Lesser-Known Enron Executives Face First Criminal Trial | AccountingWEB

Lesser-Known Enron Executives Face First Criminal Trial

The first Enron case to go before a jury does not involve famous names or deals that led to the company’s spectacular demise.

"It’s not about Andy Fastow, it’s not about Jeff Skilling, it’s not about Ken Lay. But I think the public thinks that it is," defense attorney Dan Cogdell told Reuters. "It’s about a very discreet transaction, and we are concerned that the public understand this is not about the demise of Enron," said Cogdell, who represents former Enron accountant Sheila Kahanek.

The conspiracy trial of Kahanek, along with a former Enron finance executive and four executives at Merrill Lunch, is set for June 7. While even the judge has called it "not a big, high-profile Enron case," it will be the first time federal prosecutors try to persuade a jury to convict former employees of the once-mighty energy company, which collapsed amid scandal in 2001.

Former finance chief Fastow, former CEO Skilling and former chairman Lay are the most recognizable Enron names. Fastow has pleaded guilty to manipulating Enron’s books and enriching himself. Skilling has pleaded innocent to 35 counts of fraud, conspiracy and insider trading. Lay, who says he is innocent, has not been charged. Only Fastow is alleged to have played a role in the deal at issue in the upcoming trial.

Prosecutors allege Enron, with the investment bank Merrill Lynch’s knowledge, booked a $12 million profit from a sham December 1999 sale of Nigerian barges to make it look like earnings targets were met. Prosecutors say Fastow made a secret promise that Enron would buy back the barges at a premium within six months to guarantee a profit to Merrill Lynch. One of his partnerships bought them six months later.

Each of the six defendants in the case allegedly played a role in pushing the deal through or hiding the promised buyback deal. In addition to Kahanek, the defendants are: Dan Boyle, a former finance executive on Fastow’s staff; Daniel Bayly, former global head and chairman of investment banking at Merrill Lynch; James A. Brown, former head of Merrill’s strategic asset lease and finance group; Robert Furst, former managing director who answered to Bayly; and William Fuhs, former vice president who answered to Brown. Brown and Fuhs also are charged with lying to investigators and a grand jury in Houston.

Defense attorneys want to show there was no enforceable side deal and even if there was, their clients didn't know about it.

If Fastow testifies it will mark his debut as a prosecution witness. He pleaded guilty in January to two counts of conspiracy, and agreed to help prosecutors with other cases.

"It’s hard to argue that this is not a significant Enron case," said David Berg, a civil litigator. "It’s indicative of the kind of dirty pool Enron was capable of."

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