New fraud charges in Enron trial

PROSECUTORS in the US have charged former Enron and Merrill Lynch officials with two new counts of fraud in the first criminal trial to emerge from the Enron scandal.

The six defendants, who prosecutors say were involved in Enron's bogus 1999 $28m (£15.3m) sale of electricity-generating barges in Nigeria to Merrill Lynch, already faced charges of conspiracy to commit wire fraud and falsifying books and records.

In the new indictment, all six - two former Enron executives and four from Merrill - face the additional charges which are punishable by up to 10 years in prison.

The barge transaction was in many ways a side issue to the massive fraud and false book-keeping which brought down the energy giant, but prosecutors say the deal was invented in secret between the defendants to help Enron fraudulently meet a year-end profit target and mislead investors.

Former Enron executives Dan Boyle and Sheila Kahanek are sharing the dock with ex-Merrill Lynch bankers Daniel Bayly, Robert Furst, William Fuhs and James Brown.

Fuhs was originally charged with obstruction of justice and making false statements, and Brown with obstruction and perjury. They each now face a maximum-of 30 years in prison.

A further-charge was also brought against Boyle, who now must answer one count of making a false statement, which carries a maximum penalty of five years.

The case is to set to go to trial in Houston on 16 August, although there will be a pre-trial hearing tomorrow. It was delayed on 7 June by district judge who said he needed more time to try the case.

Boyle is former vice-president in Enron's global finance unit and Kahanek an in-house accountant. Bayly was Merrill's chairman of investment banking, while Brown and Fuhs ran the bank's asset lease and finance group. Furst was Enron relationship manager.

Chris Flood, the attorney for Fuhs, told Bloomberg he hadn't had a chance to review the new charges, 'but it appears as if the government might be desperate'.

The prosecution case may face a rocky path thanks to evidence from former Enron chief financial officer Andrew Fastow, their most senior co-operating witness, who pleaded guilty to separate fraud charges in January.

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 barge sale was really a loan. Lawrence Zweifach, who represents Brown, said he would review the new indictment before commenting.