571 F.3d 492 (5th Cir. 2009), 08-20038, United States v. Brown

Docket Nº:08-20038.
Citation:571 F.3d 492
Opinion Judge:REAVLEY, Circuit Judge:
Party Name:UNITED STATES of America, Plaintiff-Appellee, v. James A. BROWN; Robert S. Furst; Daniel Bayly, Defendants-Appellants.
Attorney:Joseph Douglas Wilson (argued), San Francisco, CA, James Lee Turner, Asst. U.S. Atty., Houston, TX, for U.S. Sidney Katherine Powell (argued), Torrence Evans Lewis, Law Offices of Sidney Powell, Asheville, NC, for Brown. Paul E. Coggins, Fish & Richardson, P.C., Dallas, TX, for Furst. Thomas A. H...
Judge Panel:Before REAVLEY, WIENER, and SOUTHWICK, Circuit Judges.
Case Date:June 16, 2009
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 492

571 F.3d 492 (5th Cir. 2009)

UNITED STATES of America, Plaintiff-Appellee,

v.

James A. BROWN; Robert S. Furst; Daniel Bayly, Defendants-Appellants.

No. 08-20038.

United States Court of Appeals, Fifth Circuit.

June 16, 2009

Page 493

Joseph Douglas Wilson (argued), San Francisco, CA, James Lee Turner, Asst. U.S. Atty., Houston, TX, for U.S.

Page 494

Sidney Katherine Powell (argued), Torrence Evans Lewis, Law Offices of Sidney Powell, Asheville, NC, for Brown.

Paul E. Coggins, Fish & Richardson, P.C., Dallas, TX, for Furst.

Thomas A. Hagemann (argued), Gardere Wynne Sewell, Houston, TX, Lawrence Saul Robbins, Brian Arturo Perez-Daple, Alice Wan-Ping Yao, Robbins, Russell, Englert, Orsek & Untereiner, Washington, DC, for Bayly.

Appeal from the United States District Court for the Southern District of Texas.

Before REAVLEY, WIENER, and SOUTHWICK, Circuit Judges.

REAVLEY, Circuit Judge:

The defendants in this interlocutory appeal, all former employees of Merrill Lynch, appear before us for the second time in connection with charges that they conspired to defraud the Enron Corporation and its shareholders by agreeing with Enron employees to " park" assets with Merrill Lynch in order to artificially enhance Enron's 1999 earnings. The assets at issue were power-generating barges located off the coast of Nigeria that Merrill Lynch allegedly agreed to buy from Enron based on a secret side-deal that Enron would buy the barges back in six months. After a jury convicted the defendants in a general verdict for inter alia conspiracy and substantive wire fraud offenses, we reversed those convictions on the legal ground that the circumstances of the transaction were not covered by the honest services theory of wire fraud, which was one of three means of fraud charged in the indictment. See United States v. Brown (Brown I). 1 The Government then sought to re-try the defendants without the honest services theory. The defendants now appeal from the district court's denial of their motion to dismiss the indictment on grounds of double jeopardy. We AFFIRM the district court's judgment.

I.

The underlying facts of the alleged fraudulent transaction between Enron and Merrill Lynch are recounted in great detail in Brown I. Briefly stated, Enron's Asia/Pacific/Africa/China (APACHI) energy division was under pressure in 1999 to sell assets in order to meet earnings targets but had been unsuccessful in finding a buyer for the Nigerian barges, and so it turned to Merrill for help. As this court wrote:

Merrill agreed to invest $7 million to purchase equity in the barges so that Enron could record $12 million in earnings and meet its forecasts. The Government contended, however, that the sale was a sham because Enron executives orally promised Merrill a flat fee of $250,000 and a guaranteed 15% annual rate of return over the six-month period of Merrill's investment; Enron executives allegedly promised that Enron or an affiliate would buyback Merrill's interest in the barges if no third party could be found. Such a buyback agreement, the Government contended, rendered Merrill's interest in the barges risk-free, meaning that Enron's accounting of the deal as a sale rather than a lease was false.2

Enron approached Merrill in December 1999 and recorded the barge deal at the end of that year after multiple discussions among the defendants and Enron employees. Merrill was apparently willing to participate because of the opportunity to foster

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good relations with Enron and because Enron management, including C.F.O. Andrew Fastow, purportedly gave verbal assurances that Merrill would be taken out of the deal within six months for a fixed rate of return on the investment. Enron allegedly paid Merrill an " advisory fee" of $250,000 even though Merrill did not provide any advisory services. In late June 2000, Merrill sold the barges through arrangements from Enron to a third company controlled by Fastow for just over $7.5 million, representing the promised six-month rate of return. Merrill thus earned $775,000 as a result of its assistance to Enron, which was able to inflate and misstate its earnings report.3

The Government charged the defendants, along with several others, in a Third Superseding Indictment with violating the wire fraud statutes under 18 U.S.C. § § 13434 and 13465 by scheming to defraud both Enron and its shareholders. Count one charged a conspiracy while counts two and three alleged substantive offenses.6 In Brown I we identified three objects alleged for the conspiracy: (1) to commit wire fraud by fraudulent deprivation of Enron's money or property (the " money or property charge"); (2) to commit wire fraud by fraudulent deprivation of the intangible right to honest services (the " honest services charge"); and (3) to falsify Enron's books and records (the " books and records charge").7

The jury found the defendants guilty in a general verdict, but we reversed. We noted that because the jury was not asked to indicate the basis for its verdict, we could affirm only if the Government proved all three theories alleged for criminal

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liability.8 The panel majority concluded, however, that the circumstances of the transaction as alleged by the Government did not extend to honest services wire fraud. The panel reasoned that while honest services fraud generally involves bribery, kickbacks, or self-dealing, the defendants' conduct was disassociated from such actions. The panel noted that the Enron employees here breached a fiduciary duty in pursuit of corporate earnings goals, which Enron had tied through incentives to employee compensation.9 The panel noted in a footnote that Enron's corporate incentive policy, coupled with " senior executive support" for the barge transaction, created an understanding that Enron was a " willing beneficiary [] of the scheme" and set the case apart from other honest services fraud cases.10 We specifically limited our holding to be that the conduct alleged by the Government was not a federal crime under the honest services theory of fraud, and we expressly declined to address the viability of the money or property charge and the books and records charge remaining in the indictment.11

Upon remand, the Government moved to redact the indictment to remove all references to the honest services theory of fraud. The redacted version of the indictment is otherwise identical to the indictment on which the defendants were convicted at the first trial. The defendants moved to dismiss the redacted indictment, raising claims of double...

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