The jury in the Enron-related criminal trial known as the Nigerian Barge case concluded the market loss hearing by determining today that the sham barge sale that was at the center of the trial cost Enron shareholders $13.7 million.
In a case that was largely dubious from the beginning, the jury’s conclusion on the market effect of the transaction was just as questionable as many other aspects of the case. In reality, there was no market loss resulting from the sham barge transaction. The fact that Enron did not account for the Nigerian Barge transaction properly actually made Enron’s earnings look better than they really were. Thus, that accounting helped to increase Enron’s share value for the benefit of investors who were buying and selling the stock at the time. Moreover, there is no evidence that the decline in Enron’s share value during its demise into bankruptcy in 2001 had anything to do with revelations regarding the barge transaction. Indeed, the alleged faulty accounting on the barge deal was not even discovered until well over a year after Enron went into bankruptcy and its equity value had become essentially worthless.
Nevertheless, the prosecution trotted an expert on to the stand who testified — apparently with a straight face — that the market loss from the sham barge transaction was $43 million. The defense countered with its own expert who testifed that, at most, the market loss attributable to the barge transaction was $120,000. In all likelihood, the jury was hopelessly confused by the entire matter and, as juries commonly do in such situations, split the baby and arrived at the utterly baseless number of $13.7 million. At least that number bears some resemblance to the $12 million profit that Merrill made on the deal, which of course has no bearing on the market loss. Oh well.
U.S. District Judge Ewing Werlein also asked the 6-women, 6-man jury in the Enron barge case to make findings on seven aggravating factors involved in the alleged offense that the Judge can use under current federal sentencing rules to increase or decrease the range of prison time an individual might receive. Two of the defendants — ex-Enron finance executive Dan Boyle and former Merrill Lynch banker William Fuhs — waived any right to have the jury advise the judge on their sentencing and were excused from the proceedings late last week. So, the jury’s findings only apply to the three other Merrill bankers who the jury found guily earlier, Daniel Bayly, James A. Brown and Robert Furst. Based on the jury’s findings, those three Merrill defendants could be facing considerable jail time depending on how Judge Werlein interprets the sentencing guidelines. All of the defendants are scheduled to be sentenced by Judge Werlein in March 2005.