A Nigerian Barge Puzzle

I have long said that the Nigerian Barge case was the easiest of all the Enron cases to understand. There was no accounting. No sub of a sub of a sub you had to keep track of. It basically came down to the central question: did Andy Fastow guarantee to Merrill Lynch that Enron would buy back the barges? That’s it. The answer is no. However, I am curious what would happen if Merrill Lynch had attempted to enforce Andy Fastow’s so-called promise. That action simply wasn’t enforceable. Enron had the ability to take ML’s money and buy women and drugs and there wasn’t a damn thing ML could do about it because ML owned the barges. They accepted full responsibility. ML shouldered the risk that the boats would sink, or that Enron was corrupt and would collapse, or that terrorists would blow the barges up, or that a Soviet-era satellite would fall to earth, land on the barges, and sink them. Basically anything could have happened to those barges under ML’s watch and Enron could have, if it was so inclined, laughed and yelled “Suckers!” as it ran over the hill.

So if ML decided it wanted out of the investment, and the bankers called Andy and said, “We’re holding you to your promise, we want our money back,” what could they have done if Andy just laughed?

There was nothing they could have done. They were simply stuck with the barges because Andy’s so-called promise was not really a promise at all. There was nothing legally binding about any “secret side deal”. If Andy made that guaranty and ML accepted it, ML was then accepting not only the risk that the boats would explode, but that Andy Fastow would live up to his promise.

The ML bankers were bright, industrious people. Most of them had been in the business for many years; they didn’t just start working for ML that day. They knew how these deals were put together. I don’t think any of them would be foolish enough to accept an unenforceable promise. It’s Merrill Fucking Lynch. Not “Joe’s Bank of Dead Pig Junction, Arkansas.” They knew what they were doing. They were buying a couple of Nigerian barges.

James A Brown Documents

Here is the link to James Brown’s oral arguments at the 5th Circuit (You will need to find the case, which is 10-20621 and the date was 7/5/11.)

And here is Brown’s Reply Brief from April 2011. Sometimes the most fascinating facts can be derived from the footnotes, and that maxim holds true for this document, particularly Footnote 4 (re: Tina Trinkle) and Footnote 5 (re: Merrill’s deal with the government which required every Merrill employee to espouse guilt or risk having its employer, Merrill, face charges.) The entire document is interesting because the Nigerian Barge case is interesting – which is kind of ironic since it is the most simple, straightforward transaction that was ever prosecuted at Enron.

Anyway, check out the document and listen to the arguments. It’ll be an education.

Notes on James Brown’s Appeal

James Brown is innocent. The government hid the evidence that proved he was innocent – as they hid evidence in the Skilling case (i.e. “The Fastow Notes”) and in the Broadband case (i.e the software and hardware that created the actual network that they were claiming did not exist.)

I have been told that James Brown will seek a rehearing to give the Court an opportunity to make clear that if the government is allowed to provide ‘summaries’ of Brady material, it must provide full and fair summaries that disclose all the key words and phrases of the actual participants to a transaction. The panel opinion completely ignored the fact that the Enron Task Force prosecutors yellow-highlighted material for the district court in clear acknowledgment that it was Brady material and then failed to give those key words to Brown. Instead, the Court wrongly relies on the Skilling decision which simply does not apply here. Brown’s Brady claim was distinct from Skilling’s, on a different record and relevant to different government theories, arguments and facts. Brown was denied even a hearing on his motion for a new trial despite the astonishing fact that the government had highlighted material as Brady then did not give it to Brown in a case where his only purported crime was one of words.

Where the crime is one of words, James Brown was entitled to all the words.

James A Brown Loses Appeal

Former Merrill Lynch banker James Brown lost an appeal of his conviction on perjury and obstruction charges over his role in Enron’s Nigerian barge deal.

James Brown argued that the government violated his right to due process by withholding evidence that could have exonerated him. However, the 5th U.S. Circuit Court of Appeals said the evidence at best might have marginally helped Brown and would not likely have changed the result.

Sidney Powell, a lawyer for Brown, said she plans to appeal Friday’s decision to the entire 5th Circuit.

