reach many high-profile objectives. He was changing the world with sophisticated Broadband products that are still in use today. Enron Broadband Services was a spunky little company with big dreams, plenty of ambition, and a destiny that would shatter Shakespeare. The three business units were progressing well, but it was still a very young company and by the time Enron Corporation collapsed, EBS had not yet fulfilled its potential. All three business units had successes; the most successful was the intermediation company, ie. EnronOnline. It was up and running and a huge success. The fiber-optic network was making great strides. The content-services unit was doing very well too, having had some big successes in its broadcasting of the Country Music Awards, and an Andre Agassi tennis tournament.

After the company collapsed, Joe Hirko was indicted with seven other Broadband defendants on a litany of charges. At trial, he was acquitted of some charges and the jury hung on others. Mr. Hirko vowed to fight on. But Mr. Hirko was tired. Like so many of the Enron defendants, Hirko was losing fortunes on attorney fees, not to mention the emotional toll that seven years of trials and accusations had taken. On October 14, 2008, Hirko accepted a plea deal offered by the government.

According to the government, Enron issued a press release on May 15, 2000, announcing the acquisition of Warpspeed Communications. According to Mr. Hirko’s plea agreement, the press release falsely represented the status of the Broadband Operating System, saying that it was presently functioning as part of Enron’s network. The press release says:

Broadband Operating System allows application developers to dynamically provision bandwidth on demand for the end-to-end quality of service necessary to deliver broadband content.

Mr. Hirko’s plea agreement states that he approved this language though he knew it contained materially inaccurate representations of the BOS’s status. According to the plea agreement, Hirko’s approval of this press release, as well as other press releases, assisted in maintaining Enron’s overall stock price, thereby improperly increasing the value of Hirko’s holdings of Enron stock.

Mr. Hirko accepted the plea agreement while he and his co-defendants Rex Shelby and Scott Yeager had petitions before the Supreme Court. The government crafted the plea so that it was irrevocable, regardless of the Supreme Court’s decisions in the Shelby and/or Yeager cases. Mr. Hirko, exhausted and wanting to move on with his life, accepted this condition on his plea.

Presently Mr. Hirko awaits sentencing, scheduled for September. If he can not change or withdraw his plea, it is possible Judge Vanessa Gilmore will do one of two things: sentence him at the low end of the range requested by the government (ie, twelve months) or she can refuse to accept the plea at sentencing. During the Broadband trial, Gilmore seemed very tough on the defendants but over the last year, she’s been more accepting of their motions, unexpectedly ruling in their favor in some motions, so it is possible that she will accept the successful Yeager decision a mitigating factor in her sentence.

It is a small blessing that Joe Hirko’s temperament is naturally calm. He is able to handle crises with grace and aplomb, so I know that he will survive in prison. He will endure, and return free to the shores of his own real life.

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