Defense alleges strategy to conceal in Enron case

A lawyer for one of three Merrill Lynch & Co. executives convicted in 2004 on charges of participating in a sham asset sale with Enron alleges that prosecutors withheld evidence from the defense to manufacture a case without a crime.In a court filing Monday, Sidney Powell, who represents former Merrill executive James Brown, accused federal prosecutors of concealing "extraordinary" evidence that was favorable to the defendants.She said the "conclusion is inescapable" that the government sought to "cripple the defense" by parsing out piecemeal disclosures.Federal law requires prosecutors to disclose information or evidence favorable to defendants before trial.Powell is asking U.S. District Judge Ewing Werlein, who presided over the 2004 trial, to dismiss the indictment and block the government from retrying Brown on charges overturned by an appeals panel because of a separate issue. She also wants the judge to erase two other convictions upheld by the panel.Justice Department spokesman Paul Bresson declined comment, saying the government would respond in a court filing.The case centered on Enron's sale of power plants mounted on barges off the coast of Nigeria to Merrill in late 1999 so the energy company could book needed year-end earnings.Prosecutors said the sale was a disguised loan because then-Treasurer Jeff McMahon and former finance chief Andrew Fastow both promised Merrill that Enron would resell or buy back the barges within six months. A Fastow-run partnership bought the barges at an agreed-upon premium by that deadline.Prosecutors said McMahon initially approached Merrill about the deal with the promise, and Fastow later reinforced it during a conference call before the transaction closed.The Merrill defendants insisted the deal was legitimate and Enron wasn't obligated to do anything with the barges. However, jurors convicted them of conspiracy and fraud for their roles in pushing through the deal. Brown also was convicted of perjury and obstruction of justice.An appeals panel overturned the fraud and conspiracy convictions in 2006, saying prosecutors wrongly argued that the defendants had deprived Enron of their "honest services," since they didn't take money or property and their action was aligned with Enron's corporate goals.The panel affirmed Brown's other two convictions.Now Brown and the other two — Daniel Bayly and Robert Furst — face retrials on fraud and conspiracy charges.Neither Fastow nor McMahon testified in the trial. Other prosecution witnesses, including McMahon's successor as treasurer, Ben Glisan, testified that they understood that a buyback promise existed. Glisan said he had discussed it with Fastow and McMahon, and McMahon told him, "I'm comfortable with handshake deals."Before the trial, prosecutors told the defense teams that Fastow, who had pleaded guilty to other crimes, had told investigators that he didn't use the words "promise" or "guarantee."Prosecutors also told the defense that McMahon had said unwritten assurances to use "best efforts" to find another buyer wasn't unusual, and that he didn't recall a guaranteed buyback or resale in six months.Monday's filing said prosecutors knew more that they didn't share.Notes taken by FBI agents of interviews with Fastow show he said he lied about a buyback guarantee to "light a fire" under his staff to find another buyer. Powell's filing alleged that prosecutors knew Glisan and others testified about a promise that hadn't really been made.Also, McMahon's lawyers told the Justice Department in an April 2005 letter — after the trial, but before the defendants went to prison — that McMahon denied making such a promise. The letter also said McMahon didn't remember the "handshake" conversation."The Enron Task Force convicted the defendants for accepting a guarantee that McMahon simply did not make, and Fastow never ratified," Monday's filing said.The McMahon letter, which was attached to the filing, aimed to persuade the government not to prosecute him on barge-related charges. He wasn't indicted, but last year he agreed to pay the Securities and Exchange Commission $300,000 in part to settle barge-related civil allegations. He admitted no wrongdoing.Other allegations in Monday's filing include that prosecutors hid statements from an in-house Merrill lawyer that she and other attorneys continued negotiating deal terms after the Merrill defendants had finished their work in late 1999. Powell said that information would have bolstered defense contentions that the defendants relied on attorney advice.[Original article