Brown and other Merrill bankers were convicted in 2004 of helping Enron in 1999 engineer a “sham sale” of electricity barges to help the energy trader meet analysts’ fourth-quarter earnings forecasts.

Prosecutors said Enron disguised a $7 million loan as sale proceeds, while secretly promising it would within six months buy back the barges.

Brown served one year in prison. The 5th Circuit previously overturned his conviction on fraud and conspiracy charges.

In his appeal of the obstruction and perjury counts, Brown said the government should have produced evidence, including FBI notes from an interview with former Chief Financial Officer Andrew Fastow, and Senate investigators’ notes from an interview with former Treasurer Jeffrey McMahon.

But the 5th Circuit said some of the evidence in fact helped the government’s case, while other evidence would have had little impact.

“The favorable evidence that Brown points to is not, even cumulatively, sufficient to give us a definite and firm conviction that it establishes a substantial probability of a different outcome,” Circuit Judge Jerry Smith wrote for the court. “There was considerable evidence of Brown’s guilt.”

This is becoming terribly routine. A defendant is charged with a crime, asks that the government abide by the rules, loses when they refuse to play by the rules, and then is told that the rules really wouldn’t have helped him anyway. It is sickening. I hope James is still resolved to fight on.

Forbes Mentions Nigerian Barge Deal

Forbes busted out with this:

It’s up there with the Enron-Merrill Lynch Nigerian barge fraud. Manhattan United States Attorney Preet Bharara is claiming in a just-released criminal complaint that, after learning of a federal investigation, a former employee of SAC Capital tore apart his computer drives with pliers and walked around New York City tossing the remains in four separate garbage trucks, The Wall Street Journal is reporting.

Whoa. Hold the phone. I for one would like some accountability served with my yellow journalism. Who at Enron or Merrill Lynch tore his computer apart and destroyed it? I think the journalist is confusing this with the classic children’s tale The Time Michael Kopper Threw Away His Computer In A Dumpster, which after a little more research into the matter seems fiction to me but what do I know, I’m just a girl with a dream, a computer, and no discernible respect for authority.

Incidentally, it’s not illegal to throw away your computer. Keep that in mind when you’re busy condemning the act that may or may not have happened.

“F—in’ pulled the external drives apart,” said Donald Longueuil who worked at SAC’s CR Intrinsic Investors division for about two years, according to a Journal report based on a criminal complaint released Tuesday. “Put ‘em into four separate little baggies, and then at 2 a.m. … 2 a.m. on a Friday night, I put this stuff inside my black North Face … jacket, … and leave the apartment and I go on like a twenty block walk around the city … and try to find a, a garbage truck … and threw the s—t in the back of like random garbage trucks, different garbage trucks … four different garbage trucks.”

This guy sounds exactly like a character my boyish friend and I made up for one of my books. He’s a mob boss named Scarpetta, stupid as a brick but mean. And sometimes he calls the hero and says, “Can I come over? I got a dead body in the trunk I want you to help me get rid of.” Then when the other guy freaks out he laughs and says, “I’m just yanking your chain. Seriously I want you to tell me how do some insider trading.” Because he’s subtle like that.

Said U.S. Attorney Bharara in a new conference: “When people frantically begin shredding sensitive documents and deleting computer files and smashing flash drives and chasing garbage trucks at 2 a.m. … it is not because they have been operating legitimately.”

Talk about deadpan delivery.

And pause.

This what I don’t like about prosecutors. SHOW ME THE PROOF HE DID SOMETHING WRONG. Don’t just assume that the odd behavior of someone is enough to prove he’s not “operating legitimately.”

And furthermore, who is this lapdog writing this crap? Whatever happened to the tough, adversarial media? I am not sure the role of the person writing but goodness, this is Forbes magazine, you’d think it would attempt to dress its unquestioning love of the US attorney with a bit of actual journalism, even if it’s just for show.

The conference was part of a rapidly expanding insider trading probe that is ensnaring a widening circle of SAC employees and affiliates. SAC is a highly secretive $12 billion (assets) hedge fund firm known for paying hefty commissions—

I count three slurs in those two sentences. Two are subtle. One is not.

