The Nigerian Barge decision

The Fifth Circuit's U.S. v. Brown, aka "the Nigerian Barge," opinion, is out. I assume we'll have a full analysis soon from Tom Kirkendall, who graciously alerted me to the opinion. All of the defendants' convictions were vacated except for one defendant's (Brown') perjury and obstruction charges. There were three separate opinions from the panel. 

Here's an excerpt from Judge Jolly's majority opinion:

Given our repeated exhortation against expanding federal criminal jurisdiction beyond specific federal statutes to the defining of common-law crimes, we resist the incremental expansion of a statute that is vague and amorphous on its face and depends for its constitutionality on the clarity divined from a jumble of disparate cases. Instead, we apply the rule of lenity and opt for the narrower, reasonable interpretation that here excludes the Defendants’ conduct. * * *

As counsel for Fuhs noted at oral argument, if we begin with the assumption that Fuhs is guilty, the documents can be read to support that assumption. But if we begin with the proper presumption that Fuhs is not guilty until proven guilty beyond a reasonable doubt, we must conclude that the evidence is insufficient to prove beyond a reasonable doubt that Fuhs had the knowledge and intent to enter into the fraudulent scheme alleged by the Government. * * *

Here's an excerpt from Judge DeMoss' opinion concurring and dissenting (he dissented as to the Brown conviction):

The cumulative effect of a vague criminal statute, a broad conception of conspiracy, and an unprincipled theory of harm that connects the ultimate demise of Enron to a single transaction is a very real threat, of potentially dramatic proportion, to legitimate and lawful business relationships and the negotiations necessary to the creation of such relationships. * * *

The Government mischaracterizes the transaction evidenced by the Engagement Letter when it labels the agreement a “sham” and asserts that Merrill was never “at risk” during the transaction. The Engagement Letter expressly states, “No waiver, amendment, or other modification of this Agreement shall be effective unless in writing and signed by the parties to be bound.” Likewise, the Engagement Letter also includes the following provision: “This Agreement incorporates the entire understanding of the parties with respect to this engagement of Merrill Lynch by Enron, and supercedes all previous agreements regarding such engagement, should they exist.” In light of these provisions, Merrill’s $7 million was absolutely at risk. Any oral assurances of a take-out offered to Merrill by any Enron employee would not have been legally binding on Enron.

In my view, both parties acted to maximize mutual benefits in a clear effort to solidify a business relationship. Both parties relied on the good faith of each other in laying a foundation for continued business relationships. Merrill could not have enforced Enron’s assurance of its best efforts commitment to remarket the investment interest that Merrill had agreed to purchase; Merrill could only have refused to deal with Enron in the future if the Engagement Letter had resulted in an unsatisfactory business investment. Such negotiations should not be the fodder for criminal indictments. If there is any criminal wrong arising from the facts in this record, and I have serious doubts on that score, it would be in Enron’s employees’ reporting of the transaction described in the Engagement Letter, not in the manner in which Merrill’s employees negotiated the deal.

And I can't resist recapping the last of many things I said about this case, almost exactly a year ago, in a post that links to a bunch of previous posts by me and Tom K:

As far as I can see, what the government has shown, at best, is vague hearsay evidence that, when Enron sold the stock in the barge company, there was a wink and a nod about some sort of arrangement short of an enforceable promise (the witnesses were not sure exactly what the arrangement was) indicating that Enron would buy back the barges or arrange a repurchase. In the end, a company related to but concededly separate from Enron did buy them back.

The transaction may have been fishy, if you buy the government's evidence. It may have helped Enron's stock. * * * Sort of like a zillion corporate transactions that push the envelope of how things ought to be done. Only this corporate transaction happened to be connected with Enron, a scalp that government prosecutors had to get in this political season. And this time the defendants lost the criminal lottery that these cases have become. The issue is whether this criminal prosecution is an appropriate use of government's power.

Tom Kirkendall deserves enormous credit for antipating this opinion in an insightful series of blog posts, and for keeping attention on this case.

Update:  Here's Tom's analysis of the opinion.