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SEC CHARGES TWO ENRON EXECUTIVES WITH FRAUD RELATING TO ENRON'S BROADBAND
SUBSIDIARY

Former CFO Kevin A. Howard, Former Senior Director of Accounting Michael W.
Krautz
Charged with Violating Federal Securities Laws

The Commission today charged Kevin A. Howard, the former chief financial
officer, and Michael W. Krautz, a former senior director of accounting,
of Enron Broadband Services Inc. (EBS) with violating the antifraud,
periodic reporting, books and records, and internal controls provisions
of the federal securities laws. EBS is a wholly owned subsidiary of
Enron Corp.

The complaint, filed in U.S. District Court for the Southern District of
Texas, alleges that defendants Howard and Krautz engaged in a scheme to
overstate the reported earnings of Enron, and its EBS subsidiary, by
$111 million during the fourth quarter of 2000 and the first quarter of
2001. The scheme, known as "Project Braveheart," involved a sham sale
of certain assets to accelerate recognition of income from a long-term
agreement to develop and provide video-on-demand services.
Conceptually, defendants sought to sell an interest in the future
revenues associated with this agreement for purposes of immediate income
recognition. As alleged in the complaint, Project Braveheart was a sham
from its inception: the transaction had no economic substance and was
created solely for the purpose of generating income.

The Commission's complaint alleges that defendants Howard and Krautz
carried out the scheme by forming a purported joint venture, assigning
the agreement to the joint venture, and selling an interest in the joint
venture to a third-party financial institution. The entity enlisted by
defendants Howard and Krautz to form the joint venture was a partner in
name only and was never intended to participate in the joint venture.
The equity stake of this joint venture partner was not at risk because
Enron guaranteed the entity a short-term take-out at a specified rate of
return. The financial institution to which Enron sold a portion of its
interest in the joint venture also did not have equity at risk as
required, having been guaranteed against loss by Enron. As a result of
Project Braveheart, Enron overstated its reported net income for the
year 2000 by $53 million and for first quarter 2001 by $58 million.

The Commission alleges that as a result of the conduct described above,
that Howard and Krautz violated the antifraud provisions of the federal
securities laws, Section 17(a) of the Securities Act of 1933 and Section
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder;
falsified Enron's book and records, Section 13(b)(5) of the Exchange Act
and Exchange Act Rule 13b2-1; aided and abetted Enron's filing of false
and misleading quarterly reports, Sections 13(a) of the Exchange Act and
Rules 12b-20 and 13a-13 thereunder; and aided and abetted Enron's books
and records and internal accounting control violations, Sections
13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. The Commission is
seeking disgorgement of ill-gotten gains, civil money penalties, a
permanent bar from acting as a director or officer of a publicly held
company, and an injunction against future violations of the federal
securities laws.

The Commission brought this action in coordination with the Justice
Department's Enron Task Force, which today filed related criminal
charges against Howard and Krautz.

The Commission's investigation is continuing. [SEC v. Kevin A. Howard
and Michael W. Krautz, Civil Action No. H-03-0905 (Harmon) SDTX] (LR-
18030; AAE Rel. 1738)

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