More on the Nigerian Barge case

The Nigerian Barge colloquy involving Vic Fleischer, Tom Kirkendall and me is getting interesting.  To recap (see my previous post with links there): Vic says that Enron, through Fastow, “promised to find a third party buyer within six months;” that the valuation of the deal is “not clear;” that he can’t “figure out what they understood would happen if no true third party buyer was found;”  that he doesn’t “think” that substantial economic risk was shifted from the seller. Vic concludes that the “deal stinks.  It reeks” despite his own expressed uncertainties about the case, and strongly implies at the end of his post that the defendants are therefore criminally guilty.

In a comprehensive reply to Vic Fleischer, Tom Kirkendall, among other things, marshals facts and arguments to support his characterization of the transaction as a legitimate sale. He points out that there was no enforceable promise to buy back or to arrange the purchase of the barges; and the barges were in fact bought by LJM2, which was technically a third party, in a transaction that offered more security than the deal Merrill made.

I would really like to see a response on the merits by Vic.  Let me be specific:  the issue here is not whether the transaction was ordinary or unsuspicious, though Tom says with some basis that it was.  The issue absolutely is not whether the defendants are “heroic” – as I explained earlier that was not Tom’s implication with the Thomas More quote.

The question raised by what Vic described as my “fawning” over Tom’s initial post is whether the criminal prosecution of this transaction, particularly in the way it has been done by the government, as detailed in Tom’s post, was appropriate. I would encourage readers to evaluate not only Vic's and Tom's posts, but the comments on all the posts, particularly including the one on Tom's post by Ben Edwards.

Let me add that we as academics, whether we’re blogging for “fun” or not, have an obligation to get this right.  This is about how the power of government is and should be used against business, and so is immensely important to this country’s economic well-being. The newspapers and movies have slanted this issue, and the partisans either side will be discounted.  We in the academy therefore have special influence. If we’re going to talk about this stuff, we should talk about it precisely and accurately. 

So I’m waiting for Vic’s response. Does this look like a criminal transaction, based on what we outsiders know? If not, was the conviction appropriate?  Did the prosecutors use questionable tactics, as Tom has indicated? Are the defendants being pursued not because of the wrongfulness of their conduct but because of the conduct's connection with Enron, as Tom has argued in his posts?  If Vic is right and Tom is wrong, I really want to know.  But if it's the converse, it's time to get that story out, and address what I view is a festering injustice.

A further thought on the transaction:  If Fastow's promise to buy back or arrange a third party purchase is not legally enforceable, perhaps Vic, presumably an expert on these transactions, can elucidate its importance.  What if, for example, the Merrill defendants honestly believed that whatever unenforceable promise Fastow made would not be honored?  Or what if Fastow clearly had not made any promise, but the Merrill defendants believed based on past dealings that Enron would bail them out if they didn't want to be stuck with the barges?  What if the Merrill defendants were willing to take their chances on buyback one way or the other to keep an important client, as Tom suggests?  If the existence of a promise is essential to criminal liability, does the evidence, as Tom outlines it in his initial post, look even close to enough to hang a substantial prison sentence on? Inquiring minds want to know.

Comments

[Victor]

My response is posted at Conglomerate. To be clear, I have not claimed to be an expert, nor am I offering my expert opinion. If I were preparing expert testimony in the case, I'd have to do a good deal more homework than time permits now. But I don't think that means that it is professionally irresponsible of me to blog about it. If, before blogging, one not only had to conduct a comprehensive literature review (as you have suggested elsewhere), but also conduct the sort of careful preparation expected of expert opinion testimony, the effect would be to stifle debate, not encourage it, and an important check on the government would be diminished, not enhanced. If I'm getting it wrong, you can tell me so, but at least we are having the conversation.