1. “Rapidly expanding insider trading probe.” This means to imply vastness – that big corruption is afoot.
2. “Highly secretive.” That’s not illegal or even suspicious.
3. “Hefty commissions.” Aha. Class envy.

and which for years has been the subject of rumors that its largesse has bought it the first call from brokers and others in the know about upcoming market-moving events. SAC’s billionaire founder Steven Cohen was the subject of similar allegations by his former wife. Neither Cohen or SAC has been charged with wrongdoing, and the firm has stated that it is cooperating with investigators.

That’s very nice of the writer to mention that Cohen hasn’t bee charged.

Longueuil declined comment and was charged with conspiracy to commit securities fraud and conspiracy to commit wire fraud in connection with his activities while at SAC and obstruction of justice afterward, according to the Journal.

Another former SAC fund manager, Noah Freeman, 35, has pleaded guilty to securities fraud and conspiracy in connection with his work at SAC, is cooperating in the government and recorded conversations with Longueuil.

The federal investigation appears to fit a classic pattern in which lower-level conspirators are investigated, confronted with their own wrongdoing and convinced to cooperate with the feds in exchange for more lenient treatment. They are then used by prosecutors to uncover evidence of wrongdoing by those higher up the chain. It’s what’s known as throwing others under the bus.

At Enron it was the reverse. The dandies at the DOJ thought it wise to aim for the big fish first. Didn’t work out very well.

Fedreal investigators have used similar tactics in a parallel investigation involving Galleon Group. That investigation has already resulted in several convictions. Galleon founder Raj Rajaratnam is scheduled to go to trial later this year, with his former underlings likely to form the basis of the government’s case.

It’s a pattern I’ve seen before. Namely in a case involving MCI, about which I co-wrote a book, Stolen Without A Gun. In that case, the feds presented one of the scamsters with evidence of his wrongdoing and convinced him to wear a wire while getting his buddies and co-conspirators to discuss their crimes.

Wear a wire? What are you, on Law on Order? Who needs a wire when there are iPhones that record audio, emails, etc.? Isn’t “wearing a wire” a bit 1989?

I interviewed the guy. Talk about a horrible experience. He knew he’d done wrong. The feds had the goods to put him away for years and were offering conditional immunity. That meant cooperate and they wouldn’t go after him for anything he helped uncover; leave something out and get prosecuted for it. The night before he strapped on the FBI’s wire, he was shaking so much his bed was knocking against the wall. He ultimately got off as an un-indicted co-conspirator, or, as his lawyer put it, as a witness.

This actually sounds like Bill Collins. Not that I have much sympathy for Bill Collins but the guy was skeered of the DOJ indicting his happy ass so he told them everything they wanted to know, plus much much more. Meaning he just made crap up on the fly.

The same people who say that torture is wrong are inevitably the same ones who think there is nothing untoward about plea deals. There simply is not logical distinction between them.

It’s amazing how great an ally prosecutors have in the need of crooks to share their experiences with their partners in crime. If I were Stevie Cohen, I’d be dipping into those billions to hire some very good criminal defense lawyers, as I’m sure he’s doing already.

Maybe you should take some of those hypothetical billions and take a journalism class. Capiche?

James Brown Appeals To Fifth Circuit For New Trial

James Brown swings again! The former Merrill Lynch executive is appealing the district court’s order denying his Motion for New Trial for perjury and obstruction of justice. It is a fascinating brief. I was particularly taken by this passage:

Whether the district court misapplied the law and abused its discretion when it denied Brown’s motion for a new trial on perjury and obstruction given that it failed to address the new prosecutors’ disclosure of crucial, first-hand evidence that: (i) proves Brown’s testimony was true;

I love how how “proves Brown’s testimony was true” was the first item on the list – and how forceful that is.

James Brown is a man of integrity, of his word. Most of all, he is innocent.

The 2010 Nigerian Barge Deal

On the Eve of Christmas 1999, Merrill Lynch and Enron Corporation came to a deal: Enron would sell its interest in an electricity producing barge offshore Nigeria to Merrill Lynch, then if ML could not find a buyer, Enron would step in and help find a buyer. AES bought the barge, but the deal was soured because the government claimed there was a “secret side deal” between Enron and ML that ML would not be at risk. Men went to prison over this deal – men I like and admire a great deal.

