A federal appeals court has overturned most of the convictions against former Merrill Lynch bankers in connection with a sham deal with Enron Corp. in 1999.

The four men and one former Enron executive were convicted in November 2004 of conspiracy and fraud charges connected to the sale of three electricity-producing barges in Nigeria from Enron to Merrill. The jury in the case agreed that Enron had illegally used the deal to inflate its profits, but the appeals court found problems with the government's fraud argument.

The U.S. Court of Appeal for the Fifth Circuit in New Orleans overturned the wire fraud and conspiracy convictions against Daniel Bayly, Robert Furst, William Fuhs and James Brown, while upholding Brown's conviction on perjury and obstruction charges.

In June the appeals court had already ordered the release of Bayly, Furst and Fuhs, pending its decision.

The four defendants had appealed on several grounds, including problems with jury instructions and the government's arguments of criminal liability and deprivation of honest services. The appeals court said the scheme fell outside the limits of honest-services fraud because the executives acted to ensure that the company benefited and not themselves personally.

In the original trial, former in-house Enron accountant Sheila K. Kahanek was acquitted of all charges, while former midlevel Enron finance executive Daniel O. Boyle was found guilty of conspiracy, fraud and lying to congressional investigators and did not appeal his conviction.

Previously on WebCPA:

Bankers Jailed in Connection with Enron Released (June 9, 2006)

Former Enron Accountant Acquitted, Five Others Convicted (Nov. 5, 2004)

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