First Enron Trial Postponed Until August

HOUSTON – A federal judge on Monday postponed the first Enron Corp. (search) criminal trial until August after lawyers informed him the proceedings will last beyond the scheduled five weeks.

U.S. District Judge Ewing Werlein indicated that it was likely the trial, set to begin Monday with jury selection, would have been interrupted for several weeks. He didn't specify why, although he has noted he has a vacation scheduled to start July 12. Werlein reset jury selection for Aug. 16.

Prosecutors declined to comment. Defense attorneys didn't say what caused the postponement, but agreed the trial wouldn't meet the initial schedule.

Werlein's decision followed a 90-minute meeting with lawyers from both sides. About 100 prospective jurors who had gathered at the courthouse were sent home.

The trial will determine whether two former Enron executives and four former Merrill Lynch & Co. (MER) executives conspired to help manipulate the energy company's books in 1999.

The six are charged with conspiracy for allegedly helping push through Enron's sham sale of Nigerian barge-mounted power plants to Merrill Lynch to help the energy company appear to have met earnings targets.

The judge also set a hearing for June 25 to take care of lingering pretrial motions, including defense concerns about statements made to investigators by former Enron finance chief Andrew Fastow (search) that could favor their clients.

Defense attorneys cried foul last week at learning about Fastow's statements just days before trial. They had been demanding information that could help them prepare their cases for months. The government says Fastow's statements don't constitute material prosecutors are obligated to provide, but they informed the defense out of an "abundance of caution."

Prosecutors don't intend to call Fastow to testify, but they contend he played a key role in the barge deal. The government says Fastow wiped out the sale's legitimacy by verbally promising that Enron would buy back the barges within six months.

Last week prosecutors revealed that Fastow had told investigators he didn't say "guarantee" or "promise," so he wasn't explicit about the certainty of the buyback. But the government contends the defendants got the message.

It's unclear when Fastow made those statements, but he has been cooperating with the government since pleading guilty in January to two counts of conspiracy.

Fastow followed through on the buyback when LJM2, one of his partnerships created to help Enron hide debt and inflate profits, bought the barges in 2000. At the time, LJM2 was treated as a separate entity from Enron even though Fastow ran it.

Merrill Lynch got involved when Jeffrey McMahon, then Enron's treasurer, approached the brokerage about the deal after Enron had failed to find another buyer for the barges. According to documents filed in Enron's bankruptcy, McMahon promised Merrill's "hold" on the barges would last six months or less and Enron would buy them back at a premium.

McMahon has not been charged and is not on the prosecution's witness list. Defense attorneys say McMahon's lawyers have told them he is unavailable to them as well.

Werlein said Monday he was hopeful the two sides would confer before the motions hearing.

The defendants are Sheila Kahanek, a former in-house Enron accountant; Dan Boyle, a former Enron finance executive; Daniel Bayly, formerly Merrill Lynch's chairman of investment banking; Robert Furst, former managing director who answered to Bayly; James A. Brown, former head of Merrill's asset lease and finance group; and William Fuhs, former vice president who answered to Brown.

The trial initially was scheduled for June 14 but Werlein moved it up a week because he wanted it over by July 9. It became clear Monday that wasn't going to happen, even under Werlein's plan to work Saturdays.

In the only other Enron-related trial since the company's implosion in 2001, the successful obstruction of justice case against former Enron auditor Arthur Andersen LLP, a protracted jury deliberation cost U.S. District Judge Melinda Harmon a European vacation in 2002.