Bloomberg: U.S. Asks Court to Reinstate Conviction in Enron Case

By Laurel Brubaker Calkins

Jan. 10 (Bloomberg) -- Prosecutors asked a U.S. appeals court to reinstate the conviction of a former finance chief of Enron Corp.'s failed Internet unit, which a trial judge threw out based on an appellate ruling in another Enron case.Kevin Howard, 45, was convicted in 2006 of five counts of conspiracy, fraud and falsifying Enron Broadband Services' books and records. After the U.S. Court of Appeals in New Orleans overturned verdicts against four former Merrill Lynch & Co. bankers in a separate case, a judge set aside Howard's conviction, saying the verdict was tainted because prosecutors' relied on an invalid legal theory used in the bankers' case.Prosecutors said today in court that jurors weren't influenced by a flawed instruction to convict Howard on the basis of co-conspirators' actions or by the underlying charge that he deprived Enron of his so-called honest services."The government theory was Howard caused the falsification of Enron's books and records by causing this scheme,'' prosecutor Douglas Wilson said. ``The jury wouldn't have found him guilty unless they found he participated in the scheme.''In the Merrill Lynch case, the appeals court ruled prosecutors overreached by charging the bankers with depriving Enron of their honest services. Judges questioned prosecutors today about a flawed jury instruction involving similar allegations in Howard's case."If you start with the assumption the jury may have used an invalid legal theory'' to convict Howard, why does the government deserve an ``escape valve'' to hold onto a tainted conviction, Judge Eugene Davis asked prosecutors.Fraud Scheme"The jury must have found he participated'' in a fraud scheme to "announce to the world'' that Enron's Internet unit "had earnings they didn't have,'' Wilson replied. Jurors must have convicted Howard based on their belief that he directed the fraud scheme, not that he deprived Enron of his honest services or was merely a co-conspirator, Wilson said.Howard's attorney, Larry Robbins, argued the government sought to "get the most bang for the buck'' by trying the Enron

Broadband defendants on the ``broadest theory of criminal liability that they could.'' He claimed prosecutors went too far in charging Howard with depriving Enron of his honest services and asking jurors to convict him for the actions of co- conspirators."The government should not be relieved of a bed it made for itself,'' Robbins said.Flawed InstructionDavis asked Robbins whether there was any merit to prosecutors' claim that the evidence against Howard meant he would have been convicted regardless of the flawed jury instruction. Robbins replied that some trial testimony showed the fraud was carried out by accountants who weren't controlled by Howard.The fraud was directed by higher executives within Enron's corporate parent, "who answered to no one but themselves,'' Robbins said. Former Enron chief executive officers Jeffrey Skilling and Kenneth Lay were convicted in 2006 of leading the fraud that destroyed the world's largest energy trader.Wilson said Howard's lawyers didn't object to the flawed jury instruction during the trial, which gives the government legal grounds to have the verdict reinstated on appeal."You think the government should get a new trial because he didn't preserve that error for the purposes of your appeal,'' Judge Patrick Higginbotham said to Wilson.Wilson agreed that the flawed jury instruction was made at the government's request."That's like saying, 'I hold the other side responsible for not having stopped me,''' Higginbotham said.Enron AppealsLawyers for Skilling and former Merrill Lynch banker James A. Brown attended today's arguments. Skilling is appealing the 24-year sentence he is serving for his role in directing the accounting fraud. Brown, whose fraud conviction was overturned in the original honest-services ruling, is now appealing the government's efforts to retry him for participating in a scheme to inflate Enron's earnings through the sham sale of Nigerian barges.Sidney Powell, Brown's lawyer, called the government's position in Howard's case ``the most lame argument I've ever heard the government make.''"They're saying, `It is all the defendant's fault that we infected the indictment with error and then infected the jury instructions with error, from which we now want to be saved,'''

she said in an interview after the hearing."I can't believe the U.S. Solicitor General authorized this appeal.''Merrill Lynch is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News.The case is U.S. v. Howard, 07-20212, U.S. Court of Appeals for the Fifth Circuit (New Orleans).