A Nigerian Barge Puzzle

I have long said that the Nigerian Barge case was the easiest of all the Enron cases to understand. There was no accounting. No sub of a sub of a sub you had to keep track of. It basically came down to the central question: did Andy Fastow guarantee to Merrill Lynch that Enron would buy back the barges? That’s it. The answer is no. However, I am curious what would happen if Merrill Lynch had attempted to enforce Andy Fastow’s so-called promise. That action simply wasn’t enforceable. Enron had the ability to take ML’s money and buy women and drugs and there wasn’t a damn thing ML could do about it because ML owned the barges. They accepted full responsibility. ML shouldered the risk that the boats would sink, or that Enron was corrupt and would collapse, or that terrorists would blow the barges up, or that a Soviet-era satellite would fall to earth, land on the barges, and sink them. Basically anything could have happened to those barges under ML’s watch and Enron could have, if it was so inclined, laughed and yelled “Suckers!” as it ran over the hill.

So if ML decided it wanted out of the investment, and the bankers called Andy and said, “We’re holding you to your promise, we want our money back,” what could they have done if Andy just laughed?

There was nothing they could have done. They were simply stuck with the barges because Andy’s so-called promise was not really a promise at all. There was nothing legally binding about any “secret side deal”. If Andy made that guaranty and ML accepted it, ML was then accepting not only the risk that the boats would explode, but that Andy Fastow would live up to his promise.

The ML bankers were bright, industrious people. Most of them had been in the business for many years; they didn’t just start working for ML that day. They knew how these deals were put together. I don’t think any of them would be foolish enough to accept an unenforceable promise. It’s Merrill Fucking Lynch. Not “Joe’s Bank of Dead Pig Junction, Arkansas.” They knew what they were doing. They were buying a couple of Nigerian barges.

Enron Stockholder’s Secret Side Deal With Prosecutors

This probably should be listed in one of my “Random Thoughts About Enron” posts because it’s short, but I think the idea is worthy of standing on its own.

Prosecutors say that the Nigerian Barge deal was not legitimate because Andy Fastow made a “secret side deal” with Merrill Lynch, guaranteeing that they would not lose money. Therefore, the prosecutors say, these were not “true sales” and thus the accounting on them was wrong and therefore Enron committed fraud.

I do not accept that this happened. However, for the sake of my argument, I’ll pretend that it did.

Now, the prosecutors have sued various parties, taken enormous chunks of the life savings of Enron executives, and basically tried to wring every bit of money that they could from the executives to return to the people who bought stock. Wouldn’t this, therefore, be fraud since the shareholders did not make a “true sale”? The prosecutors have given them a “secret side deal” that no matter what happens (i.e., Enron collapses), they won’t lose any money.

If Enron committed fraud, then that is horrible, but it doesn’t mean the stockholders should be compensated for it. They took a risk, the risk was bad, and they lost. That happens all the time. Either they made a true sale or they didn’t. So which is it?

One Of The Nigerian Barges

How can something so ugly cause so much trouble?

Notes on James Brown’s Appeal

James Brown is innocent. The government hid the evidence that proved he was innocent – as they hid evidence in the Skilling case (i.e. “The Fastow Notes”) and in the Broadband case (i.e the software and hardware that created the actual network that they were claiming did not exist.)

I have been told that James Brown will seek a rehearing to give the Court an opportunity to make clear that if the government is allowed to provide ‘summaries’ of Brady material, it must provide full and fair summaries that disclose all the key words and phrases of the actual participants to a transaction. The panel opinion completely ignored the fact that the Enron Task Force prosecutors yellow-highlighted material for the district court in clear acknowledgment that it was Brady material and then failed to give those key words to Brown. Instead, the Court wrongly relies on the Skilling decision which simply does not apply here. Brown’s Brady claim was distinct from Skilling’s, on a different record and relevant to different government theories, arguments and facts. Brown was denied even a hearing on his motion for a new trial despite the astonishing fact that the government had highlighted material as Brady then did not give it to Brown in a case where his only purported crime was one of words.

Where the crime is one of words, James Brown was entitled to all the words.