It always struck me as the most innocent of the Enron deals. The Nigerian Barge Deal was so utterly transparent: there was no complicated, sophisticated structured finance, no history of edgy deals, nothing. And it was for a pittance: about $7 million.

It simply was not a fraudulent transaction and anyone who says it was is lying to you.

I’ve carried this deal around in my heart for a while. There was something so elegant about it, so simple and yet … I saw how a business could be built that would just flush with money.

When I went to work at my current company, I brought up the Nigerian Barge Deal on my first day. “I think we should do this,” I said. People looked at me like I was crazy. Maybe I was crazy. But it didn’t stop me from thinking about it, mulling it over.

Then I started to talk to some of the brokers. Guys who were doing big deals every day. Finally I got the attention of one of them. We talked about it and he said it had legs but it was going to be extremely hard to break into the business because nobody in the company had maritime experience. Nobody knew a damn thing about tankers, barges or anything else. Finance, we had. But doing these kinds of deals was a whole new country.

Flash forward to last week. My company had a conference and a guy from a certain tanker company arrived (ahem). I talked to him for a few minutes, full on Charm Offensive as I furtively looked around for one of the brokers. The brokers are consummate salesmen and I badly needed one of them. No help. I was, to turn a phrase, at sea.

I am not terribly ashamed to admit I had a glass of white wine, and he drank a scotch and thusly lubricated, I began to talk about – what else – the Nigerian Barge Deal.

Everything in my head was telling me to STFU. SHUT UP. NOBODY WANTS TO TALK ABOUT ENRON. PLEASE SHUT UP. The dialogue inside my head continued as the sun went down behind the big windows and people began to leave.

The guy gave me his card and said, “Be in touch.”

Sure thing. Yep. I’m sure you want to hear from the tipsy analyst who talked about Enron.

But the thing is, I couldn’t let it go. So I spent some time over the weekend researching the company. I don’t cover the company as part of my job. I don’t even cover the sector. I know NOTHING about the transportation of petroleum and NGLs. Hopeless.

Then today I got a phone call on my office line. I answered, expecting it to be the IR guy I’d just talked to from one of my companies who was calling me back.

Not IR guy. It was the Nigerian Barge Guy! “It seems our timing might be right,” he said. “How about a meeting?”


I hung up the phone and ran through the office into the brokerage. The guy who had listened to me looked up from the phone and I pantomimed that he should hang up. Like Now.

He hung up and looked at me like I was annoying him. “Help,” I squeaked. “We have a meeting with Nigerian Barge Guy.”

He grabbed two of his guys and I grabbed a yellow legal pad and we went into the small conference room to discuss.

First: the ethical issues. Was there anything that would compromise my “real job”? We talked about it and decided no.

Second: we had no idea what we were doing. Nobody had ever tried to broker a freakin barge before.

Third: we had no idea what we were doing. This was the issue we kept coming back to. Then the broker squinted at me across the table. “What did you tell him at the conference?”

“We talked about Enron,” I mumbled. “I told him I thought it was a good idea and….” I doodled on my paper.

“But you didn’t make him any promises? Like you didn’t say we’re experts at this?”

“No!” I said emphatically. “No way. I didn’t say anything like that.”

“So you just talked to him?”

I nodded.

“Well it seems to me he knows what he’s getting then.”

I could not tell if that was a blessing or a curse.

What I wouldn’t give for Ken Rice at that moment. Ken Rice could sell ice cream to eskimos. He was a salesman, one of those big, husky, gregarious guys who just seemed effortlessly “on” in those situations. Ken Rice I’m not. I’m not even Ben Glisan.

“I can’t go to the meeting,” I said suddenly. “I’ll get nervous. I’ll say something dumb.”

“You’re the reason we have a meeting!”

I frowned at my yellow legal pad, trying to imagine what I thought I was doing. This really was not my forte. I’m an analyst. I just read documents and talk to IR people all day. I try to figure out what the stock was going to do…

And that’s when I realized what I could contribute. The financial rationale for doing this deal with two complete novices and a couple of support staff.

