The link requires a subscription so here is the article in full. I love seeing James Brown vindicated!
Retrial Dropped, Enron Figure Talks
By JOHN R. EMSHWILLER
James A. Brown didn’t act like a guilty man eight years ago when federal authorities contacted the Merrill Lynch executive during the early days of their Enron Corp. investigation.
Unlike some colleagues at the securities firm who didn’t talk, Mr. Brown spent hours answering questions. “I figured that as long as I told the truth I couldn’t get into trouble,” he says.
Still, he was convicted in 2004 of perjury, obstruction of justice, fraud and conspiracy. Mr. Brown went from minor-hero status for objecting inside Merrill to a suspicious Enron deal involving barges off the coast of Nigeria, to facing three decades in prison. His career was destroyed, and he spent 12 months in prison before an appeals court reversed part of the conviction.
Former Merrill Lynch executive James A. Brown says a key email of his was misunderstood.
The 58-year-old Mr. Brown has always maintained his innocence. In September, the Justice Department dropped the fraud and conspiracy charges only days before a scheduled retrial. Mr. Brown, still fighting his perjury and obstruction convictions, recently gave The Wall Street Journal his first interview about the legal ordeal.
Mr. Brown’s retelling of his part in the corporate scandal comes as federal investigators sift through the rubble of the financial crisis for possible crimes. Much of the nitty-gritty of such investigative work involves little-known figures of the corporate world like Mr. Brown, who often are snared by prosecutors hoping to nab higher-ranking executives.
The U.S. government’s Enron Task Force criminally charged about 30 individuals, including Mr. Brown, but said there were more than 100 other unindicted co-conspirators. The task force got guilty pleas from more than a dozen people and won a 2006 fraud conviction against former Enron President Jeffrey Skilling.
Some of the group’s courtroom victories have been upended on appeal. Mr. Skilling’s conviction and 24-year sentence are under appeals-court review following a Supreme Court decision invalidating part of his case.
Critics contend the Enron Task Force abused its powers by threatening potential defense witnesses and bludgeoning individuals into admitting to crimes. Government officials deny those assertions, and courts haven’t upheld any defense claims of prosecutorial misconduct.
Mr. Brown’s odyssey began in December 1999 when Enron asked Merrill to acquire an interest in electricity-producing barges it owned off the Nigerian coast so that the Houston company could book a $12 million profit on the deal by year end.
A Chicago native, Mr. Brown joined Merrill in 1994, turning to finance after tromping through snake-infested swamps in Florida, looking for phosphate deposits as a geologist, helped convince him to change careers.
Investigative records show Mr. Brown, then heading the Merrill unit that handled the barge deal, argued against the transaction. One of his worries: Merrill might be viewed as helping Enron manipulate earnings.
In the interview, Mr. Brown said he didn’t think the barge transaction was illegal—just a bad business deal. Senior Merrill officials gave a go-ahead anyway.
Enron collapsed in December 2001, and investigators later found documents suggesting the company had illegally guaranteed Merrill a profit on the barge deal, which would make the supposed “sale” a sham. Enron Chief Financial Officer Andrew Fastow allegedly made the guarantee to Merrill executives during a conference call. Merrill later sold its barge interest—at the allegedly promised profit—to a partnership run by Mr. Fastow.
“I had no feeling of danger,” says Mr. Brown, who didn’t participate in the conference call. He wasn’t one of the four Merrill officials sued in 2003 by the Securities and Exchange Commission over the barge deal.
Still, the transaction became a focus of the Enron Task Force. As the only Enron-related criminal case brought against people working on Wall Street, it aimed to send a message of “deterrence,” according to a person familiar with the situation.
Mr. Brown’s lawyer soon told him that prosecutors considered him a target for indictment. “I said: ‘How can I be indicted?’” he recalls now. “I haven’t done anything wrong.”
A possible turning point came when investigators discovered a March 2001 email written by Mr. Brown. He wrote that Mr. Fastow had made a “promise to pay us back no matter what.”
Mr. Brown says he wrote the email hastily and never meant to suggest an illegal guarantee. Instead, Mr. Brown says he heard Mr. Fastow had merely promised to use his “best efforts” to get Merrill out of the barge deal.
The criminal charges filed in September 2003 against Mr. Brown and three other former Merrill executives turned his comfortable life in suburban Connecticut, including a wife and two children, upside down. Nancy Brown says her husband “could hardly move or speak” on the arraignment day in Houston.
While family and friends were supportive, Mr. and Mrs. Brown’s 17-year-old daughter felt “ostracized” by some schoolmates, they say. Mr. Brown took Merrill up on its suggestion that he accept an early retirement.
Merrill, now owned by Bank of America Corp., still is paying Mr. Brown’s legal bills. A Merrill spokesman declined to comment.
The U.S. government recommended Mr. Brown get a sentenced of more than 30 years. He prepared a will and gave signing authority over assets to his wife. When a federal judge handed down a sentence of 46 months, “I felt like the firing squad had missed,” he says now.
Mr. Brown’s 22-year-old son nearly died in an auto accident shortly before the former Merrill executive reported to a low-security federal prison in Fort Dix, N.J. Weeks passed before it was clear the son would survive.
“After that, I said whatever else happens I can handle,” he says. In prison, Mr. Brown taught inmates about basic personal finance and dined once a week with mobsters while schooling them in reading newspaper stock tables, he recalls.
In 2006, a federal appeals court overturned part of the barge case, ruling the government had misapplied a controversial crime theory, known as “honest services” fraud. The court upheld Mr. Brown’s perjury and obstruction convictions, but he was released from prison.
The Justice Department moved in 2007 to send Mr. Brown back to prison, arguing that the law required him to serve the rest of his 46 months.
Sidney Powell, Mr. Brown’s lawyer, says one prosecutor claimed “he had ‘tremendous leverage’ and could force Jim to testify” against co-defendants in planned retrials. A judge rejected the government’s motion.
By early this year, the Justice Department dropped plans to retry any of the former Merrill officials, except for Mr. Brown, who was pressing claims that prosecutors in his 2004 trial withheld favorable evidence.
Days before jury selection for Mr. Brown’s retrial was to begin in September, the government abandoned the fraud and conspiracy charges. A Justice Department spokeswoman declines to comment. In court filings, the government denied withholding evidence and the judge rejected the misconduct claims. Mr. Brown says he plans to continue pressing that issue.
Write to John R. Emshwiller at john.emshwiller@wsj.com