Forbes Mentions Nigerian Barge Deal

Forbes busted out with this:

It’s up there with the Enron-Merrill Lynch Nigerian barge fraud. Manhattan United States Attorney Preet Bharara is claiming in a just-released criminal complaint that, after learning of a federal investigation, a former employee of SAC Capital tore apart his computer drives with pliers and walked around New York City tossing the remains in four separate garbage trucks, The Wall Street Journal is reporting.

Whoa. Hold the phone. I for one would like some accountability served with my yellow journalism. Who at Enron or Merrill Lynch tore his computer apart and destroyed it? I think the journalist is confusing this with the classic children’s tale The Time Michael Kopper Threw Away His Computer In A Dumpster, which after a little more research into the matter seems fiction to me but what do I know, I’m just a girl with a dream, a computer, and no discernible respect for authority.

Incidentally, it’s not illegal to throw away your computer. Keep that in mind when you’re busy condemning the act that may or may not have happened.

“F—in’ pulled the external drives apart,” said Donald Longueuil who worked at SAC’s CR Intrinsic Investors division for about two years, according to a Journal report based on a criminal complaint released Tuesday. “Put ‘em into four separate little baggies, and then at 2 a.m. … 2 a.m. on a Friday night, I put this stuff inside my black North Face … jacket, … and leave the apartment and I go on like a twenty block walk around the city … and try to find a, a garbage truck … and threw the s—t in the back of like random garbage trucks, different garbage trucks … four different garbage trucks.”

This guy sounds exactly like a character my boyish friend and I made up for one of my books. He’s a mob boss named Scarpetta, stupid as a brick but mean. And sometimes he calls the hero and says, “Can I come over? I got a dead body in the trunk I want you to help me get rid of.” Then when the other guy freaks out he laughs and says, “I’m just yanking your chain. Seriously I want you to tell me how do some insider trading.” Because he’s subtle like that.

Said U.S. Attorney Bharara in a new conference: “When people frantically begin shredding sensitive documents and deleting computer files and smashing flash drives and chasing garbage trucks at 2 a.m. … it is not because they have been operating legitimately.”

Talk about deadpan delivery.

And pause.

This what I don’t like about prosecutors. SHOW ME THE PROOF HE DID SOMETHING WRONG. Don’t just assume that the odd behavior of someone is enough to prove he’s not “operating legitimately.”

And furthermore, who is this lapdog writing this crap? Whatever happened to the tough, adversarial media? I am not sure the role of the person writing but goodness, this is Forbes magazine, you’d think it would attempt to dress its unquestioning love of the US attorney with a bit of actual journalism, even if it’s just for show.

The conference was part of a rapidly expanding insider trading probe that is ensnaring a widening circle of SAC employees and affiliates. SAC is a highly secretive $12 billion (assets) hedge fund firm known for paying hefty commissions—

I count three slurs in those two sentences. Two are subtle. One is not.

1. “Rapidly expanding insider trading probe.” This means to imply vastness – that big corruption is afoot.
2. “Highly secretive.” That’s not illegal or even suspicious.
3. “Hefty commissions.” Aha. Class envy.

and which for years has been the subject of rumors that its largesse has bought it the first call from brokers and others in the know about upcoming market-moving events. SAC’s billionaire founder Steven Cohen was the subject of similar allegations by his former wife. Neither Cohen or SAC has been charged with wrongdoing, and the firm has stated that it is cooperating with investigators.

That’s very nice of the writer to mention that Cohen hasn’t bee charged.

Longueuil declined comment and was charged with conspiracy to commit securities fraud and conspiracy to commit wire fraud in connection with his activities while at SAC and obstruction of justice afterward, according to the Journal.

Another former SAC fund manager, Noah Freeman, 35, has pleaded guilty to securities fraud and conspiracy in connection with his work at SAC, is cooperating in the government and recorded conversations with Longueuil.

The federal investigation appears to fit a classic pattern in which lower-level conspirators are investigated, confronted with their own wrongdoing and convinced to cooperate with the feds in exchange for more lenient treatment. They are then used by prosecutors to uncover evidence of wrongdoing by those higher up the chain. It’s what’s known as throwing others under the bus.

At Enron it was the reverse. The dandies at the DOJ thought it wise to aim for the big fish first. Didn’t work out very well.