The brokers got on the phone to put some feelers out to see if anyone was in the market for a big-ass boat. I went to my sanctum and shut the door in an attempt to think this through. Now was the time to call the guy back and tell him I’m sorry, we were busy. Or dead.

I began to muddle through the documents available on the web, and I called another analyst to ask if she knew anything about this company. She didn’t. I went back to my documents.

This is what I know about the tanker industry: Technology has made shale so accessible (via horizontal wells and multi stage fracturing) that there is just too damn much of it. Right now the people making bank on gas are the gas storage companies. Shell, ConocoPhillips, Exxon, Encana, Nexen, and a slew of others are shutting-in some gas to harvest when the market is stronger.

Oil is rising, however. Because Obama has put a moratorium on drilling in the Gulf, Florida, and the Atlantic, companies are going farther offshore and to other countries to drill. That means oil has to travel a long way to get here… meaning we’re gonna need tankers. Lots and lots of tankers.

That’s it. It’s not terribly detailed, but it’s enough that I believe the trend is going to be an increase in tankers, meaning an increase in buyers. If someone asked me if I wanted to make a whole business of it, I wouldn’t have a definite answer. More people I’m not: Jeff McMahon, Dan Boyle, Dan Bayly, William Fuhs, or James A. Brown.

I know that I am far out of my league. I have no idea how the great Nigerian Barge Deal of 2010 will turn out, but I know that the people who put these things together are much more talented than they’ve ever been given credit for.

James A. Brown Speaks to WSJ

The link requires a subscription so here is the article in full. I love seeing James Brown vindicated!

Retrial Dropped, Enron Figure Talks


James A. Brown didn’t act like a guilty man eight years ago when federal authorities contacted the Merrill Lynch executive during the early days of their Enron Corp. investigation.

Unlike some colleagues at the securities firm who didn’t talk, Mr. Brown spent hours answering questions. “I figured that as long as I told the truth I couldn’t get into trouble,” he says.

Still, he was convicted in 2004 of perjury, obstruction of justice, fraud and conspiracy. Mr. Brown went from minor-hero status for objecting inside Merrill to a suspicious Enron deal involving barges off the coast of Nigeria, to facing three decades in prison. His career was destroyed, and he spent 12 months in prison before an appeals court reversed part of the conviction.

Former Merrill Lynch executive James A. Brown says a key email of his was misunderstood.
The 58-year-old Mr. Brown has always maintained his innocence. In September, the Justice Department dropped the fraud and conspiracy charges only days before a scheduled retrial. Mr. Brown, still fighting his perjury and obstruction convictions, recently gave The Wall Street Journal his first interview about the legal ordeal.

Mr. Brown’s retelling of his part in the corporate scandal comes as federal investigators sift through the rubble of the financial crisis for possible crimes. Much of the nitty-gritty of such investigative work involves little-known figures of the corporate world like Mr. Brown, who often are snared by prosecutors hoping to nab higher-ranking executives.

The U.S. government’s Enron Task Force criminally charged about 30 individuals, including Mr. Brown, but said there were more than 100 other unindicted co-conspirators. The task force got guilty pleas from more than a dozen people and won a 2006 fraud conviction against former Enron President Jeffrey Skilling.

Some of the group’s courtroom victories have been upended on appeal. Mr. Skilling’s conviction and 24-year sentence are under appeals-court review following a Supreme Court decision invalidating part of his case.

Critics contend the Enron Task Force abused its powers by threatening potential defense witnesses and bludgeoning individuals into admitting to crimes. Government officials deny those assertions, and courts haven’t upheld any defense claims of prosecutorial misconduct.

Mr. Brown’s odyssey began in December 1999 when Enron asked Merrill to acquire an interest in electricity-producing barges it owned off the Nigerian coast so that the Houston company could book a $12 million profit on the deal by year end.

A Chicago native, Mr. Brown joined Merrill in 1994, turning to finance after tromping through snake-infested swamps in Florida, looking for phosphate deposits as a geologist, helped convince him to change careers.

Investigative records show Mr. Brown, then heading the Merrill unit that handled the barge deal, argued against the transaction. One of his worries: Merrill might be viewed as helping Enron manipulate earnings.

In the interview, Mr. Brown said he didn’t think the barge transaction was illegal—just a bad business deal. Senior Merrill officials gave a go-ahead anyway.

