Enron criminal proceedings set the scene for cases against the disgraced top executives

Almost three years after Enron's implosion, the first criminal trial involving former executives of the bankrupt energy company reaches court today.
The so-called "Nigerian barge trial" at the Southern US District Court house in Houston is separate from the forthcoming trials of Enron's most senior executives -Kenneth Lay, former chairman, and Jeffrey Skilling, former chief executive, were charged on counts including conspiracy and fraud earlier this year - but is more than a sideshow.
Prosecutors allege that Enron’s transfer of its interest in three electricity-generating barges in Nigeria to Merrill Lynch in 1999 was a sham sale, designed to inflate the company’s earnings by $12m (£6. 7m) and generate bonuses for those involved. Though the sums involved are small in the context of the wider charges against Enron, the case is important because it may help to answer one of the key questions thrown up by the scandal - to what extent were elements of the financial community aware of, or perhaps even complicit in, Enron's corporate wrongdoing?
The case before US District Judge Ewing Werlein is a foretaste of the government's charges against the more senior Enron executives and their links with the financial community. It will also showcase the conduct of the government-appointed Enron Task Force, amid defendants' accusations that the case has become a political football in the authorities' response to public distaste for corporate excess.
Two mid-level Enron executives - Dan Boyle, former vice-president of global finance, and Sheila Kahanek, an accountant - are being tried alongside four ex-Mer-rill Lynch bankers: Daniel Bayley, head of investment banking from 1999 to 2001, James Brown, William Fuhs and Robert Furst. The six face charges of conspiracy to commit fraud and, in some cases, lying- to investigators about their role in the barge transaction.
The government aims to show the energy group pledged to repurchase the transferred assets after it had closed its quarterly accounts, and guarantee a profit to the bank. Defendants will maintain there was no such oral agreement or, if the*§ was, they had no knowledge of it.
The numbers are tiny compared with the millions parked in special-purpose vehicles, away from the Enron balance sheet. But the outcome could cement any link found between Enron and financial institutions accused of abetting its wrongdoing, at a time when class action suits are still pending against a host of banks involved in structuring other Enron deals.
In the past few months, JP Morgan Chase and Citigroup alone have added almost $9bn to their reserves for litigation costs, of which the biggest single element is Enron. Later this month, extradition hearings will take place in the UK of three former investment bankers accused of defrauding their employer, Greenwich Nat-West, the capital markets division of National Westminster bank, by investing secretly in an off-balance sheet Enron partnership.
But there has been good news, too, for banks with links to the disgraced company; in August, JP Morgan Chase won a case in London brought by WestLB, the German bank, which refused to pay $165m it guaranteed on a swap or "prepay transaction" arranged by JP Morgan for Enron. The judge rejected WestLBJs argument that JP Morgan conspired with Enron to devise a transaction that would allow the energy trader to massage its balance sheet in
breach of US securities law.
The barge trial in Houston has already been delayed twice amid posturing over jury selection and additional indictments, as well as the conflicting commitments of Judge Werlein. The first scheduled criminal trial, involving executives at Enron's high-profile broadband division, has been pushed back to next March by similar issues.
Like Mr Lay, Mr Skilling and Richard Causey, the company's former chief accountant, the six defendants on trial today sought to be tried separately, but the requests were refused.
The more senior trio maintain that separate trials are necessary as evidence against their fellow defendants will taint their defence against multiple charges of fraud, conspiracy and insider trading. But government prosecutors argue that there is enough in common to link the cases. Judge Sim Lake is to decide early next month how the cases will be tried, with most observers expecting them to be tried together early next year.
Among Houston residents, there is an unwillingness to discuss the various cases, and bitterness beneath the surface in conversations about the scandal, from downtown bars to the ornate Petroleum Club on top of the ExxonMobil tower.
Many people here owned Enron paper, directly or through mutual funds. They also resent the damage caused by Enron to the reputation of the city and state. Most people just want the trials to be over.