Fedreal investigators have used similar tactics in a parallel investigation involving Galleon Group. That investigation has already resulted in several convictions. Galleon founder Raj Rajaratnam is scheduled to go to trial later this year, with his former underlings likely to form the basis of the government’s case.

It’s a pattern I’ve seen before. Namely in a case involving MCI, about which I co-wrote a book, Stolen Without A Gun. In that case, the feds presented one of the scamsters with evidence of his wrongdoing and convinced him to wear a wire while getting his buddies and co-conspirators to discuss their crimes.

Wear a wire? What are you, on Law on Order? Who needs a wire when there are iPhones that record audio, emails, etc.? Isn’t “wearing a wire” a bit 1989?

I interviewed the guy. Talk about a horrible experience. He knew he’d done wrong. The feds had the goods to put him away for years and were offering conditional immunity. That meant cooperate and they wouldn’t go after him for anything he helped uncover; leave something out and get prosecuted for it. The night before he strapped on the FBI’s wire, he was shaking so much his bed was knocking against the wall. He ultimately got off as an un-indicted co-conspirator, or, as his lawyer put it, as a witness.

This actually sounds like Bill Collins. Not that I have much sympathy for Bill Collins but the guy was skeered of the DOJ indicting his happy ass so he told them everything they wanted to know, plus much much more. Meaning he just made crap up on the fly.

The same people who say that torture is wrong are inevitably the same ones who think there is nothing untoward about plea deals. There simply is not logical distinction between them.

It’s amazing how great an ally prosecutors have in the need of crooks to share their experiences with their partners in crime. If I were Stevie Cohen, I’d be dipping into those billions to hire some very good criminal defense lawyers, as I’m sure he’s doing already.

Maybe you should take some of those hypothetical billions and take a journalism class. Capiche?

Enron’s Foreign Assets Being Sold

Tom Fowler, writing for the Houston Chronreports that AEI, the Houston-based company that includes many of Enron Corp.’s foreign energy businesses, is selling off much of its assets in an effort to restructure as a smaller operation that will focus on international power generation.

The company said it will sell its interests in 10 operating companies to nine separate parties for $4.8 billion, representing 80 percent of AEI’s total assets. This includes selling Brazilian power distribution firm Elektro to Iberdrola and Colombian natural gas transport firm Promigas to Empresa de Energia de Bogota and others.
Jim Hughes, CEO of AEI, said the move is the result of a search for strategic alternatives after AEI withdrew its initial public offering in October 2009.
“This was a clean sheet exercise that evaluated all available alternatives,” Hughes said in a statement. “We concluded that AEI should sell the vast majority of its regulated assets, return the capital to our shareholders, and plan to reorganize the company around a smaller business focused on power generation.”
The funds received from the sales will be used to repay debt. The remaining cash will used to fund equity capital needs for various new generation projects.

After Enron’s December 2001 bankruptcy, all of its international businesses — ranging from power plants to natural gas and power distribution businesses – were spun off into a separate entity that was put up for sale. There was little to link the businesses, which stretched over 14 countries.

In 2006, Ashmore Energy purchased the assets and changed its name in 2007 to AEI Services. By focusing on growth projects in emerging markets the company was able to make headway. In 2009, the company had $8.2 billion in revenue.

Hughes said the company will reorganize around its remaining power generation assets in Asia, Central America and the Caribbean, and South America, and will continue planned power plant projects in Guatemala, Peru, Argentina, Chile, and China.

The remaining business will represent 2,236 megawatts of generating capacity with $190 million of earnings and $400 million of net debt. Another 1,000 megawatts in potential new pro-jects are under development and over 2,000 megawatts of longer-term projects are in the works.AEI, the Houston-based company that includes many of the late Enron Corp.’s foreign energy businesses, is selling off much of its assets in an effort to restructure as a smaller operation that will focus on international power generation.
The company said it will sell its interests in 10 operating companies to nine separate parties for $4.8 billion, representing 80 percent of AEI’s total assets.

This includes selling Brazilian power distribution firm Elektro to Iberdrola and Colombian natural gas transport firm Promigas to Empresa de Energia de Bogota and others.

Jim Hughes, CEO of AEI, said the move is the result of a search for strategic alternatives after AEI withdrew its initial public offering in October 2009.

