Two former Enron executives responsible for aborted video- on-dem...

Two former Enron executives responsible for aborted video- on-demand (VoD) venture with Blockbuster were indicted on securities and wire fraud charges for allegedly using accounting tricks to generate $111 million in fake earnings. Federal grand jury in Houston returned 19-count indictment against Kevin Howard and Michael Kurtz, charging them with securities fraud, wire fraud, conspiracy and lying to FBI. Howard, finance vp, and Kurtz, senior dir.-transactional accounting, at Enron Broadband Services, are accused of fraudulently recording earnings in 2000 and 2001. Transaction at center of charges involved 20-year exclusive agreement Enron signed with Blockbuster in April 2000 to stream movies to consumers’ home using proprietary broadband network. Companies began testing system in Dec. 2000, but quickly encountered problems including tendency of set-top boxes to catch fire, Dept. of Justice (DoJ) has said. In fall 2000, Howard and Kurtz created finance transaction code-named Braveheart that was designed to allow Enron to immediately recognize anticipated future earnings from agreement. Enron executives created joint venture to deploy Blockbuster contract with nCube, company that supplies VoD equipment to cable operators, and Thunderbird, investment fund controlled by Enron, DoJ said. Enron sold portion of joint venture to Canadian Imperial Bank of Commerce (CIBC), deal that enabled company to record $53 million in revenue in 4th quarter of 2000 and $58 million in first quarter of 2001. Howard and Kurtz were employed at Enron at time of their March 12 arrests, but they since have left company, spokeswoman said. Former executives, free on $500,000 bond each, have denied charges. Pretrial hearing is set for July 1.