New York Times: Gov’t Enron Trial Record is Spotty

HOUSTON (AP) -- The court battle rarely stops when a jury renders a verdict.

More than two months after winning convictions against Enron Corp. founder Kenneth Lay and former CEO Jeffrey Skilling, the Justice Department's Enron Task Force is smarting from a blow to its trial record dealt by the 5th U.S. Circuit Court of Appeals.In a 2-1 decision last week, a panel from the court overturned fraud and conspiracy convictions against four former Merrill Lynch & Co. executives who participated in a sham 1999 deal that allowed Enron to book bogus profits.Viewed alongside other Enron setbacks, some experts say the Merrill decision highlights some questionable government strategies. But they say bagging the Lay and Skilling convictions likely will define the Justice Department's success in ferreting out Enron crimes.''In a sense, this reversal underscores how the government also fell victim to the Byzantine nature of the Enron fraud,'' said Robert Mintz, a former federal prosecutor. ''These were unprecedented crimes to which the government responded with some very aggressive and largely untested theories of prosecution.''In the end, the government got their men in the form of Skilling and Lay. That will likely be what everyone remembers when they think of Enron,'' Mintz said.Enron, once the nation's seventh-largest company, spiraled into bankruptcy proceedings in December 2001 amid revelations of hidden debt and inflated profits. The Justice Department formed the task force to launch a sprawling investigation that produced 16 guilty pleas from ex- Enron executives.

Mintz said that when the government stuck to basics, like testimony in the Lay-Skilling trial from eight of those ex-executives who had pleaded guilty to crimes as well as others who witnessed criminal behavior, prosecutors were successful.But earlier cases show spotty success. Last year, a flawed jury instruction promoted by prosecutors prompted the U.S. Supreme Court to reverse former Enron auditor Arthur Andersen LLP's 2002 conviction of obstruction of justice. Although an appellate panel called Andersen a member of Enron's ''supporting cast'' for destroying tons of Enron documents in late 2001 as investigators started probing the energy company, the instruction allowed jurors to convict without finding criminal intent.The 2004 Merrill case involved the brokerage pretending to buy three power plants on barges off the coast of Nigeria from Enron so the energy company could appear to have made earnings targets. Jurors in that case acquitted an in-house accountant, while convicting the four former Merrill executives, who appealed, and a former midlevel Enron finance executive who did not appeal.The appellate panel ruled that evidence was insufficient to convict one of the Merrill defendants. Regarding the other three, the panel said prosecutors wrongly pursued a theory that these defendants deprived Enron of its right to their honest services because, although the deal may have been a sham, the energy company and its shareholders weren't robbed of money or property.Perjury and obstruction convictions of one of those three for lying to a grand jury about the deal were affirmed.''This opinion should not be read to suggest that no dishonest, fraudulent, wrongful or criminal act has occurred,'' the ruling said.The Merrill ruling followed the government's disappointment last year in the first trial of five former Enron broadband executives. The jury ended the complicated, jargon-filled three-month trial with a handful of acquittals but was unable to reach verdicts on dozens of other counts. Prosecutors alleged the defendants either lied about the unit's prospects to inflate Enron's stock price or manufactured earnings.In the first broadband do-over involving two of those five defendants this year, the division's former finance chief was convicted of fraud and conspiracy while an in-house accountant was

acquitted. Retrials of the other three have been indefinitely postponed pending the 5th Circuit's ruling on their appeals to combine the cases.''You're seeing a pattern of juries and appellate judges rejecting the views of the task force,'' said Barry Pollack, who represented former broadband unit accountant Michael Krautz in both trials and won his acquittal in the second round.But Sam Buell, who helped prosecute Andersen and now teaches at the Washington University School of Law, said all the trials and appeals have yet to play out.Lay died of heart disease July 5, just six weeks after he was convicted of 10 counts of fraud, conspiracy and lying to banks in two separate cases. His death allows for his convictions to be erased. Skilling, who was convicted of 19 counts of fraud, conspiracy, insider trading and lying to auditors, faces decades in prison upon his Oct. 23 sentencing.Skilling aims to appeal, and it remains to be seen how appellate courts view his case.In addition to the retrials of three ex-broadband executives, three British ex-bankers face a yet- unscheduled trial on wire fraud charges for allegedly colluding with Enron to defraud their former employer in 2000.And the reversal in the Merrill case isn't necessarily the last word there.Justice Department spokesman Bryan Sierra said prosecutors are considering their options. Buell said the government likely will pursue a hearing before the entire 5th Circuit.''If this were a football game, a little yellow flag would already be out on the field,'' Buell said. ''I wouldn't see any trends here as the government going too far on white collar crime.''Copyright 2006 The Associated Press