“This was a clean sheet exercise that evaluated all available alternatives,” Hughes said in a statement. “We concluded that AEI should sell the vast majority of its regulated assets, return the capital to our shareholders, and plan to reorganize the company around a smaller business focused on power generation.”

The funds received from the sales will be used to repay debt. The remaining cash will used to fund equity capital needs for various new generation projects.

Enron’s international assets were interesting when they belonged to Enron because they were so viciously fought over. They divided the company into Team Skilling and Team Rebecca Mark. The actual projects were very interesting – Dahbol, in particular, snags my imagination. But I also think the so-called problems with those projects were viewed in hindsight as worse than they actually were. The people I know who worked with the foreign assets – and one of my good friends is one such person – tell me that the assets retained their intrinsic value but suffered like all businesses did when the tech bubble burst. Companies just did not want to spend money on those big projects at that time.

Another thought: why didn’t Enron find somebody to do a “Nigerian Barge Deal” with? If Enron was in the practice of engaging in sneaky practices, why stop with a minuscule $7 million deal with some Merrill Lynch bankers? Surely if ML was willing to park a barge, they could find someone to park Indian or Brazilian assets, right?

The fact that the international business suffered tells me that Enron was honest. If Enron was collecting such huge losses, and were corrupt, Jeff Skilling, in all his supposedly criminal magic, would have found a way to stop it.

James Brown Appeals To Fifth Circuit For New Trial

James Brown swings again! The former Merrill Lynch executive is appealing the district court’s order denying his Motion for New Trial for perjury and obstruction of justice. It is a fascinating brief. I was particularly taken by this passage:

Whether the district court misapplied the law and abused its discretion when it denied Brown’s motion for a new trial on perjury and obstruction given that it failed to address the new prosecutors’ disclosure of crucial, first-hand evidence that: (i) proves Brown’s testimony was true;

I love how how “proves Brown’s testimony was true” was the first item on the list – and how forceful that is.

James Brown is a man of integrity, of his word. Most of all, he is innocent.

Update on the Great Nigerian Barge Deal of 2010

First thing, we ran it past legal. When they approved it, we hired McKinsey. One of the consultants is British. He reminds me of Hugh Grant, but smarter. He doesn’t do that delightfully baffled thing that Hugh Grant does – he seems like a bit of a hard ass, actually, which is fine. We didn’t hire him to make sweet love to us, we hired him to figure out how to do this deal. I actually felt like we hired him to tell us how to sell the deal to the counterparty but officially, it’s an engagement to tell us how to do the deal.

This deal isn’t the only thing we’re working on. I have my normal job I have to perform every day, and so does everybody else …. the whole organization can’t be disrupted for this. So the McKinsey guys come in to the office around 4 and we work until 9 or so.

My idea was to use analogies to sell the deal. When I brought this up, Hugh Grant looked at me blankly, so I continued. We should sell it by saying we’ve done things like this. The brokers have handled deals up to $250 million. We’re not novices in brokering assets, we’re only inexperienced with these particular assets.

This wasn’t completely destroyed in the first five seconds, so we kept expanding it, and tweaking it and finally we had a strategy.

So we worked up some PowerPoint slides to demonstrate some salient points. Then we argued about them, and one guy and I got into a nasty argument because he’s a bloviating douche who has an ego that doesn’t quit and I refuse to let him boss me around like he tries to do with every other female in the office. Which reminds me: earlier today he told another person – the receptionist – that she was stupid. Said it to her face. I nearly exploded, but waited until I could get her alone and asked if I understood that situation correctly. She assured me I did. “Does he talk to you like that?” she asked.

“Oh hell no!” I answered. “He would not dare.”

She nodded. “You project that,” she said. “That don’t-even-think-about-fucking-with-me vibe.”

I was actually pleased to hear that though I don’t actually try to appear that way. I just want to go somewhere and resent anything and anyone who tries to stand between me and my objective.

I left the receptionist and returned to my office where I sat down and returned some calls. I glanced at the date display on my phone and felt a tremor of… I suppose it was fission. Today is December 16. The original Nigerian Barge deal was starting to come together right about this time. It would become finalized the next week.

Those strange instances, when you think that you can see through the moment to the pattern underneath, the bones of one’s life. The faultless perfection of Fate.

If I cared nothing for Enron, if I had never known about the Nigerian Barge Deal, would I even be in this same position?

