Enron Crooks Get Shorter Sentences

Houston federal Judge Ewing Werlein rejected the recommendation of the prosecutors in describing the corporate fraud which stole over $43 million out of the pockets of common investors, as "relatively benign". The Chamber of Commerce----filed amicus briefs for the crooks.See the Wall Street Journal article below:

Link: WSJ.com - Merrill Ex-Officials' Sentences Fall Short of Recommendation.

Merrill Ex-Officials' Sentences Fall Short of Recommendation By JOHN R. EMSHWILLER and KARA SCANNELL Staff Reporters of THE WALL STREET JOURNAL April 22, 2005; Page C3

A federal judge in Houston gave two former Merrill Lynch & Co. officials substantially shorter prison sentences than the government was seeking in a high-profile case that grew out of the Enron Corp. scandal....

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Yesterday's Merrill sentencing in the so-called "Nigerian barge case" had attracted attention in the business community because of questions over how to calculate investor losses in fraud cases. They also were the first decisions to involve senior corporate defendantsfollowing recent Supreme Court rulings that gave judges more leeway in determining prison terms.

Judge Ewing Werlein, Jr. sentenced former Merrill investment banking chief Daniel Bayly to 30 months in federal prison and James Brown, who headed the brokerage giant's structured-finance group, to a 46-month term.

The federal probation office, with backing from Justice Department prosecutors, had recommended sentences for Messrs. Bayly and Brown of about 15 and 33 years, respectively. Mr. Brown had been convicted on more counts than Mr. Bayly.

The case stemmed from Enron's 1999 sale to Merrill of an interest in some electricity-producing barges off the Nigerian coast. Prosecutors argued that because Enron had secretly guaranteed Merrill against any loss, the sale was a sham, which allowed the energy titan to illegally book $12 million in pretax profit. The government argued that the bogus profits artificially inflated Enron's market capitalization at the time by at least $43.8 million and that this amount should be considered the loss to investors.

In their court filings, the defendants argued that the calculated loss to Enron shareholders should be zero, based partly on the fact that the alleged barge fraud wasn't revealed until after Enron had collapsed into bankruptcy proceedings in December 2001. In an unusual move, the Chamber of Commerce, the nation's biggest business group, filed an amicus brief arguing that the government's approach could discourage legitimate business activities.

While Judge Werlein rejected the government's loss calculation, he didn't completely reject the government's theory of how to calculate the loss. He put the loss around $1.5 million, which was related to the amount of investment-banking fees paid in the barge deal.

The judge described the barge fraud as a relatively "benign" crime in the catalogue of alleged misdeeds that took place at Enron.

Three other defendants convicted in the barge case face a later sentencing date.

Write to John R. Emshwiller at john.emshwiller@wsj.com2 and Kara Scannell at kara.scannell@wsj.com3

URL for this article:
http://online.wsj.com/article/0,,SB111410393680013424,00.html

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Please note that an online Wall Street Journal requires a subscription (no luck in reading the otherwise good article.) The source link to the 2nd article isn't working.