The mainstream media covering the criminal trial of former key Enron executives Ken Lay and Jeff Skilling continues mostly to miss the point that the prosecution’s case over almost seven weeks now has been extraordinarily weak for a case of this magnitude.

Virtually all of the substantive testimony has come from prosecution witnesses testifying under draconian plea deals, most of the testimony alleging wrongdoing has been uncorroborated, and documentary evidence to back up claims of wrongdoing has been almost non-existent.

Of course, no one knows what effect any of this is having on the jurors, some of whom may already have been swayed to convict simply by the overwhelming media bias against Lay and Skilling.

Yesterday’s testimony was a case in point. Three witnesses testified and not one of them came close to implicating either Lay or Skilling in a crime.

Vince Kaminski, a former high-level Enron risk analyst, testified that he warned that some of Enron’s special purpose entity structures were inherently risky, but that management went ahead with the deals, anyway.

Johnnie Nelson, a colorful former Enron pipeline worker who was offered by the prosecution for the transparent purpose of entertaining the jury, testified that he was angry with Lay because he, like Lay, invested virtually all of his personal savings in Enron stock that turned out to be worthless.

Finally, Chris Loehr, a seemingly nice young man who worked for one of the special purpose entities that Fastow managed, confirmed that Fastow told him about Fastow’s secret “Global Galactic” agreement that supposedly guaranteed that the SPE’s would not lose money on a number of their deals with Enron, but could not corroborate Fastow’s testimony that Skilling knew about it.

Now, there is a prosecution witness who could corroborate Fastow’s testimony about the Global Galactic agreement — former Enron CFO and former Lay-Skilling co-defendant, Richard Causey. Fastow claimed that he worked out the terms of the Global Galactic deal with Causey, who Fastow claimed disclosed it to Skilling. Causey entered into a plea deal with the Enron Task Force on the eve of trial and, thus, is readily available to testify.

But in a stunning development that has gone largely unreported in the media covering the trial, it now appears that the Enron Task Force will not call Causey as a witness to corroborate Fastow’s testimony. The NY Times’ Alexei Barrionuevo — Kurt Eichenwald‘s colleague who is one of the few reporters covering the trial expressing increasing skepticism regarding the prosecution’s case — reports on this development in his latest dispatch on the trial:

A looming question is when, or if, Richard A. Causey, Enron’s former chief accounting officer, will testify in the case. He could be crucial to supporting Mr. Fastow’s claims that Mr. Skilling was shown a list of side deals that Mr. Fastow kept track of.

Mr. Causey is not on the government’s witness list. But prosecutors say that does not preclude them from calling him in a rebuttal that would follow the expected testimony of Mr. Skilling and Mr. Lay. Mr. Causey pleaded guilty to fraud in December, just one month before the trial started.

Mr. Fastow testified for four days about the partnerships and about secret side deals he said he made with Mr. Skilling that guaranteed the partnerships would profit from purchasing distressed Enron assets. But during three days of cross-examination by defense lawyers, Mr. Fastow admitted to stealing tens of millions of dollars from Enron while deceiving his bosses and even his own wife about much of his illicit activity.

The government knew that calling Mr. Fastow brought inherent risks, but chose to call him anyway.

Barrionuevo is spot on. If the Task Force does not call Causey, then that means he cannot corroborate the key testimony of the primary prosecution witness in the trial to date. That would blow a huge hole in what is already a shaky prosecution case and — if the jurors have not already made up their minds to convict — could well be the basis of reasonable doubt about the prosecution’s entire case.

Where is Waldo?, indeed.

Early last week, oral arguments were heard in the Fifth Circuit Court of Appeals on the appeal of the four Merrill Lynch executives who were convicted of wire fraud and conspiracy charges in November 2004 in the trial of the Enron-related case known as the Nigerian Barge case.
Reports from those who attended the oral argument indicate that it went well for the appellants, but it may have gone even better had counsel for the Merrill Four known about former Enron CFO Andy Fastow’s testimony from this past Thursday afternoon in the ongoing criminal trial of former key Enron executives Ken Lay and Jeff Skilling.
The Enron Task Force contended in the Nigerian Barge case that the Merrill Four were guilty of conspiring with Enron executives to mislead Enron investors in connection with Merrill’s purchase of a dividend stream attributable to an ownership interest in some power-generating barges moored off the coast of Nigeria. On a threshold basis, the Task Force’s case against the Merrill Four was bizarre because it was Enron, not Merrill, that may have improperly accounted for the transaction, although even that issue was never proven at trial. For its part, Merrill was simply buying a relatively small asset that Enron wanted to sell in Merrill’s ongoing effort to ingratiate itself to a potentially good customer of Merrill’s investment banking services.
The prosecution’s case against the Merrill Four rested almost entirely on the testimony of former Fastow henchmen, Michael Kopper and Ben Glisan, both of whom were deeply involved with Fastow in effectively embezzling money from Enron in connection with Fastow’s management of certain special purpose entities. Kopper and Glisan both testified on the key issue in the trial — i.e., that Fastow made during a December 1999 telephone call a legally unenforceable oral inducement to Bayly that Enron would either buy Merrill’s interest in the barges back or broker the interest to a third party, such as LJM2, an Enron SPE — despite the fact that neither Kopper nor Glisan participated in the telephone call. Inasmuch as Fastow’s oral inducement allegedly constituted a “hidden side deal” for Enron to “buy-back the barges,” the Task Force argued that Enron’s accounting of the transaction as a “true sale” was fraudulent and that the Merrill Four should have known that, so they were guilty of conspiracy.
Remarkably, the prosecution did not call either Fastow or anyone else who actually participated in the key December 1999 telephone call to testify during the trial of the Nigerian Barge case. Nevertheless, the Task Force represented to defense counsel for the Merrill Four that Fastow’s testimony in regard to the transaction was consistent with that of Kopper and Glisan. Based on that representation and the weakness of the prosecution’s case at trial generally, the defense team of the Merrill Four elected not to call Fastow as a witness during the trial. The jury convicted the Merrill Four, anyway.
With that backdrop, imagine the surprise of counsel for the Merrill Four when they heard about Fastow’s following testimony on cross-examination this past Thursday afternoon in the Lay-Skilling trial. After reading a portion of Kopper and Glisan’s testimony from the barge trial, Fastow testified as follows:

Q. Now, after having read through those pages [of Glisan and Kopper’s testimony], does that refresh your recollection at all about the events that transpired in December of ’99 concerning LJM[2] having been approached and what it did in response to that approach about these barges?
A. No, sir. They’re largely contradictory to my recollection of events.

Fastow went on to testify at some length on the barge transaction and contradicted key portions of both Kopper and Glisan’s testimony from the barge trial, such as the reason why LJM2 elected not to buy the interest in the barges at the time that Merrill bought the interest.
As noted earlier here (see also the thread here), this is not the first example of key testimony from prosecution witnesses in the Nigerian Barge trial being contradicted by testimony of prosecution witnesses in the Lay-Skilling trial. Meanwhile, four former Merrill Lynch executives sit in prison with their lives turned upside down based largely on testimony of prosecution witnesses that the Enron Task Force knew contradicted that of another key prosecution witness who the Task Force elected not to call.
The Department of Coercion, indeed.