Wall Street to have Role in 1st Enron Trial

Former finance chief Fastow not expected  to testify

HOUSTON, Texas (AP) -- Nearly two years before  Enron Corp. crashed in scandal, the one-time  energy giant cooked up what prosecutors say  was a sham transaction involving Merrill Lynch  & Co.

The deal is not among the financial machinations  that pushed Enron into bankruptcy in 2001,  but prosecutors contend it's one of many accounting  schemes Enron used to polish a facade of success.

Jury selection in the trial -- the first  criminal trial to involve former Enron executives  -- begins Monday. The trial is expected to  take up to two months and promises to cast  a harsh spotlight on Wall Street's practices  with corporate America.

Enron's collapse led a series of corporate  scandals that prompted Congress to pass sweeping  securities law reforms. Thousands of Enron's  workers lost their jobs, and the stock tumbled  to just pennies, wiping out many workers'  retirement savings.

"It's significant because this calls  into question Wall Street practices in dealing  with corporate America," said Philip  Hilder, a former federal prosecutor who represents  several Enron-related clients in Houston.  "The ramifications of this are broader  than Enron, certainly."

None of the six defendants -- four former  Merrill Lynch executives and two former midlevel  Enron executives who are charged with conspiracy  and fraud -- have the notoriety or name recognition  of Enron's former top senior managers like  company founder Kenneth Lay and former CEO  Jeffrey Skilling.

But prosecutors accuse the six of helping  push through a sale of several floating power  plants stationed along the coast of Nigeria  to the brokerage firm in late 1999 that allowed  Enron to book about $12 million in pretax  earnings.

The defendants, who have pleaded innocent,  are: Daniel Bayly, former chairman of investment  banking for Merrill; Robert S. Furst, the  former Enron relationship manager for Merrill;  James A. Brown, former head of Merrill's asset  lease and finance group; William Fuhs, former  Merrill vice president who answered to Brown;  Dan Boyle, a former finance executive on former  Enron finance chief Andrew Fastow's staff;  and Sheila Kahanek, a former in-house Enron  accountant.

The brokerage firm avoided prosecution a year  ago by cooperating with the government and  implementing reforms that prohibit dubious  deals. Six months earlier, Merrill paid the  Securities and Exchange Commission $80 million  to settle civil allegations involving the  barge deal without admitting or denying wrongdoing.

Fastow, who in January became the government's  most high-profile cooperating witness when  he pleaded guilty to two counts of conspiracy,  is alleged to have assured Bayly that Enron  would buy back the barges.

Fastow is not among witnesses prosecutors  plan to summon to testify.

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