Houston Chronicle: 3 want Fastow notes in l-Enron case

[column width="1/1" last="true" title="" title_type="single" animation="none" implicit="true"]By KRISTEN HAYS

Copyright 2008 Houston ChronicleFormer Enron CEO Jeff Skilling isn't the only Enron defendant claiming the government wrongly hid crucial evidence that supported his claims of innocence in his 2006 trial.Three former Merrill Lynch & Co. executives say prosecutors did the same thing to them before, during and after their 2004 trial that centered on an asset sale the government alleged was a disguised loan.Now the Merrill defendants, who face a possible retrial after most of their convictions were overturned on appeal because of a separate issue, want to bolster their arguments with the same records that an appeals court gave Skilling.Those records consist of more than 400 pages of notes taken by FBI agents in numerous interviews with former Enron finance chief Andrew Fastow. The notes cover Fastow statements that the Merrill defendants say corroborate their contention that the asset sale was genuine.Federal law requires prosecutors to give defense lawyers evidence or information deemed favorable to defendants.In both the Skilling and Merrill cases, defense teams vehemently sought details about Fastow's statements before the trials, and prosecutors insisted that summaries of FBI notes satisfied the requirement to hand over information that bolstered the defense.The raw notesSkilling's legal team didn't receive the raw notes from which those summaries were crafted until last December, after the 5th U.S. Circuit Court of Appeals ordered the government to provide them. That order also required that the notes remain sealed — meaning Skilling's lawyers couldn't make the notes public or share them with the Merrill defendants.But last week, the 5th Circuit allowed Skilling to file a public brief alleging that prosecutors engaged in misconduct by hiding information in the notes that contradicted Fastow's trial testimony against Skilling.The Merrill defense teams also had sought the notes regarding Fastow's statements about the deal central to their case — Enron's sale of barge-mounted power plants to Merrill in late 1999 so the energy company could book critical earnings.The Skilling brief prompted Fastow's lawyers to re-urge U.S. District Judge Ewing Werlein in Houston to order the government to give them the notes."This evidence is more than five years past due," Sidney Powell, a lawyer for former Merrill executive James Brown, said in a filing in the barge case this week.

Arnold Spencer, the federal prosecutor now heading the barge case, said in a filing last month that the government would turn over the notes if ordered to do so by Werlein or the 5th Circuit.What words?During the barge trial, prosecutors insisted that the deal was a sham because Fastow guaranteed in a conference call with one of the Merrill defendants, Daniel Bayly, that Enron would buy back or resell the assets within six months. A Fastow-run partnership bought the barges by that deadline.Shortly before the trial began, prosecutors alerted the defense teams that Fastow had told investigators that he wasn't explicit about a buyback and didn't use the words "promise" or "guarantee."Prosecutors didn't summon Fastow to testify in the barge case. Instead, two of his former subordinates at Enron who did not participate in that conference call — treasurer Ben Glisan and managing director Michael Kopper — testified that Merrill had received a guarantee that Enron would buy back or resell the barges by June 2000.The Skilling brief filed last week says that the Fastow notes reveal that he told investigators he had lied to subordinates by "telling Enron people this was a guarantee" in order to "motivate" and "light a fire" within Enron to find a third-party buyer for the barges.Paul Coggins, who represents the third Merrill defendant facing retrial, Robert Furst, said revelations in the Skilling brief show that the Merrill defendants are as entitled to the Fastow notes as Skilling."Fastow's telling the FBI that he misled his own subordinates, that he said there was a guarantee to light a fire under them to remarket the barges. That was never disclosed in the first trial."This raises questions as to why the government has fought so hard to keep these notes out of our hands," Coggins said.The Justice Department must file a response to the Skilling brief with the 5th Circuit by Tuesday. "We'll continue to litigate in court, and we'll have no further comment," department spokesman Paul Bresson said this week.Oral arguments in Skilling's appeal are slated for April 2 in New Orleans. The barge retrials are indefinitely postponed pending the outcome of appeals unrelated to the Fastow notes.

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