Judge dismisses charges against ex-Merrill exec in Enron case at prosecutors' request

HOUSTON – A judge on Thursday dismissed charges against a third defendant in a problematic Enron-related case marred by overturned convictions and flawed legal theory.

The motion by prosecutors to have charges against former Merrill Lynch executive James A. Brown dismissed was granted just days before a retrial was to begin on Monday. The charges were originally overturned in 2006 on appeal.

But even with Thursday's dismissal, Brown could still return to prison on two other convictions that were not overturned.

U.S. District Judge Ewing Werlein Jr.'s ruling came a day after prosecutors asked that the charges be dropped.

Justice Department spokeswoman Alisa Finelli declined to comment Thursday on the decision to dismiss one charge of conspiracy to commit wire fraud and two charges of wire fraud, the three most serious counts Brown faced when indicted in 2003.

Sidney Powell, Brown's attorney, said her client and his wife were pleased by the prosecutors' decision.

"The Browns are beginning to get a sense that the worst is over and their family can get out from under the cloud they have been living under for seven years, a cloud of persecution," Powell said.

In 2004, Brown and two other executives, Robert S. Furst and Daniel Bayly, were convicted of conspiracy and wire fraud, accused of helping push through Enron's sham sale to Merrill Lynch of three power barges moored off the Nigerian coast in 1999. The deal was struck to make the earnings of Enron's energy division appear larger.

Enron Corp. filed for bankruptcy protection in December 2001, after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable.

Brown was an accountant at Merrill Lynch. Bayly was the firm's former head of investment banking and Furst was Merrill's Enron relationship manager.

The fraud and conspiracy charges of all three men were thrown out in 2006 after an appeals court found fault with the prosecution's legal theory known as "honest services."

The court said the three executives were doing what Enron wanted them to do and did not profit at its expense. As a result, the court ruled, they did not deprive Enron of "honest services." Prosecutors later removed the "honest services" language from the indictment.

In January, prosecutors dismissed charges against Bayly. In May, Furst entered into agreement with prosecutors that would dismiss charges against him after serving a year of probation.

Brown was also convicted of perjury and obstruction of justice for lying to a grand jury about the nature of the deal. Those convictions were upheld by the appeals court.

Brown was sentenced to nearly four years for all five counts. When the conspiracy and wire fraud convictions were overturned, he was freed on bond — after serving a year in prison — until those charges could be resolved.

Prosecutors have indicated Brown should be returned to prison for the perjury and obstruction of justice charges but have not said how much more time they want him to serve.

Powell said Brown has already served the maximum possible sentence for those two charges.

"They really don't have a leg to stand on in putting him back in prison," she said.

Powell said Brown wants a retrial on the perjury and obstruction charges because "he didn't lie to anybody."

Werlein has denied motions by Brown's attorneys for a retrial or to have him sentenced to time served on the perjury and obstruction counts.

Brown was to remain free on bond while he appeals Werlein's denial of a new trial.