Two Merrill Lynch executives convicted for their roles in a Nigerian barge deal that inflated Enron's profits have been ordered released from prison pending their appeal.
Some legal observers say their release could mean some of the convictions in the case may soon be overturned.
Former executives Daniel Bayly and Robert Furst were ordered free on bail Thursday by the 5th U.S. Circuit Court of Appeals. They join fellow Merrill executive William Fuhs, who was released on bond in March pending the same appeal.
For the court to issue such an order, a defendant has to show there is a substantial chance of a reversal in the case.
Brian Wice, a Houston attorney who specializes in appeals, said the fact that they are being ordered free on bail strongly suggests the court is leaning toward reversal.
"They are a coat of paint away from having their convictions reversed," Wice predicted.
Federal courts rarely release prisoners while they await their appeals, particularly in the conservative 5th Circuit, Wice said.
The court heard oral arguments in the appeals in March. It issued the order on Thursday to release Bayly and Furst without explanation.
"It could have been a faulty instruction, it could have been anything," said Jimmy Ardoin, a defense attorney who represented former Enron accountant Sheila Kahanek, the only defendant in the barge case to be acquitted.
Fuhs had refiled a motion for release pending appeal, which Bayly and Furst joined.
Furst and Bayly must attend bail hearings today before being released.
"We're pleased that the court issued this order," said Gregory Poe, Bayly's Washington, D.C., attorney. He declined further comment.
Furst's attorney, John Nields, also of Washington, acknowledged the order had been made but declined to elaborate.
A reversal would be seen as a blow to the Enron Task Force. In November 2004, a jury found the three Merrill workers, as well as Merrill colleague James Brown and Enron executive Dan Boyle, guilty.
Justice Department spokesman Bryan Sierra declined comment, citing a longtime policy in which the government does not publicly discuss a case while waiting on a ruling.
Rusty Hardin, a Houston defense attorney who was once a prosecutor, said the court is obviously taking the appeal "very seriously" but added that a reversal is not set in stone.
'I'd be concerned'
"If I were the prosecutor, I'd be concerned but it's not an absolute certainty" yet that the convictions will be overturned, Hardin said.
The case focused on a 1999 deal for Enron to sell three electricity-generating barges off the Nigerian coast to Merrill Lynch. The government claimed the sale was a sham designed to create $12 million in revenue for Enron to help it meet earnings targets.
The key problem with the deal, according to prosecutors, was a verbal promise that Enron's former chief financial officer, Andrew Fastow, made to buy the barges back at a profit from Merrill Lynch within six months.
The side deal means it wasn't really a sale, as Enron claimed, prosecutors said, but simply a loan.
Bayly, of Connecticut, and Furst, of Dallas, were found guilty of conspiracy to commit wire fraud and conspiracy to falsify books and records.
Bayly was accused of taking part in a telephone conversation in which Fastow made assurances that the barges would be bought back in one year.
He is expected to be released on bond today from a low-security prison in Petersburg, Va., where he's been serving a 30-month sentence.
Furst is serving a three-year, one-month sentence at a low-security facility in Seagoville, near Dallas, and is also expected to be released today.
Prosecutors say Furst had a summary drawn up of the proposal for Merrill Lynch to temporarily buy Enron's interest in floating power plants.
Fuhs, a Denver resident and the lowest-ranking of the Merrill employees involved in the Nigerian barge deal, was released on bond in March.
Brown, a Connecticut resident, was found guilty of perjury and obstruction of justice in addition to the same conspiracy counts as his fellow banking executives. Like them, he is appealing.
Brown's attorney could not be reached for comment.
'All went well'
During the trial, an e-mail from Brown was shown to jurors that cited the barge deal, saying: "We had Fastow get on the phone with Bayly and lawyers and promise to pay us back no matter what. Deal was approved and all went well."
Boyle, of the Clear Lake area, is not appealing his conviction.
All of the men began their prison sentences last summer.
- 106 Money & Politics
- 107 Energy
- 186 Financial Services, Insurance and Banking
- 208 Regulation