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Last Updated: Wednesday, 1 September, 2004, 08:27 GMT 09:27 UK
Top Enron official gets plea deal
Enron logo
Enron's fall shocked America
A second high-ranking official at the former internet subsidiary of failed US energy giant Enron has struck a deal with US prosecutors.

Kevin Hannon, Enron Broadband Services' (EBS) former chief operating officer, has pleaded guilty to conspiracy to commit securities and wire fraud.

Meanwhile, Enron's natural gas pipelines, its most prized remaining assets, are to be auctioned off.

Enron had previously received two offers worth up to $2.3bn (1.3bn).

As part of Mr Hannon's plea deal, the 44-year-old has admitted exaggerating to Wall Street the size and success of the business.

Two offers

While EBS portrayed itself as a developed company with an established customer base, it was in fact merely a start-up with no sustainable sources of revenue, US prosecutors said.

Mr Hannon now becomes the second of seven indicted EBS officials to strike a plea bargain, and faces a maximum of five years in prison and a fine of $250,000 - a much smaller sentence than that he could have received had he been convicted without co-operating with the prosecution.

In July, former EBS chief executive Kenneth Rice made his own deal, while the remaining five defendants are due to go on trial in October. They may also choose to take a plea deal.

Enron's main pipeline business - CrossCounty Energy - is due to be auctioned on Wednesday.

So far two separate companies have made an offer - NuCoastal, and a joint venture of Southern Union and GE Commercial Finance Energy Financial Services.

Cash return

When the auction is complete, Enron will choose a winning bid before presenting it to US bankruptcy judge Arthur Gonzalez for approval in September.

Mr Gonzalez is in charge of Enron's reorganisation following its emergence from bankruptcy in July.

Enron is also to sell another subsidiary business - Portland General Electric - leaving it with just one company - Prisma Energy International - which has small-scale pipeline and power assets in 14 countries.

Assuming all the sales are successful, Enron's creditors will eventually get about $12bn, 92% in cash and 8% in Prisma shares. Shareholders will get nothing and the Enron name is likely to disappear.

Enron's collapse into bankruptcy in the wake of a false accounting scandal stunned corporate America.

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