The girl said that I have a don’t-fuck-with-me vibe. I think what she’s seeing is the playful defiance – the willingness to experiment and see what I can get away with. I wanted to do the Nigerian Barge Deal to prove it could be done, to do it legally and then just sit back and see if any indictments come down the pike.

Reading the accounts of the trials, I can see that the questioning always begins in a friendly – almost desultory- way. Rising slowly in pitch and intensity… this testimony of men. But the trial testimony never took me where I wanted to go. I wanted to feel my way eagerly through the maze of metal doors to the last door: the single depthless mirror. I wanted to be the one on trial because I wanted to win for them. To prove a point louder than they dared. They must do things quietly, discreetly (as is their nature) but I have no such encumbrances.

And so I wanted to yell for all of them. Jeff Skilling and Ken Lay, the Nigerian Barge defendants, the Broadband Defendants… even Arthur Andersen. The prosecution witnesses hurt me just as much as Jeff Skilling himself. How I wanted them to will themselves into language! To nudge them into their own stammering, radical defense. Say it! Say: I am worth saving! They accused themselves of horrible crimes that they knew they not commit. They accepted all the blame and wouldn’t utter the truth: I did nothing wrong.

I think of Rex Shelby… beautiful, sweet Rex Shelby… and I feel like this world has absolutely no value. What trash, that it would punish a man like him. That it would give him the awful choice of going broke while trying to save himself, or confess, go broke anyway by paying a fine, and then become a felon for something he didn’t do – but at last the government would leave him alone.

It is obscene.

And so, after these long years, I find myself – by accident? by design? I have no idea – in a circumstance that looks shockingly like the same circumstance of 1999 when a group of bankers talked to an energy company about a Nigerian barge.

I shut my eyes in my office and drew in a deep breath. Instead of shaking my fist at the darkening sky, I think of ravenous kisses.

James A. Brown Speaks to WSJ

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

James A. Brown Dismissal Order

It is a thing of beauty.

Brown Dismissal Order

Government Dismisses Some Charges Against James A. Brown

In a revealing last-minute move, after being denied a postponement of this Monday’s trial start date, the government moved to dismiss the remaining “conspiracy and wire fraud charges” against James Brown today in the Enron-related Nigerian Barge case. All the other defendants in the case had already had their charges dismissed; however, trying desperately to force Brown to drop his appeal of two other counts based on the government’s egregious misconduct and Brady violations in Brown’s original trial, prosecutors refused to dismiss Brown’s counts.

Finally, facing an imminent retrial for which they had obviously failed to prepare their factually and legally empty case, the prosecutors did what they should have done long ago — they dismissed the remaining charges against Brown. So, after seven painful years of being hounded by the government on ridiculous charges, Brown is clear of the government’s irrational vindictiveness. I am happy for James Brown now and sorry that he had to endure this stupidity for so long.

If there is anyone out there who still believes that the government was not guilty of intentional abuse and misconduct in the Enron indictments, here is yet another compelling body of evidence of that fact. There was no rational reason for the Nigerian Barge indictments in the first place — yet it has taken seven years for the falsely accused defendants to claw their way out of the government’s clutches. The government’s behavior has been beneath shameful—including their latest game of dragging Brown through the last six months of intense litigation of a case they never intended to retry!

More on this soon!
Brown’s Opposition to Continuance
Government’s Motion to Dismiss

UPDATE
The original indictment was issued September 16, 2003—exactly 7 years ago. It feels like a circuit has closed with perfect, elegant symmetry.

Merrill Lynch’s Involvement With Hard Assets (Such As…Oh… Picking Something At Random….Nigerian Barges?)

One of the questions I occasionally come across, both directly from people and rhetorically from journalists attempting to find fault with the Nigerian Barge deal, is what in the name of cheeze whiz was Merrill Lynch doing buying a barge? Isn’t Merrill’s business in banking, they would ask with a glint of gotcha in their eyes. Even when I tried to tell them that in order to bank, one must have an asset to buy or sell, my words often fell on deaf ears.

But now I have irrefutable proof that the Nigerian Barge deal was not unusual for Merrill Lynch. How about this, from the publication Oilgram: [Volume 84 / Number 47 / Friday, March 10, 2006. Look. It. Up.]

