Vaporware, Illegal?

According to this New York Times report (registration required), Enron executives and engineers will be charged with (among other things) with illegally pumping up the company’s stock price by lying about the existence of certain Internet technology. Anyone remember the Internet boom? SOP for tech companies a couple of years ago.

…whether anyone charged with those crimes will ever go to jail may rest in part in the hands of an unlikely group of people, including Drew Carey, Shania Twain, Pete Sampras and some fans of independent short films.

The reason is simple. The defense is expected to argue that Enron possessed — at various levels of quality — the technical ability it claimed. And the proof, say software specialists from Enron and other industry executives, lies in part in the technical features that the company offered while streaming video over the Internet for Mr. Carey’s comedy show, the 1999 Country Music Awards, the Wimbledon tennis competition and a Web site that provided an assortment of independent short films.

Well they certainly had something working… maybe not what the media relations, executives, and PR people were spinning it as, but they did have some technology.

But the primary charges against four of the seven defendants — Kenneth Rice, Joe Hirko, Scott Yeager and Rex Shelby — state that certain software-driven functions promoted by Enron as available on its network were not. Prosecutors contend that Enron executives falsely said that the company had products for shipping and streaming video and other media over the Internet to corporations, and that it could meter and bill customers based on use, as well as allow customers to select qualities of service and schedule times for shipping data across the network.

Other companies knew how to do this… Maybe Enron was too stupid to figure it out. At the end of the day, is stupidity and mismanagement a criminal offense or a civil offense? We know where the prosecutors stand on this issue.

The more interesting question is whether this form of prosecution will be used against other companies in the future.

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