Enron's alleged deal on barges in e-mails

HOUSTON — A string of e-mails noting an alleged oral promise that Enron would rescue Merrill Lynch from a risky barge sale is proof that the transaction — and $12 million in profit booked from it — was a sham, prosecutors said yesterday.

The e-mails were introduced during the testimony of Sean Long, a former Enron development executive. He recounted a January 2000 conversation in which former Enron finance executive Dan Boyle told him that Enron had assured Merrill Lynch that Enron would find another buyer for the barge interest by June 2000 or buy it back.

Boyle is one of six former Enron and Merrill Lynch executives on trial for conspiracy and fraud in the barge deal. Prosecutors allege the promise of a buyback made the transaction a loan, instead of a sale, and the executives committed fraud by booking $12 million as profit.

But the deal's formal paperwork includes no mention of a buyback, and the defendants, who have pleaded innocent, say Enron was never obligated to take Merrill Lynch out of the deal by June 2000, as the government contends.

Long, who is not on trial, testified that he came under tremendous pressure in December 1999 to sell the interest in the barges so Enron could meet its earnings targets. But the short timeline scared away many companies, who wanted more time for due diligence. Long also testified that, in January 2000, the Nigerian government said it wouldn't buy power from the barges, Long said.

Desperate to close a sale with Merrill Lynch, Enron agreed to a buyback, Long said — a contention prosecutors said yesterday was backed up by a string of March 2000 e-mails between Enron executives.

Boyle e-mailed Long and others who asked about talks with the Nigerian government, noting that if no buyer emerged by June 30, Enron would have to restate financial results to erase the barge profit and that would "require a level of damage control with Arthur Andersen," then Enron's outside auditor.

Earlier yesterday, Long said the $12 million profit was so critical to meeting earnings targets that his supervisor told him and Sheila Kahanek, former in-house Enron accountant who also is a defendant, in September 1999 that their "sole reason for living" was to sell interest in the three barges by year's end.

In addition to Kahanek and Boyle, the defendants are: Robert S. Furst, former Enron relationship manager for Merrill Lynch; James A. Brown, former head of Merrill Lynch's asset lease and finance group; Daniel Bayly, former head of investment banking for Merrill Lynch; and William Fuhs, former Merrill Lynch vice president who answered to Brown.