The first Enron criminal case to go to trial appeared at first blush to be a snoozer, focusing on an obscure deal to sell barges in Nigeria five years ago and lacking big names from the bankrupt energy giant.
But it may be a sleeper, after last week’s revelation that the U.S. Justice Department’s star informant has testimony that was more helpful to the defendants, four former Merrill Lynch bankers and two ex-Enron Corp. executives.
The criminal conspiracy trial is scheduled to begin with jury selection on Monday afternoon in U.S. District Judge Ewing Werlein’s Houston federal court. It is expected to last five weeks.
Before it starts, Enron Task Force prosecutors and the defense will tangle over startling evidence from former Enron Chief Financial Officer Andrew Fastow. The government’s top cooperating witness, Fastow pleaded guilty to separate fraud charges in January.
The information was turned over just days before the trial, prompting the defendants variously to ask for a delay, the dismissal of the charges and the handover of all Fastow-related material.
According to a summary of what Fastow told the government, some of what he said appears to undercut the prosecution’s key contention: that the defendants knew and hid the fact the $28 million barge sale was really a loan.
Prosecutors say Fastow orally promised Merrill that someone would buy back the barges within six months at a 22 percent premium, making the deal’s accounting fraudulent — and hiding it as a crime.
But the new Fastow information complicates that argument, said David Berg, a lawyer with Berg & Androphy in Houston and author of “The Trial Lawyer: What It Takes To Win.”
“If they go to trial with this, this does seem — certainly from Merrill’s Lynch’s standpoint — to lessen their culpability. And it lessens the culpability of the Enron employees,” Berg said.
Fastow does not appear on the government’s witness list and it was unclear if defense attorneys would call him, since his testimony could backfire for them. The prosecutors are also more familiar with his knowledge, giving them an edge when questioning.