Houston Chronicle: Case Could Avoid Trial

By KRISTEN HAYS

Copyright 2007 Houston ChronicleThree former Merrill Lynch & Co. executives whose 2004 fraud and conspiracy convictions in an Enron case were overturned last year may avoid facing another jury.Upon informing U.S. District Judge Ewing Werlein on Friday that the government wanted to retry the case "sooner rather than later," Assistant U.S. Attorney Arnold Spencer said prosecutors also would "continue our conversations" with defense attorneys to resolve it without a second trial.Spencer declined to elaborate, as did attorneys for two of the defendants. But one of the defense attorneys, Dan Cogdell, said he was "looking for a civil resolution, not a criminal resolution," such as a settlement with the Securities and Exchange Commission.Werlein, who presided over the first trial, encouraged some sort of nontrial resolution. He said prosecutors should "at least ponder" where the government's time, money and energy is best spent."So I wish you well in your conversations. I hope you will be able to be successful," the judge said.Friday's hearing came nearly six months after a three-judge panel of the 5th U.S. Circuit Court of Appeals threw out most jury convictions of Daniel Bayly, James Brown, Robert Furst and a fourth former Merrill executive, William Fuhs.The case involves a year-end 1999 deal in which the government contends the brokerage pretended to buy three power plants on barges from Enron so the energy company could appear to have met quarterly earnings targets. The defendants claimed the deal was proper.Jurors acquitted in-house Enron accountant Sheila Kahanek while convicting the four Merrill defendants and Dan Boyle, a former Enron finance executive.Brown lawyer Cogdell represented Kahanek, who called him "my hero" upon her acquittal. He said Friday he "can't wait to revisit this case."The appeals panel erased Fuhs' convictions for lack of evidence, and he cannot be retried. Boyle did not appeal and is serving a three-year, 10-month prison term.The panel also upheld Brown's convictions of perjury and obstruction of justice for lying to a grand jury about the nature of the deal. Cogdell and Sidney Powell, another of Brown's new attorneys, are seeking to appeal that decision to the U.S. Supreme Court.But regarding the reversals, the panel's 2-1 ruling said the original prosecutors improperly presented a theory to win the fraud and conspiracy convictions. The opinion said the government wrongly claimed the men deprived Enron of their honest services because their

actions were in line with corporate goals and didn't rob the energy company or shareholders of money or property.The opinion also said it "should not be read to suggest that no dishonest, fraudulent, wrongful or criminal act has occurred."Gary Brown, who probed the barge deal as special counsel for the Senate Committee on Governmental Affairs, said Friday that even with the reversals, the case sent a message to Wall Street that investment bankers shouldn't help companies fudge their financial results."I think people have gotten that message loud and clear, but there needs to be some resolution that's clear these people are guilty of some wrongdoing," said Brown, who is not related to defendant James Brown. He said a civil settlement would suffice, "given the fact that they've also served some time."Powell said James Brown "wants to be vindicated."Bayly, former head of investment banking for Merrill, and Furst, the brokerage's former liaison with Enron, served nearly a year in prison when they and Fuhs were released in June 2006 pending their appeals.[Original article]