Feds won't fight overturned convictions

NEW YORK (CNNMoney.com) -- Government prosecutors won't challenge an appeals court's decision to overturn the convictions of several former Merrill Lynch & Co. executives in an Enron-related case, according to a published report.

The Houston Chronicle reported that the Justice Department decided not to take their case to the Supreme Court after the 5th U.S. Circuit Court of Appeals decided last August to throw out fraud and conspiracy convictions for Daniel Bayly, Merrill Lynch's (Charts) former head of investment banking; James A. Brown, former head of the firm's asset lease group; Robert Furst; and a fourth former Merrill executive, William Fuhs.

But prosecutors declined to comment whether they will retry Bayly, Brown and Furst for their participation in a fraudulent deal that helped Enron appear to be profitable. All three served nearly a year in prison before being released as a result of the appeal. A status hearing will be held Friday afternoon.

All four men had been convicted for conspiring to help Enron make earnings targets in late 1999 by taking part in a fraudulent scheme in which Merrill Lynch pretended to buy three power barges from Enron.

The appeals court ruled that federal prosecutors crossed the line when they presented jurors with a theory that the defendants deprived Enron of its right to their honest services, the Chronicle reported.

Honest services is a legal statute implying that a person to the best of his or her knowledge provided a company with the professional services that person was hired to do. The appeals court panel said the actions of the defendants were were consistent with corporate goals and did not rob the energy company or shareholders of money or property.

Former Enron CEO Jeffrey Skilling will attempt to appeal his convictions using the honest services defense. Skilling was convicted in May 2006 on 19 counts of fraud, conspiracy, insider trading and lying to auditors. He is serving a 24-year, four-month prison term.

His attorneys are expected to file an appeal later this month, the Chronicle reported.

Enron's collapse marked the first of the high-profile corporate scandals that rocked the nation after the 1990s economic boom, followed by WorldCom, Global Crossing, Adelphia and Tyco (Charts).

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