Enron collapsed in December 2001, and investigators later found documents suggesting the company had illegally guaranteed Merrill a profit on the barge deal, which would make the supposed “sale” a sham. Enron Chief Financial Officer Andrew Fastow allegedly made the guarantee to Merrill executives during a conference call. Merrill later sold its barge interest—at the allegedly promised profit—to a partnership run by Mr. Fastow.

“I had no feeling of danger,” says Mr. Brown, who didn’t participate in the conference call. He wasn’t one of the four Merrill officials sued in 2003 by the Securities and Exchange Commission over the barge deal.

Still, the transaction became a focus of the Enron Task Force. As the only Enron-related criminal case brought against people working on Wall Street, it aimed to send a message of “deterrence,” according to a person familiar with the situation.

Mr. Brown’s lawyer soon told him that prosecutors considered him a target for indictment. “I said: ‘How can I be indicted?’” he recalls now. “I haven’t done anything wrong.”

A possible turning point came when investigators discovered a March 2001 email written by Mr. Brown. He wrote that Mr. Fastow had made a “promise to pay us back no matter what.”

Mr. Brown says he wrote the email hastily and never meant to suggest an illegal guarantee. Instead, Mr. Brown says he heard Mr. Fastow had merely promised to use his “best efforts” to get Merrill out of the barge deal.

The criminal charges filed in September 2003 against Mr. Brown and three other former Merrill executives turned his comfortable life in suburban Connecticut, including a wife and two children, upside down. Nancy Brown says her husband “could hardly move or speak” on the arraignment day in Houston.

While family and friends were supportive, Mr. and Mrs. Brown’s 17-year-old daughter felt “ostracized” by some schoolmates, they say. Mr. Brown took Merrill up on its suggestion that he accept an early retirement.

Merrill, now owned by Bank of America Corp., still is paying Mr. Brown’s legal bills. A Merrill spokesman declined to comment.

The U.S. government recommended Mr. Brown get a sentenced of more than 30 years. He prepared a will and gave signing authority over assets to his wife. When a federal judge handed down a sentence of 46 months, “I felt like the firing squad had missed,” he says now.

Mr. Brown’s 22-year-old son nearly died in an auto accident shortly before the former Merrill executive reported to a low-security federal prison in Fort Dix, N.J. Weeks passed before it was clear the son would survive.

“After that, I said whatever else happens I can handle,” he says. In prison, Mr. Brown taught inmates about basic personal finance and dined once a week with mobsters while schooling them in reading newspaper stock tables, he recalls.

In 2006, a federal appeals court overturned part of the barge case, ruling the government had misapplied a controversial crime theory, known as “honest services” fraud. The court upheld Mr. Brown’s perjury and obstruction convictions, but he was released from prison.

The Justice Department moved in 2007 to send Mr. Brown back to prison, arguing that the law required him to serve the rest of his 46 months.

Sidney Powell, Mr. Brown’s lawyer, says one prosecutor claimed “he had ‘tremendous leverage’ and could force Jim to testify” against co-defendants in planned retrials. A judge rejected the government’s motion.

By early this year, the Justice Department dropped plans to retry any of the former Merrill officials, except for Mr. Brown, who was pressing claims that prosecutors in his 2004 trial withheld favorable evidence.

Days before jury selection for Mr. Brown’s retrial was to begin in September, the government abandoned the fraud and conspiracy charges. A Justice Department spokeswoman declines to comment. In court filings, the government denied withholding evidence and the judge rejected the misconduct claims. Mr. Brown says he plans to continue pressing that issue.

Write to John R. Emshwiller at john.emshwiller@wsj.com

Government Dismisses Some Charges Against James A. Brown

In a revealing last-minute move, after being denied a postponement of this Monday’s trial start date, the government moved to dismiss the remaining “conspiracy and wire fraud charges” against James Brown today in the Enron-related Nigerian Barge case. All the other defendants in the case had already had their charges dismissed; however, trying desperately to force Brown to drop his appeal of two other counts based on the government’s egregious misconduct and Brady violations in Brown’s original trial, prosecutors refused to dismiss Brown’s counts.

