By Marisa Taylor |
McClatchy NewspapersWASHINGTON — Almost seven years after the energy giant Enron collapsed, a series of court decisions has opened the door to new trials for some of the convicted corporate executives and threatened to hobble the Justice Department's efforts to pursue future corporate-fraud cases.
In the wake of the scandal, prosecutors pursued executives for covering up the company's financial bleeding and unloading millions of dollars in stock. The Bush administration was under pressure to hold the company's executives accountable for what at the time represented the largest bankruptcy in U.S. history. More than 4,000 Enron employees lost their jobs, and investors lost billions.
However, legal experts said the government's recent setbacks in court raised troubling questions about how federal prosecutors handled the high-profile cases and suggested that the Justice Department could face serious obstacles in other white-collar investigations:
* In one defeat for the Enron prosecutors, the usually divided Supreme Court in 2005 unanimously overturned the conviction of Enron accounting firm Arthur Andersen after the justices found that the trial judge had instructed the jury improperly.
* In another case, four former executives from Enron's Internet subsidiary, Enron Broadband Services, are getting another trial after a federal jury acquitted them on some charges and deadlocked on the rest. The group was accused of exaggerating the firm's technology capabilities in order to inflate stock prices and cash out. One former executive was acquitted in the original trial.
* Three Merrill Lynch executives are being retried after the 5th U.S. Circuit Court of Appeals reversed most of their convictions. They're accused of helping to inflate Enron's earnings by arranging a fraudulent sale to their company of three electricity-generating barges off the coast of Nigeria. A jury acquitted a fourth executive, and the conviction of a fifth was thrown out because of a lack of evidence.
* Finally, prosecutors are under fire in the conviction of former Enron Chief Executive Officer Jeffrey Skilling because of allegations that they withheld evidence that could have cleared him. A federal appeals court also tossed out a legal approach that the prosecutors used, giving Skilling and future defendants new ammunition to challenge their convictions.
Prosecutors secured 18 guilty pleas, but the legacy of the entire Enron investigation is at stake in Skilling's appeal and the 5th Circuit's ruling in the Merrill Lynch case gives Skilling a realistic shot at overturning at least part of his conviction, experts said.
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