Bad guy or bad rap?

New details surface about Portland member of the ‘Enron 8’ Joe Hirko’s lawyer: Don’t make broadband millionaire a scapegoat

By Kristina Brenneman

The Portland Tribune, Feb 6, 2004, Updated Oct 30, 2009

When Joe Hirko left Enron Broadband Services, the Portland General Electric spinoff that he had helped fashion into a high flier for Enron Corp., his colleagues threw him a goodbye party at OMSI.

Hirko “had the biggest grin in the world, because he was about to walk away with $35 million,” recalled Barry Lavine, a former Enron Broadband programmer who was at the party.

He was leaving, Lavine suggested, because he sensed trouble ahead. “Basically he said, ‘They are going to steamroll over us, and I’m going to get out while I can,’ ” Lavine remembered.

Today, a little less than four years after that party, Hirko, the financial wizard who helped engineer PGE’s 1997 sale to Enron Corp., faces a prison term, permanent exile from any responsible position at a publicly traded U.S. corporation and the loss of a considerable portfolio of assets, including $780,000 in property in South Kona, Hawaii; a large amount of tax-exempt Oregon state, county and municipal bonds; and an array of common stocks.

Hirko, 47, is scheduled to go on trial in October in U.S. District Court in Houston for allegedly conspiring with his broadband cohorts to pump up the company’s stock price by lying about incomplete technology and profits. He has pleaded not guilty.

His four-member Portland defense team says the Oregon State University grad, who worked summers crunching numbers before joining PGE straight from college in 1980, didn’t do anything wrong. He is merely a pawn in the government’s quest to send Enron’s bad guys to jail, they say.

“We don’t believe there was any intent to mislead the public,” said Per Ramfjord, an attorney at Stoel Rives LLP who along with two colleagues and the well-known defense attorney Norm Sepenuk make up Hirko’s defense team.

“You worry about a company like EBS being made a scapegoat for the downfall of high-tech companies that thrived through the late ’90s. It’s hard not be tainted by this. Mr. Hirko worked hard and reaped rewards, but so did many others.”

Roster of players questioned

Hirko, who lives in Northwest Portland, “is baffled by what has happened É it’s really difficult for someone like him,” Ramfjord said.

Hirko would not comment on the case on advice of his counsel.

Described by former co-workers as smart and straight-arrow honest, Hirko is the only Portland-based executive of the so-called Enron 8, the group of executives the government has accused of fraudulently pumping up Enron Broadband’s stock price. The group faces 223 charges of securities fraud, wire fraud, money laundering and conspiracy in a case that has become the poster child for corporate fraud.

Hirko could spend years in jail for his four-year tenure as chief executive of Enron Broadband, whose stock soared to $78 a share in January 2001 in the excitement over its capabilities to send television simulcasts and data over miles of high-speed fiber-optic network.

Government prosecutors said the telecom company, which started in a PGE basement office as FirstPoint Communications, never had the technology and live cable lines it claimed to possess. To boost sales, its executives used special purpose entities and fake deals to hide its “poor business performance” and pump up quarterly earnings, according to court documents.

The remains of the EBS cable network were sold last week for $750,000 to Time Warner Telecom of Oregon LLC.

Some former Enron Broadband workers interviewed for this story said the executives’ deals were shady but they are skeptical that Hirko was involved. They point instead to EBS’ Houston-based co-chief executive officer, Kenneth Rice, who was indicted on charges similar to those leveled against Hirko, and to Enron Corp. CEO Jeff Skilling.

“I thought he was on the up and up,” said Lavine, who is now an independent consultant. “The distortions, hype were really not his doing. Hirko did not understand a lot of the technical stuff.”

Others aren’t so certain what happened within the Enron morass.

“I know he was highly thought of by Enron management, including Skilling,” said Al Alexanderson, the retired PGE counsel who was recently subpoenaed by government prosecutors for the broadband trial. “He may very well have believed it was a terrific venture. I don’t know. It’s certainly possible he and others were drinking their own whiskey.”

Operating system touted

A status hearing is scheduled for Monday. The Enron Broadband trial was delayed in April to give lawyers more time to sift through about 80 million pages of documents produced by the government. The documents include everything from press releases and e-mails to audiotapes and videotapes of market analyst conferences.

In an April 1999 news release, Hirko crowed about Enron Broadband’s ability to send TV-quality video and data over the Internet, which the government contends are both false claims. The promotional train hit its peak Jan. 20, 2000, during Enron’s annual meeting with securities analysts at Houston’s Four Seasons Hotel. Hirko touted the Enron Broadband network at the meeting and claimed to have an “advanced” software system Ñits so-called Broadband Operating System or BOS Ñ that was superior to its competitors’.

After the meeting, share prices of Enron Broadband went from $54 to $72 in one day.

Bryan Sierra, a spokesman for the U.S. Justice Department’s Enron Task Force, said he could not comment specifically on the Hirko charges. However, in earlier press conferences, the Enron prosecuting team showed little doubt about the strength of its case.

“We have full confidence that the proof at trial will bear out the allegations of the indictment,” said task force director Leslie Caldwell in a statement last June.

Ramfjord countered that Hirko’s forward-looking comments in press releases and statements were not indicative of “any nefarious conduct.”

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