Merrill Lynch takes capacity in USLNG plant

Deal with Sempra in Gulf moves bank into physical gas market

New York—While several large investment banks have increased their presence in the US natural gas marketing sector, Merrill Lynch has gone a step further, securing capacity for LNG at a new Gulf Coast import terminal.

Merrill Lynch Commodities has signed an agreement for capacity at Sempra LNG’s Cameron terminal in Hackberry, Louisiana, Sempra LNG announced March 9.

The 15-year full-service agreement allows Merrill Lynch to import 500,000 Mcf/d at Cameron. The deal is contingent upon the investment house finalizing its LNG supply arrangements, Sempra said.

Depending on the timing of those supply deals, Sempra could choose to fulfill the capacity contract either with the initial phase of Cameron LNG’s development, which is set for completion in 2008, or after the terminal’s proposed expansion is completed in 2010, Sempra said.

“We are pleased to have signed this terminal capacity agreement with a company as respected and well known as Merrill Lynch Commodities,” Sempra LNG president Darcel Hulse said in a statement. “Their knowledge of the marketplace confirms Cameron LNG’s position as a strategic gateway for LNG supplies in the United States.”

Last August, Sempra signed a 20-year agreement with Italy’s Eni for 600,000 Mcf/d of capacity at Cameron. Between the Eni and Merrill Lynch contracts, Cameron now has 1.1 Bcf/d of its initial send-out capacity of 1.5
Bcf/d spoken for. Last October, Sempra signed a non-binding Heads of Agreement with Algeria’s state oil company Sonatrach for 250,000 Mcf/d to 500,000 Mcf/d of capacity at Cameron. A Sempra spokesman said March 9 no final decision on that proposed contract has been reached.

Officials with Merrill Lynch could not be reached to discuss the company’s move into the physical gas business. In oil markets, the company is active in petroleum futures and over-the-counter swap markets, but has not
yet expanded into trading physical petroleum products. However, the oil trading group plans to lease tanks at some point and become an accredited pipeline shipper, possibly within the next year, to participate in US spot markets, according to a source at the company.

The recent steep contango in the gasoline market had kept most tanks in use as traders bought physical and sold forward futures contracts. Now that the forward curve has flattened, tanks may become more widely available for leasing, the source added. The Sempra spokesman also noted that preparations for an open season on the possible expansion of the company’s Energia Costa Azul LNG import terminal are still under
way. That terminal, a joint venture with Shell in Baja California, Mexico, would have initial send-out capacity of 1 Bcf/d.

So Merrill Lynch has a history of dabbling in hard assets that go bye-bye across the sea.

Oh beautiful, unconventional Merrill Lynch. How badly you’ve been maligned. And those sweet, good, honest men at Enron, how horribly you’ve been treated.

Let us remember that James A. Brown is set to go to trial in two months on charges stemming from this transaction. He is accused of … well, I don’t really know because the indictment apparently was written by someone who has not yet entered law school because they forgot to mention what his crime was. But it has something to do with the Nigerian Barge Deal.

James A. Brown, William Fuhs, Robert Furst, Dan Boyle and Dan Bayly are innocent.

Latest James A. Brown Filings

If you care about justice at all, read these documents. See for yourself the abuse of power the DOJ has perpetuated against James Brown, and indeed all of the Enron defendants.

Defendant’s Opposition To Govt Motion To Strike Brown’s Emergency Motion To Compel This one is excellent; I love the attorney’s tart tone in this one. The first line is priceless: “The government’s time would be better spent producing all the Brady material Brown has requested for seven (7) years, including the raw notes of all interviews of all government witnesses, rather than filing a motion to strike.”

Awesome.

Defendant Brown’s Reply On Supplemental Briefing For New Trial

Defendant’s Chart of Brady Materials. This is another eye-popping document. It will make you angry and it will also make you ache for the man who has endured this treatment at the hands of the US Government.

What Does The Future Hold For Upcoming Enron Trials?

As James A. Brown prepares for his second trial on September 20 under an indictment which fails to state an offense, I have to wonder about the sanity of our government. For instance, I wonder how much taxpayer money has been spent prosecuting this man, and jailing him for a year on a perjury charge which stemmed from his testimony about a phone call he was not even a party to. How many millions? Is it more millions than seven? Because if it is, I think we can call this even.

