Enron-related case of ex-Merrill Lynch exec close to being settled without retrial

Executive’s Enron-related case may be near end

HOUSTON — The May retrial of a former Merrill Lynch executive whose 2004 Enron-related fraud and conspiracy convictions were overturned was delayed by a month Friday by a federal judge, with prosecutors and defense attorneys saying they are close to reaching a plea agreement.

But plea negotiations to resolve the charges against another ex-Merrill Lynch executive have not been as productive and the case was set for an August trial.

Attorneys for Robert S. Furst told U.S. District Judge Ewing Werlein Jr. during a court hearing that they and prosecutors are close to a deal to resolve the case. Werlein moved the start of the retrial to June 1 from May 3.

Paul Coggins, Furst’s attorney, and prosecutor Patrick Stokes declined to comment on the possible deal.

But at a court hearing later Friday, attorneys for James A. Brown told Werlein that talks to settle their client’s case have grown contentious.

“I’m not going to succumb to their attempts to intimidate either (Brown) or I,” said Sidney Powell, one of Brown’s attorneys.

Stokes said prosecutors have been reasonable in plea negotiations but that Powell has not been cooperative.

Werlein urged both sides to “put down some of the swords and armor and have some conversations on this.”

Furst, Brown and a third executive, Daniel Bayly, were convicted in 2004 of conspiracy and wire fraud. They were accused of helping push through Enron’s sham sale to Merrill Lynch of three power barges moored off the Nigerian coast in 1999. The deal was struck so Enron could appear to have met earnings targets.

Enron Corp. filed for bankruptcy protection in December 2001, after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable.

Bayly was Merrill Lynch’s former head of investment banking. Furst was Merrill’s Enron relationship manager and Brown was an accountant.

After being convicted, Bayly was given a 2 1/2-year sentence, Furst got three years and Brown was sentenced to a three-year, 10-month term.

Their convictions were thrown out in 2006 after an appeals court found fault with the prosecution’s legal theory known as “honest services.”

The court said the executives were doing what Enron wanted them to do and did not profit at its expense. As a result, the court ruled, they did not deprive Enron of “honest services.”

Prosecutors later removed the “honest services” language from the indictment.

In January, prosecutors dismissed charges against Bayly.

The appeals court upheld Brown’s convictions of perjury and obstruction of justice for lying to a grand jury about the nature of the deal and he served about a year in prison on those charges.

Powell said the case against Brown should also be dismissed because prosecutors have not retried her client in a timely matter since the case was sent back to Werlein following another round of appeals in August.

Powell also questioned why details about why Bayly’s case was dismissed have not been made public. Prosecutors have declined to comment on the dismissal of Bayly’s case.

The honest services theory has resulted in overturned convictions in other Enron cases. A ruling from the Supreme Court is expected this summer in the appeal of convicted former Enron CEO Jeffrey Skilling, who is challenging the validity of the legal theory.