Larry Ribstein fawns over Tom Kirkendall's post about the Nigerian Barge case.  The basic facts are that Enron "sold" some barges to Merrill Lynch.  That is, Enron recognized a "sale" for accounting purposes.  Enron could not formally guarantee that they would buy back the barges, but promised to find a third party buyer within six months.   From an economic standpoint, the so-called sale starts to look like a loan.

A few things are not clear to me after reading Kirkendall's post and one of the briefs.  I don't understand how the parties came up with a valuation.  Nor is it clear to me whether Merrill Lynch did its own diligence on the valuation.  Nor can I figure out what they understood would happen if no true third party buyer was found.  Would Enron step in?  Would LJM2 (the Fastow partnership) step in and buy the barges?  At what price? 

I agree that it's not a slam dunk criminal case.  The appeal has a real shot at success, and I'm not at all sure the government made its case.  But that's no reason to lionize the defendants.  The deal stinks.  It reeks.  In no way is this deal an "ordinary structured finance transaction," as Kirkendall claims.  In an ordinary structured finance transaction, substantial economic risk is shifted away from the seller.  I don't think that happened here, and it's the shifting of economic risk that justifies the accounting treatment.  Kirkendall really goes over the top at the end of the post, explaining:

For as Thomas More reminds us, if the courts do not stand up for justice and the rule of law in such cases, "do you really think you could stand upright in the winds [of abusive state power] that would blow then?"

The implicit comparison of the Merrill defendants to a Man For All Seasons makes me want to barf. 

Ribstein, however, has a stronger stomach than I do.  His take on Enron: 

This has given me a taste for the real Enron movie, in which Ken Lay builds a business, is taken down by arrogant politically driven prosecutors, and then vindicated at trial.

I wish he were kidding. 

The Enron prosecutors might be guilty of overreaching.  But an overreaching prosecution does not mean that a defendant is innocent, let alone heroic. 

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