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Chamber Files Brief On Enron Losses

Calculation Could Affect Sentences

By Carrie Johnson
Washington Post Staff Writer
Tuesday, March 29, 2005; Page E04

The U.S. Chamber of Commerce has submitted a friend-of-the-court brief essentially arguing for lighter sentences for top Merrill Lynch & Co. officials convicted last year of fraud for their role in helping Enron Corp. improperly meet profit goals.

The chamber filed a 24-page brief with a federal judge in Texas late last week, contending that prosecutors had incorrectly calculated shareholder losses stemming from an improper energy deal. The calculation could have a profound impact on how much time the former Merrill executives, including onetime investment banking chief Daniel H. Bayly, spend behind bars.

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It was not until the early 20th century that the Senate enacted rules allowing members to end filibusters and unlimited debate. How many votes were required to invoke cloture when the Senate first adopted the rule in 1917?
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Legal experts said it is unusual for the chamber, the nation's largest business lobby, to weigh in on a criminal proceeding, though the group frequently has offered guidance to judges seeking to calculate shareholder losses in civil cases.

Robin Conrad, a senior vice president for the chamber's litigation center, said the group took the unusual step of weighing in because it believes judges should use the same standards to assess shareholder losses in both criminal and civil cases.

The controversial transaction allowed the struggling energy trading firm to meet ambitious earnings targets, according to testimony in last year's six-week criminal trial. Merrill agreed to buy three energy-generating Nigerian barges from Enron in the waning days of 1999. In return, Enron officials promised to buy them back within months and guaranteed the investment bank would not lose money on the deal. Prosecutors successfully argued that the deal served no business purpose for Merrill and helped mislead investors about Enron's performance.

The Justice Department's Enron Task Force pegs the loss to shareholders from the phony deal at $43.8 million. But defense lawyers maintain that Enron eventually made money from the transaction, when it later sold the barges at a profit to another energy company.

Bayly faces a statutory maximum sentence of 15 years. But U.S. District Judge Ewing Werlein Jr. could impose less prison time based on factors including the shareholder losses and Bayly's lack of a prior criminal record.

"It is important that hard cases not make bad law, even when the hard case involves Enron," wrote lawyers representing the chamber in their March 25 brief.

The lawyers maintained that the barge deal, disclosed to the public only after Enron filed for bankruptcy protection in 2001, did not produce any actual losses for company shareholders. To increase criminal penalties based on "subjective and speculative claims of inflated value," they wrote, could deter executives at other companies from engaging in lawful business conduct.

Bayly and former Merrill banker James A. Brown are to be sentenced April 21. Three other defendants will be sentenced in May. Defense lawyers for Bayly did not return calls seeking comment.

"Seeking to straitjacket courts so as to minimize the sentencing consequences to defendants who commit serious corporate crimes through the use of sham transactions to manipulate earnings should be of concern to the public, including the honest businessmen and -women who are members of the Chamber of Commerce," said Andrew Weissmann, director of the government's Enron Task Force.


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