Today in 2004, Enron corporate secretary Paula Rieker pleaded guilty to one count of insider trading after accusing herself of selling stock upon knowledge that Enron’s broadband unit lost more money than publicly claimed. She was sentenced to two year’s probation for insider trading. Prosecutors had asked she be given a reduced sentence because she helped authorities in their investigation. [Her sentence was the second in as many weeks to be shockingly light: Former chief financial officer Andrew Fastow drew six year sentence, reduced from ten.]
Her primary purpose in the Enron show-trials seems to be that, like Ken Rice and Kevin Hannon, she provided “powerful and credible testimony” against Dr. Lay and Jeffrey Skilling.
“As one example, she provided a credible and corroborated account of an effort by Skilling and others to manufacture an extra penny of earnings at the end of a reporting quarter,” prosecutors Sean Berkowitz and John Hueston said in a court filing.
At the trial of Lay and Skilling, Rieker told jurors that Skilling twice ordered that the company boost its reported earnings-per-share figures to meet or beat Wall Street expectations and support its stock.
However, it was also demonstrated at trial that Jeff Skilling was not even in the country when the challenged figures were collated or published. Furthermore, when the challenged figures were published, they did not change the stock price an iota.
The extra penny controversy was as contrived as Ms. Rieker’s testimony of the subject.