James A. Brown, Robert S. Furst, and Daniel Bayley were employees of Merrill Lynch. The government accused them of using communications facilities to conspire with Enron executives to defraud the Enron Corporation and its stockholders by falsely enhancing the value of the Enron corporation. Specifically the three men were accuse of conspiring with Enron officials in 1999 to “buy’ three power generating barges, from Enron, located off the coast of Nigeria in order to artificially enhance Enron’s 1999 end-of-year earnings report. In addition to the agreement to “buy” the barges their was a side agreement that Enron Corporation would either buy the barges back after six months or would find a third party buyer for the barges at a fifteen per cent annual rate of return for Merrill Lynch. Thus, the purchase was actually a rental.

The case went to trial. The government gave three grounds for convicting the defendants on wire fraud and 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”). The defendants were convicted and appealed. The Fifth Circuit Court of Appeals granted the Appeal in 2006 in Brown I. The Court ruled that the “honest services” charge: did not apply and since the jury was not asked to determine which of the three grounds they accepted they may have wrongly convicted on the “honest service” grounds. “Honest services” are those duties an employee owes to an employer including the fiduciary duty to disclose evidence that might be harmful to the employer. Generally “honest services” involve bribery or self-dealing. Here the Enron Corporation co-defendants of the three men who appealed in Brown II were not attempting to hurt the corporation. Rather they were attempting, however misguided, to comply with the company goal of enhancing Enron’s 1999 end-of-year earnings report. Therefore they could on be convicted of wire fraud on an “honest services” theory.

The government redacted the indictment to remove the “honest service” grounds and moved to retry the case. The three defendants objected on double jeopardy grounds. The trial court denied the objection and they appealed again to the Fifth Circuit. Tuesday the Fifth Circuit denied the appeal in Brown II.

The Court, using the one bite of the apple rule, found that since the Fifth Circuit in the first appeal did not find that there was insufficient evidence to convict the defendants on either the money or property charge or the books and records charge they could be retried on these theories. Under the one bite of the apple theory if an appellate court reverses the conviction because the government had insufficient evidence to convict the defendants in the trial court it cannot go out and find more evidence and try again. This would violate the constitutional ban on double jeopardy. But since the 2006 Fifth Circuit decision specifically refused to find that the government had insufficient evidence on any grounds other than the “honest services” ground it is not a violation of double jeopardy to retry the defendants on the other grounds.

Since the case can go to trial again the Enron saga continues.