Thursday, September 16, 2010

U.S. Won't Seek Retrial in Enron Case

The Wall Street Journal

 
In the latest twist in the government's multi-year prosecution of the Enron Corp. scandal, the Justice Department moved Wednesday to drop charges against a former Merrill Lynch & Co. official days before a scheduled retrial involving the only criminal case brought against Wall Street figures in the alleged misdeeds at the onetime energy giant Enron Corp. .

The Justice Department asked a federal judge in Houston to drop fraud and conspiracy charges against James A. Brown, a former Merrill official who along with three former brokerage-firm colleagues was convicted in 2004 in connection with a 1999 deal known as the "Nigerian barge transaction."

A Justice Department spokeswoman declined to comment.

At the 2004 trial, prosecutors alleged that Enron's sale of an interest in three power-producing barges, located off the coast of Nigeria, to Merrill was a sham that allowed the energy company to illegally book a profit. Prosecutors said the deal wasn't legitimate because Enron had promised to take Merrill out of the deal within six months at a predetermined profit. This guarantee meant that Merrill was never at risk, so Enron couldn't legally treat the deal as a sale. The four Merrill defendants, who went to prison in 2005, maintained they did nothing illegal.

The barge case was widely viewed as an effort by the government to send a message to the financial community about acceptable and unacceptable conduct in helping major corporations structure their finances. It was also viewed as an early test case for the Justice Department's Enron Task Force, which eventually secured more than a dozen guilty pleas from former Enron officials. Its work culminated in the 2006 fraud and conspiracy convictions of former Enron chairman Kenneth Lay and former president Jeffrey Skilling. Mr. Lay died shortly after of heart-related problems and Mr. Skilling is still appealing his conviction and 24-year prison sentence.

But some of the government's trial-court success on Enron has unraveled in the appellate courts. In 2006, for example, the Fifth Circuit U.S. Court of Appeals overturned the fraud and conspiracy convictions of Mr. Brown and the other defendants from Merrill, which was purchased in January 2009 by Bank of America Corp. The appellate court upheld Mr. Brown's conviction for perjury and obstruction of justice in connection with the Enron investigation. As a result of the appellate ruling, Mr. Brown and the three other Merrill defendants were released from prison at various points in 2006.

In 2007, the government moved to put Mr. Brown back in prison, arguing that his roughly twelve months of incarceration wasn't long enough to satisfy his perjury and obstruction convictions. A year earlier, the government hadn't opposed Mr. Brown's release. U.S. District Judge Ewing Werlein Jr., who has presided over the barge case, denied the government's request.

The government has resolved its disputes with the other Merrill defendants, including in one case dismissing the remaining charges. However, it pressed on against Mr. Brown.

In recent months, his attorneys and prosecutors have made numerous court filings in anticipation of the retrial, which Judge Werlein had scheduled for Monday. Mr. Brown's attorneys contended in court filings that all charges should be thrown out for prosecutorial misconduct. The filings argued that the government withheld key exculpatory evidence from the defense before the 2004 trial. Such failure violates the law, the defense argued. However, Judge Werlein ruled in favor of the government, which argued that it had turned over all necessary material before the 2004 trial.

On Friday, the Justice Department unexpectedly asked Judge Werlein to postpone the trial. A government filing argued that Mr. Brown's continued efforts to appeal his perjury and obstruction convictions might eventually force the government to add those counts back into the case. Any trial should be postponed until all possible charges could be handled at once, the filing said.

Mr. Brown's attorneys vehemently opposed a continuance. In a filing, they said they had recently contacted key government witnesses from the 2004 trial, who told them they hadn't heard from the government—in one case for years. Such lack of preparation "suggests that the government has been using the court to run an outrageous 'bluff'….for the improper purpose of continuing to harass and persecute Brown and threaten his liberty," the filing said.

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