Finally, facing an imminent retrial for which they had obviously failed to prepare their factually and legally empty case, the prosecutors did what they should have done long ago — they dismissed the remaining charges against Brown. So, after seven painful years of being hounded by the government on ridiculous charges, Brown is clear of the government’s irrational vindictiveness. I am happy for James Brown now and sorry that he had to endure this stupidity for so long.

If there is anyone out there who still believes that the government was not guilty of intentional abuse and misconduct in the Enron indictments, here is yet another compelling body of evidence of that fact. There was no rational reason for the Nigerian Barge indictments in the first place — yet it has taken seven years for the falsely accused defendants to claw their way out of the government’s clutches. The government’s behavior has been beneath shameful—including their latest game of dragging Brown through the last six months of intense litigation of a case they never intended to retry!

More on this soon!
Brown’s Opposition to Continuance
Government’s Motion to Dismiss

The original indictment was issued September 16, 2003—exactly 7 years ago. It feels like a circuit has closed with perfect, elegant symmetry.

Merrill Lynch’s Involvement With Hard Assets (Such As…Oh… Picking Something At Random….Nigerian Barges?)

One of the questions I occasionally come across, both directly from people and rhetorically from journalists attempting to find fault with the Nigerian Barge deal, is what in the name of cheeze whiz was Merrill Lynch doing buying a barge? Isn’t Merrill’s business in banking, they would ask with a glint of gotcha in their eyes. Even when I tried to tell them that in order to bank, one must have an asset to buy or sell, my words often fell on deaf ears.

But now I have irrefutable proof that the Nigerian Barge deal was not unusual for Merrill Lynch. How about this, from the publication Oilgram: [Volume 84 / Number 47 / Friday, March 10, 2006. Look. It. Up.]

Merrill Lynch takes capacity in USLNG plant

Deal with Sempra in Gulf moves bank into physical gas market

New York—While several large investment banks have increased their presence in the US natural gas marketing sector, Merrill Lynch has gone a step further, securing capacity for LNG at a new Gulf Coast import terminal.

Merrill Lynch Commodities has signed an agreement for capacity at Sempra LNG’s Cameron terminal in Hackberry, Louisiana, Sempra LNG announced March 9.

The 15-year full-service agreement allows Merrill Lynch to import 500,000 Mcf/d at Cameron. The deal is contingent upon the investment house finalizing its LNG supply arrangements, Sempra said.

Depending on the timing of those supply deals, Sempra could choose to fulfill the capacity contract either with the initial phase of Cameron LNG’s development, which is set for completion in 2008, or after the terminal’s proposed expansion is completed in 2010, Sempra said.

“We are pleased to have signed this terminal capacity agreement with a company as respected and well known as Merrill Lynch Commodities,” Sempra LNG president Darcel Hulse said in a statement. “Their knowledge of the marketplace confirms Cameron LNG’s position as a strategic gateway for LNG supplies in the United States.”

Last August, Sempra signed a 20-year agreement with Italy’s Eni for 600,000 Mcf/d of capacity at Cameron. Between the Eni and Merrill Lynch contracts, Cameron now has 1.1 Bcf/d of its initial send-out capacity of 1.5
Bcf/d spoken for. Last October, Sempra signed a non-binding Heads of Agreement with Algeria’s state oil company Sonatrach for 250,000 Mcf/d to 500,000 Mcf/d of capacity at Cameron. A Sempra spokesman said March 9 no final decision on that proposed contract has been reached.

Officials with Merrill Lynch could not be reached to discuss the company’s move into the physical gas business. In oil markets, the company is active in petroleum futures and over-the-counter swap markets, but has not
yet expanded into trading physical petroleum products. However, the oil trading group plans to lease tanks at some point and become an accredited pipeline shipper, possibly within the next year, to participate in US spot markets, according to a source at the company.

The recent steep contango in the gasoline market had kept most tanks in use as traders bought physical and sold forward futures contracts. Now that the forward curve has flattened, tanks may become more widely available for leasing, the source added. The Sempra spokesman also noted that preparations for an open season on the possible expansion of the company’s Energia Costa Azul LNG import terminal are still under
way. That terminal, a joint venture with Shell in Baja California, Mexico, would have initial send-out capacity of 1 Bcf/d.

