Names In the News

Enron Prosecutions

The indictments and pleas related to the Enron scandal keep piling up.

A former in-house accountant for the Enron Corporation and a former vice president at Merrill Lynch & Co., Inc., have been charged with conspiracy to commit fraud and other crimes in connection with the federal government's ongoing probe into the collapse of Enron.

Three leading former employees of Merrill Lynch were indicted in September 2003 on related charges.

The indictment alleges that Enron and Merrill Lynch engaged in a year-end 1999 deal involving the "parking" of Enron assets with Merrill Lynch. That arrangement allowed Enron to fraudulently enhance the year-end 1999 financial position that it presented to the public; it also enabled certain Enron executives to receive unwarranted bonuses.

Federal officials alleged that Enron attempted unsuccessfully in 1999 to sell an interest in electricity-generating power barges moored off the coast of Nigeria.

Enron then allegedly arranged for Merrill Lynch to serve as a temporary buyer so that Enron could record earnings and cash flow in 1999, making Enron appear more profitable than it was.

The indictment states that Enron promised in a secret oral "handshake" side-deal that Merrill Lynch would receive a return on its investment plus an agreed-upon profit within six months, and that Enron would sell the barges to a third party or repurchase them within six months -- a promise hidden from outside parties.

Meanwhile, David W. Delainey, the former chief executive officer of Enron North America and Enron Energy Services, pled guilty in October to insider trading.

Delainey faces a maximum sentence of up to 10 years in prison and a fine of up to $1 million at his sentencing, which will be scheduled at a later date.

Delainey admitted to involvement in a wide-ranging fraudulent scheme that included the use of excess profits generated in one business unit's California energy trading to conceal hundreds of millions of dollars of losses in another business unit.

More than two dozen people have been charged to date in the Enron case by the Corporate Fraud Task Force, including 18 former Enron executives.

Deaf to Whistleblowers

The Justice Department is prohibiting whistleblowers from assisting in the review of documents discovered during a federal False Claims Act investigation unless the whistleblowers sign a waiver specifically limiting their reward to those claims alleged in the original whistleblower complaint.

Senator Charles Grassley, R-Iowa, wants Attorney General John Ashcroft to put a stop to the practice.

In a letter sent in September to Ashcroft, Grassley said that he's aware of a number of cases where whistleblowers refused to sign such waivers.

Grassley writes that in one case, "documents seized from a contractor, who allegedly manufactured defective military hardware, went unreviewed for well over a year because the Civil Division turned down the whistleblower's offer to put in place a team to review the documents."

The Justice Department's new policy appears to prohibit whistleblowers from amending their complaints in light of information obtained during discovery -- even if that new information was obtained due to the insight, knowledge and resources of whistleblowers and their counsel, Grassley said.

"The Department's policy strikes me as completely at odds with the legislative intent behind the False Claims Act," Grassley wrote. "The policy neither promotes the free flow of information from whistleblowers to the government, nor does it foster a working partnership between whistleblowers, their counsel and the government."

The Pfizer-Nigeria Case

The Second Circuit Court of Appeals has reinstated a lawsuit charging that Pfizer conducted medical experimentation in Nigeria without seeking informed consent.

The lawsuit alleges that during an epidemic of meningitis in Kano, Nigeria, the plaintiffs went to a local government hospital to seek medical care, but were unwittingly enrolled in Pfizer's clinical trial of the antibiotic Trovan.

Pfizer's trial was designed to win regulatory approval to sell Trovan in the lucrative U.S. market.

The lawsuit alleges that in addition to performing experimentation without informed consent, Pfizer also manipulated the study by giving inadequate doses of the drug used as the study "control" in order to make Pfizer's Trovan look more effective. This manipulation allegedly caused both injury and death.

The lawsuit, brought by Elaine Kusel of Milberg Weiss in New York, alleges violations of the Alien Tort Claims Act (ATCA) -- specifically that Pfizer's actions violated customary international law which forbids medical experimentation without informed consent.

A federal district court in New York dismissed the case on forum non conveniens grounds -- which would force the case to be sent to Nigeria -- but held that plaintiffs properly asserted claims under the ATCA.

The appeals court reversed the dismissal and sent it back to the lower court to continue the litigation.

"It is important that U.S. companies be held accountable in our courts for their conduct that harms unprotected foreign nationals," says Kusel.

-- Russell Mokhiber