Money doesn’t matter to the government because they have infinite resources. The defendants like Jim Brown and Rex Shelby, who have been litigating since 2004, are mere mortals; they can’t afford to spend money forever on their defenses. Of course the agents of our government know this; it is part of their strategy. It is a significant form of leverage in forcing defendants to accept plea bargains.

I also wonder at a system which ignores corruption, punishes honesty, and would cast innocent men aside in a mad stampede for the glories of history and a cushy private sector job. The fresh Brady documents that were kept from James Brown prove beyond any measure that the government KNEW that the Nigerian Barge transaction was legitimate, that all the people involved believed it was legitimate and acted ethically, and that the government deliberately and with great malice kept exculpatory evidence from James Brown. If the defense had access to this material this before trial it would have changed the entire defense—and the government certainly knew it. It is the only reason they could have possibly had to withhold it.

So why wasn’t Judge Werlein outraged? The prosecutors were lying to him! But he, like Judge Gilmore and Judge Lake, seemed to have a soft-focus lens when it came to the prosecutors. They could get away with more, their objections were more often sustained, they would allow the prosecution to immunize their own witnesses but not the witnesses of the defense, and their jury instructions were used more often than the defense’s.

If it wasn’t quite enough to have the prosecutors and judge in the tank for the prosecutors, all Enron defendants had to handle the onslaught of negative media attention. When was Daniel Bayly’s sterling reputation ever mentioned? When did anyone talk about the fact that James Brown had a reputation as a straight-shooter and nobody who knew him would believe that he had acted in bad faith? Sean Berkowitz and Bethany McLean’s romance was heating up in the Skilling / Lay trial, the media would later fawn over the new lovers’ amusing story of how they met. But who talked about the wives of the Merrill Lynch executives, or the Enron executives, who cried and struggled and tried to hold it together as their husbands desperately tried to save themselves? Who cared about the children of these men, the families and friends who loved them? They became fodder for a ruthless news cycle which cared more about sensationalizing the story than actually reportage.

In these circumstances, it is hard to believe any of the defendants came out okay. And yet they did. And some, like Kevin Howard, Rex Shelby and James Brown not only survived, they endured – or will endure – a second trial.

I hope it is different this time. We are all five years older now. A child born on the day the Broadband verdicts were rendered will enter Kindergarten this September: a lot can – and has – changed.

To most people, the word “Enron” is ancient history. It died ten bloody years ago. The passion for a witch hunt has somewhat abated – at least for these particular witches. I predict jury fatigue. I can imagine sitting as a juror on Brown’s case and wondering why in the world I should care about a $7 million deal that was done eleven years ago, and not really seeing where the big controversy is. Even if he was guilty (and he is NOT), I can’t imagine thinking that eleven years later, we should punish him.

And the Broadband Trial is going to be a snooze-a-thon. Rex Shelby was a technology guy. For most people, his testimony will be as interesting as listening to someone read aloud engineering specifications for a washing machine – except more boring because we can all visualize washing machines; it’s much harder to visualize a “concept” like the EIN. (I, however, am going to laugh and laugh and laugh as I watch the prosecutors try to monkey through the EBS technology.) So if I were a juror on that case, I’d constantly be wondering what time is lunch. Or pass the judge a note to ask the defendant to remove his shirt. Just to liven things up.

In addition to a bored jury listening to testimony that is completely irrelevant in 2010, I predict the media has been so shamed in its coverage that will be a little more benign. One former defendant tells me the story of meeting a Houston Chronicle journalist while he was out and about, and she greeted him with a hug. As if she’d never said those horrible things about him!

The Enron Task Force has failed to deliver in its lavish promises of “massive fraud” at Enron. There was no fraud. These men are innocent. They were years ago, and they are today. I worry that the prosecutors play dirty, but I pray that everyone is a little less tolerant of their shenanigans. Is it too much to hope for in America?

Daniel Bayly Sentencing Transcript

Bayly Sentencing

Every time Kathy Ruemmler speaks in this transcript, I want to stab somebody in the neck with a fork. She’s so slimy, pretending to be some great moral authority on behalf of the United States of America. From adulteress to Assistant Counsel in the White House. That’s Affirmative Action in action.