U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18717 / May 19, 2004
Accounting and Auditing Enforcement
Release No. 2018 / May 19, 2004
Securities and Exchange Commission v. Paula H. Rieker, Civil Action No. H-04-1994 (SDTX)
SEC CHARGES PAULA H. RIEKER WITH VIOLATING FEDERAL SECURITIES LAWS WHILE SERVING AS INVESTOR RELATIONS OFFICIAL AT ENRON
Defendant Barred From Serving As Officer Or Director Of Public Company and Agrees to Pay $499,333; Will Cooperate With Government Investigations
The Securities and Exchange Commission today charged Paula H. Rieker, a former Managing Director for Investor Relations and Corporate Secretary for Enron Corp., with violating the antifraud provisions of the federal securities laws. Without admitting or denying the allegations of the Complaint, Rieker has agreed to be enjoined permanently from violating and aiding and abetting the violation of Sections 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5, and to be barred from acting as an officer or director of a public company. As part of the settlement agreement, which is subject to the approval of the U.S. District Court, Rieker will pay disgorgement, prejudgment interest, and a civil penalty totaling $499,333. The Commission brought this action in coordination with the U.S. Department of Justice Enron Task Force, which filed a related criminal charge against Rieker. Rieker agreed to enter a guilty plea in connection with that charge and to cooperate with the government's continuing investigation.
As alleged in the Complaint, Rieker engaged in insider trading in violation of the federal securities laws in July 2001 when she traded on material inside information about significant losses in Enron Broadband Services (EBS). The Complaint also alleges that Rieker violated the federal securities laws by providing substantial assistance to Enron executives and senior managers in the dissemination of false and misleading information to the public about Enron business units in analyst calls and earnings releases.
Specifically, the Commission's Complaint alleges as follows:
- Aiding and Abetting Material Misrepresentations and Omissions: In her role as Managing Director for Investor Relations, Rieker was actively involved in the compilation and drafting of Enron's First and Second Quarter 2001 earnings releases, and scripts for Enron's March 23, 2001 Analyst Call and the First and Second Quarter 2001 Analyst Calls. During her efforts, Rieker learned specific information about Enron's retail energy business unit, Enron Energy Service (EES), and about EBS revealing that EES and EBS were not the successful business units described in the earnings releases and scripts she compiled, and as described by Enron in the analyst calls. Nevertheless, Rieker did not correct the false and misleading information provided to analysts and investors by Enron executives and senior managers.
- Insider Trading: Rieker, in her role as an investor relations official at Enron, learned that Enron's EBS business unit was experiencing significant financial problems and was experiencing losses greater than had been previously disclosed to analysts and investors. While in possession of this material non-public information, Rieker sold Enron stock in advance of Enron's public disclosure of EBS' true financial picture and avoided losses.
The Commission's investigation is continuing.
SEC Complaint in this matter