Friday, April 6, 2007

Once More Into the Enron Nigerian Barge Trial

The Houston Chronicle reports (here) that the government has decided to retry the three Merrill Lynch defendants accused of helping Enron by arranging a sham transaction to purchase and then resell Nigerian Barges at the year-end in 1999.  The three executives are Daniel Bayly, the firm's former head of investment banking; James Brown, who headed the asset leasing group; and Robert Furst, Merrill's former liaison with Enron.  The convictions of the three were overturned in August 2006 by the Fifth  Circuit, which found that the government's honest services fraud theory was improper and tainted the convictions (U.S. v. Brown here).  Prosecutors have eliminated that basis for the mail/wire fraud counts, so the government will have to prove a scheme to defraud Enron of money or property, which may be a bit more difficult to establish.  The defendants served a portion of their jail terms before being released on bail by the Fifth Circuit after the oral argument in the case, a clear sign that the convictions were in trouble.  While the Chronicle article mentions that there are plea negotiations, a key issue likely is whether the government will demand that any of them serve additional jail time.  The SEC also filed civil securities fraud charges against them, so any resolution will have to include the civil side of the ledger.  The new trial is scheduled for January 2008, a scant eight years after the transaction. (ph)

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