Ex-Enron Treasurer to Testify at Barge Trial

A former Merrill Lynch (MER) executive pointed to a verbal buyout agreement with Enron Corp. (search) in saying he might support an "unsecured deal" with another company, according to an e-mail presented to jurors in an ongoing conspiracy and fraud trial.

One of the six defendants in the trial, former Merrill Lynch executive James A. Brown (search), wrote an e-mail to colleagues in March 2001 that referred to the December 1999 Enron deal that involved Merrill buying a $7 million interest in three electricity-producing barges, enabling Enron to book a critical $12 million pretax profit.

In the e-mail, Brown says to others at Merrill Lynch that he would support another "unsecured deal" — this time with Continental Airlines (CAL) — if the brokerage had "total verbal assurances" from top Continental executives.

"We had a similar precedent with Enron last year, and we had (former Enron finance chief Andrew) Fastow get on the phone with (defendant Daniel) Bayly and lawyers and promise to pay us back no matter what," the e-mail said. "Deal was approved and all went well."

Continental nixed providing any such buyout promise.

The e-mail was presented to jurors Tuesday despite strenuous arguments from Brown's lawyer, Lawrence Zweifach, that the e-mail was prejudicial and out of context. He asked U.S. District Judge Ewing Werlein to declare a mistrial after the e-mail was presented to jurors, and Werlein declined.

Prosecutors say Brown, three other former Merrill executives and two former midlevel Enron executives conspired to push through the deal as a sale even though the buyout promise meant it was really a loan.

The defendants say Enron was never obligated to buy back or find another buyer for the barges.

However, jurors saw another string of internal Merrill Lynch e-mails indicating the brokerage expected to be bought out by June 30, 2000 — the deadline the government contends was promised by Fastow.

In mid-June 2000 a letter drafted at Merrill Lynch instructed Enron to wire $7.5 million to a specified account by the end of that month to buy out the brokerage's $7 million investment at a premium.

E-mail traffic indicated the letter wasn't sent because Enron found a buyer — LJM2, a Fastow-created partnership. LJM2 paid $7.5 million at the end of June 2000.

An e-mail sent June 14, 2000, the day the letter was dated, from former Merrill Lynch executive William Fuhs said he had just called then-Enron finance executive Dan Boyle, who "pre-empted our letter" by saying "Enron has lined up a new buyer" that will pay the "agreed upon amount."

Prosecutors introduced the e-mails and other documents through testimony from FBI Special Agent Raju Bhatia, a member of the government's Enron Task Force.

Former Enron treasurer Ben Glisan Jr. (search), who is serving a five-year prison sentence for conspiracy, was slated to testify Wednesday after Bhatia. Glisan pleaded guilty to conspiracy a year ago and became the first ex-Enron executive to go to prison.

Glisan was a key player in ensuring Merrill Lynch was bought out, according to an e-mail he wrote to Enron's barge dealmaking team in May 2000 that noted they had to follow through on the alleged promise:

"To be clear, (Enron) is obligated to get Merrill Lynch out of the deal on or before June 30. We have no ability to roll the structure," the e-mail said.

Glisan was indicted in May 2003 on two dozen counts of fraud, conspiracy, money laundering and others for participating in various schemes orchestrated by Fastow, his then-boss.

In addition to Boyle, Brown and Fuhs, the barge defendants are former Merrill Lynch executives Daniel Bayly and Robert Furst and former in-house Enron accountant Sheila Kahanek.