The first Enron Corp. criminal trial will continue this week in Houston, as prosecutors use emails and other evidence to prove two former executives conspired with four Merrill Lynch bankers to illegally increase Enron’s profits so that it could meet Wall Street expectations.

The six charged with conspiracy and wire fraud charges are Dan Boyle, former vice president of Enron’s Global Finance Group, Sheila Kahanek, an ex-director in Enron’s international investment division, and four ex-Merrill bankers: James A. Brown, Daniel Bayly, William Fuhs and Robert Furst. Brown, Fuhs and Boyle also are charged with lying about the transaction (see NGI, June 28). The case is expected to last up to two months.

Seven men and nine women, including four alternates, were selected to serve on the jury last Tuesday, and arguments immediately began. The defendants are accused of increasing Enron’s profit by $12 million by disguising a sale of some electricity-generating barges that were moored on the Nigerian coast. Prosecutors charge that the Merrill executives “bought” the barges from Enron then “sold” them back to an Enron partnership.

“This is a case about cheating and lying,” prosecutor John Hemann said in his opening statement. “This was really no more than a loan, a loan to help Enron out of a jam at the end of 1999.”

Hemann said that the federal government will prove that Merrill executives were attempting to curry favor with Enron when they agreed to temporarily purchase the barges in late 1999. The ex-Enron executives assured Merrill that they would buy back the barges within six months, which was ultimately completed by Enron. However, Hemann said the transaction should have been recorded on Enron’s books instead of logged as revenue.

“Whether they sank or blew up or were taken over by pirates,” said Hemman, Merrill was promised that the barges would be bought back by Enron in six months. The transaction was part of Enron’s “pay-to-play” system, he said, which demanded that investment bankers assist Enron with its side projects. The prosecutor said that the paper contracts do not detail any incriminating promises. However, Hemann said several emails between Enron and Merrill executives detailed the actual transaction.

According to Hemann, the government plans to call some former Enron executives, including treasurer Ben Glisan Jr., who is serving a five-year prison term. Glisan sent an email about the barges and attempted to have one of the Merrill defendants allow Enron to postpone the barge repurchase, he said. Also expected to testify is Michael Kopper, a former protege of ex-CFO Andrew Fastow. Kopper already has pleaded guilty to fraud in connection with Enron’s demise and is cooperating with prosecutors. Fastow has pleaded guilty and will serve 10 years in prison. He also is cooperating with authorities, but he is not expected to testify in the case.

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