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The Enron Task Force took a major hit when a federal court jury in the Enron Broadband trial returned a verdict that acquitted defendants of some criminal charges and ended with a hung jury on other charges. U.S. District Judge Vanessa Gilmore of Houston declared a mistrial on the dozens of charges against the five defendants, all former employees of the Enron Broadband Services subsidiary of Houston’s Enron Corp., on which the jury did not reach a verdict. She scheduled a pretrial conference for September for a retrial. The jury reached the verdict on July 20, the fourth day of deliberations in the three-month trial. The verdict was the second major blow for the Enron Task Force, which in May received another disappointment when the U.S. Supreme Court overturned the obstruction-of-justice conviction the task force had won in 2002 against Arthur Andersen, Enron’s former accounting firm. “What occurred [on July 20] doesn’t bode well for the government,” says Houston lawyer Thomas Ajamie, of Ajamie LLP. “This should have been the easy kill. It’s the least complicated part of the business to explain.” Sean Berkowitz, the director of the Enron Task Force, declines comment. Berkowitz is new in the job. On July 18, while the jury was deliberating in the Broadband case, the U.S. Department of Justice announced that Berkowitz would succeed Andrew Weissmann as director of the task force. Weissmann, who joined the task force in January 2002, did not return two telephone calls seeking comment before presstime on July 21. He was a member of the team that prosecuted Andersen and had been director of the task force for 17 months. But the week of his resignation did not go well for the task force. On July 20, the jury in United States v. Joseph Hirko, et al. acquitted Hirko, former president and chief executive officer of EBS; Scott Yeager, former senior vice president of strategic development at EBS; and Rex Shelby, senior vice president of engineering operations at EBS, of some charges and deadlocked on others. The jury was unable to agree on a verdict on any of the charges against Michael Krautz, senior director of transactional accounting at EBS, or against Kevin Howard, former vice president of finance at EBS. After the verdict, Gilmore entered a gag order that prohibits jurors from talking about the trial and deliberations with anyone, including defense attorneys and the Assistant U.S. Attorneys who prosecuted the case for the Enron Task Force, until after a retrial. The gag order also applies to all lawyers involved in the case. Lee Hamel, a partner in Houston’s Hamel, Bowers & Clark who is a defense attorney for Yeager, says his client is “very pleased with the verdict,” but Hamel declines further comment, citing the gag order. A lawyer for Howard, Jack Zimmerman, a partner in Houston’s Zimmerman and Lavine, when asked if he is pleased with the verdict, says, “I can tell you that this law firm normally feels like it’s been a successful defense when there’s a not-guilty verdict.” Lawyers for the other three defendants did not return telephone calls before presstime. The jury returned a not-guilty verdict on a total of 24 charges, and Gilmore declared a mistrial on 211 more charges. The verdict came as prosecutors prepare to try a criminal case in January 2006 against three higher-level former Enron officials — former Chairman Kenneth Lay, former CEO Jeffrey Skilling and former chief accounting officer Richard Causey. “If I were Skilling and Lay I would be mildly encouraged” by the EBS verdict, says Houston trial lawyer David Berg, a partner in Berg & Androphy. Michael Ramsey, a solo practitioner in Houston who represents Lay in United States v. Richard A. Causey, et al., says he is encouraged by the verdict. “It’s very helpful to [a] public understanding of Enron, because the people that worked at Enron were basically bright, decent humans. Enron was not a criminal organization, nor was it a house of cards, and it defies common sense to believe that it was,” Ramsey says. “Once juries get up close to the facts and start to analyze them, they will start to realize that the Enron Task Force is a house of cards.” Daniel Petrocelli, a partner in O’Melveny & Myers in Los Angeles who represents Skilling, did not return a telephone call before presstime. Neither did Reid Weingarten, a partner in Steptoe & Johnson in Washington, D.C., a lawyer for Causey. The Fifth Superseding Indictment in the Broadband trial alleges the five former EBS employees, from April 1999 through May 14, 2001, engaged in conduct and made false and misleading statements designed to deceive investors and others about the technological capabilities, value, revenues and business performance of EBS. The government alleged the defendants did that by causing Enron to issue materially false and misleading press releases, by making and causing others to make materially false and misleading statements to equity analysts and others, by using fraudulent means to generate revenue so EBS and Enron could appear to reach publicly announced financial targets and by failing to disclose material adverse information about EBS’s poor business performance. All of the defendants deny the allegations. In the wake of the Broadband verdict and Weissmann’s resignation, Ajamie says the government lawyers need to regroup. “They’ve lost their chief prosecutor. They’ve lost this case. They will have to regroup and decide how they are going to win these trials,” he says.

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