updated 10/24/2004 7:20:05 PM ET 2004-10-24T23:20:05

The fate of four former Merrill Lynch & Co. executives and two former midlevel Enron executives on trial for fraud and conspiracy could be in a jury’s hands by Wednesday.

Prosecutors and defense attorneys have essentially wrapped up their cases in the first criminal trial to emerge from Enron Corp.’s 2001 collapse, which was fueled by crushing revelations of hidden debt, inflated profits and accounting trickery.

U.S. District Judge Ewing Werlein advised jurors they can expect lengthy closing arguments after they hear from one last defense witness Monday and take the rest of the day off while he and attorneys hash out instructions for how they must regard evidence in the case.

Closing arguments could begin Tuesday. Defense attorneys for each of the six defendants want an hour each, which would give prosecutors six hours to maintain an equal balance. Werlein, who had said previously 30 minutes for each defendant was too brief, favored 45 minutes for each defense team, or a total of nine hours for both sides. The judge has yet to rule on time limits.

The case centers on on a relatively small deal for a company that once purported to rake in billions in revenues and the deal didn’t contribute to the company’s implosion.

Prosecutors allege Enron wrongly booked a $12 million pretax profit from a sale of three power plants mounted on barges to Merrill in the last days of 1999 because the deal came with an unwritten promise to resell or buy back the barges within six months. That promise, the government contends, means Merrill was never at risk of losing its $7 million investment and the sale was really a loan.

Prosecutors say the defendants knew Enron needed the profit to meet earnings targets, and the brokerage participated in hopes of gaining more investment banking business from what was then a lucrative client wooed by Wall Street.

Lawyers for the Merrill defendants have consistently defended the deal, saying the brokerage was at risk of losing its investment because Enron was never obligated to resell or buy back the barges.

Merrill avoided prosecution last year by cooperating with investigators, accepting responsibility for any employees who may have broken the law and implementing reforms to prohibit dubious year-end deals.

Conviction would send a message
James Cox, a Duke University law professor, said a conviction would resonate throughout Wall Street regarding intentional involvement in a client’s alleged fraud.

A massive conglomerate of shareholder lawsuits pending in Houston alleges, in part, that various banks and brokerages — including Merrill Lynch — participated in shady transactions with Enron before the energy company’s collapse. In comparison to more complex deals highlighted in civil allegations, Cox said, the Nigerian barge deal is simpler for a jury to grasp.

“It’s a question of deterrence,” Cox said. “A victory is an important accomplishment here even though the dollar amount is pretty small.”

The Merrill defendants are Daniel Bayly, former head of investment banking; James A. Brown, former head of Merrill’s asset lease group; William Fuhs, who answered to Brown; and Robert S. Furst, who helped manage Enron’s relationship with the brokerage. The Enron defendants are Dan O. Boyle, a former finance executive on Fastow’s staff; and Sheila Kahanek, a former in-house accountant.

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