So Merrill Lynch has a history of dabbling in hard assets that go bye-bye across the sea.

Oh beautiful, unconventional Merrill Lynch. How badly you’ve been maligned. And those sweet, good, honest men at Enron, how horribly you’ve been treated.

Let us remember that James A. Brown is set to go to trial in two months on charges stemming from this transaction. He is accused of … well, I don’t really know because the indictment apparently was written by someone who has not yet entered law school because they forgot to mention what his crime was. But it has something to do with the Nigerian Barge Deal.

James A. Brown, William Fuhs, Robert Furst, Dan Boyle and Dan Bayly are innocent.

Latest James A. Brown Filings

If you care about justice at all, read these documents. See for yourself the abuse of power the DOJ has perpetuated against James Brown, and indeed all of the Enron defendants.

Defendant’s Opposition To Govt Motion To Strike Brown’s Emergency Motion To Compel This one is excellent; I love the attorney’s tart tone in this one. The first line is priceless: “The government’s time would be better spent producing all the Brady material Brown has requested for seven (7) years, including the raw notes of all interviews of all government witnesses, rather than filing a motion to strike.”


Defendant Brown’s Reply On Supplemental Briefing For New Trial

Defendant’s Chart of Brady Materials. This is another eye-popping document. It will make you angry and it will also make you ache for the man who has endured this treatment at the hands of the US Government.

Nigerian Barge Trial Testimony: Katherine Zrike Denies Parking Arrangement With Enron

As I learn more about Katherine Zrike, in house counsel for Merrill Lynch, I become more baffled by the prosecution and more proud of the defendants for withstanding this idiocy (as if I weren’t already proud of them!)

This is part of Katherine Zrike’s testimony on cross-exam by Matthew Friedrich:

Q. Let me start you, if I could, by referring you to — with Fuhs Exhibit 6. The handwritten notation that Mr. Fuhs had you read at the bottom of the page. Could you read that again, please?

A. Translated with my shorthand –

Q. Yes.

A. – or just exactly the way?

Q. If you could translate it with your shorthand into what the words meant to you.

A. Meant to me. Okay. “Real equity with only agreement from Enron to re-market our equity.”

Q. And that was your understanding; correct?

A. That was my understanding.

Q. Your understanding was that the only agreement was a re-marketing agreement; correct?

A. That’s correct.

Q. At any time, did anyone ever tell you that Enron and Merrill Lynch had reached a verbal agreement that, if the barges couldn’t be sold, that Enron would buy the barges back from Merrill Lynch?

A. No, they did not.

Q. Had they told you that, would you have allowed the transaction to go forward?

A. No, I would not.

Q. Why would you not have allowed the transaction to go forward?

A. I would have equated that to a park, to a prearrangement that would violate our year-end transaction rules. I would have felt it was a sham.

Q. Parking is wrong?

A. Yes.

Q. You would not have allowed the transaction to go forward; correct?

A. That’s correct.

Q. If it’s a parking transaction, then that means that Enron would not have been able to report a gain for the
transaction; correct?

A. They should not have been able to do it legally, under the accounting rules.

Q. You would have stopped the deal had you known that there was such an agreement; correct?

A. Yes.

Q. Ms. Zrike, at any time were you ever told that Enron and Merrill Lynch had reached a verbal agreement that
Merrill Lynch would receive a fixed rate of return from the barge deal?

A. I was never told that.

Q. Had you been told that, would that have caused you concern?

A. It would have caused me concern if it was Enron that was guaranteeing the price.

Q. And what would your concern have been?

A. That, again, it goes back to having the attributes of a park or an illegal transaction under the accounting rules, given what we understood Enron was going to be doing in recognizing the gain on the sale.

Q. Had you known that Enron had given Merrill Lynch a verbal agreement that it would pay fixed rate of interest, you would not have allowed the deal to go forward, would you?

A. No, I would not.

I really don’t know how much more clear this could be. Katherine Zrike was plainspoken and honest, in short: a terrific witness. She was an attorney; she wouldn’t risk her career for this transaction – particularly for Enron, a company she didn’t even work for.