Three ex-Merrill Lynch & Co. Bankers will be retried for their roles in an Enron Corp. fraud involving the sham sale of Nigerian power barges to the securities firm, prosecutors said.
A US appeals court in New Orleans last year threw out the convictions of former Merrill bankers Daniel Bayly, Robert Furst and James A. Brown, ruling they hadn't deprived Enron of their „honest services'' because their actions, while possibly criminal, were in Enron's best interest. Prosecutors yesterday said they wouldn't appeal that ruling to the US Supreme Court. „We would prefer to try the case sooner rather than later,'' Arnold Spencer, the government's lead prosecutor, told US District Judge Ewing Werlein at a hearing today in Houston federal court. The reversal of the 2004 verdicts was fatal to convictions in another Enron case and could boost chances for the appeal of former Enron CEO Jeffrey Skilling, who is serving 24 years in prison for defrauding investors. He said he will appeal his conviction on similar grounds as early as March. The bankers and a former finance executive at Houston-based Enron were found guilty of helping Enron disguise a $7 million loan as proceeds from the fake sale to New York-based Merrill of electricity-generating barges moored off the coast of Nigeria. Bayly and Brown got 30-month prison terms; Furst got 37 months.
At yesterday's hearing, Werlein urged both sides to resolve the matter without a trial. The defense said it was willing to pursue talks with the government. Prosecutors said they planned to seek a new, narrower indictment of the defendants. Werlein set a hearing to determine the status of the case for March 29. During yesterday's hearing, the judge encouraged prosecutors to bring „fresh eyes, without the Enron Task Force perspective'' to consider whether the government's „time, money and energy is best spent'' retrying the three bankers. „When this case started off some three or four years ago, it was the lead horse for the government's Enron Task Force,'' Werlein said, adding that the case has since been „whittled down'' by the appellate ruling. Werlein also questioned whether the statue of limitations had expired on indicting the bankers for conduct that occurred in 1999 and 2000.
„This is getting to be pretty ancient, isn't it?'' he said. David Berg, a Houston defense attorney who has followed the Enron investigation, said the government should heed Werlein's advice. „The judge telling them to rethink it is his way of telling them they will have a very difficult time finding a prosecution theory he will not toss out,'' said Berg. „The defense has the government on the ropes, and they should not cave in to any criminal plea agreement.'' Houston lawyer Dan Cogdell, who won acquittal for Enron accountant Shelia Kahanek in the first barge trial, told reporters he is „eager to revisit the case'' as Brown's attorney. Cogdell asked Werlein for a trial date in January 2008, saying he needed time to learn the case from a new client's perspective. „We don't even know what charges or what manner and means the government is going to go forward,'' Cogdell told Werlein.
After the hearing, Cogdell said „We're looking for a civil resolution, not a criminal resolution'' to the case. Bayly's lawyer Tom Hagemann told Werlein he hoped to use the next few weeks to „look at a way we can not try this case.'' Furst's lawyer Paul Coggins said after the hearing, „We're seeking a quick resolution if possible.'' The verdict against a fourth former Merrill banker in the barge case, William Fuhs, was overturned for lack of evidence, and he can't be retried. All four were released from federal prisons last year. Brown, whose conviction for lying to investigators was upheld, has asked the US Supreme Court to review that case. Bayly, Merrill's former global chief of investment banking, was released from prison in June after serving a third of his sentence. Brown, a former strategic financial group chief, was released in August, having served a third of his term. Furst, a former managing director, was released in June after serving eight months of his sentence. Dan Boyle, the former Enron executive convicted alongside the bankers, remains in prison, having dropped his appeal. He is serving a 46-month sentence in a federal prison camp in Beaumont, Texas, and is scheduled for release in December. In January, a federal judge, citing the appeals court's ruling, threw out the fraud convictions of Kevin Howard, a former executive at Enron's broadband unit. Merrill is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News. The case is US v. Bayly, H-03-063, US District Court, Southern District of Texas (Houston). (Bloomberg)