It’s been 600 days since the Enron Task Force disbanded after former Enron CEO Jeff Skilling received his sentence of 24 years in prison. As part of the wider commemorations of the anniversary, it was thought timely to check “Where Are They Now?” for a group characterized as a “huge success” and whom even the Coolidge Republicans of the Bancroft-era Wall Street Journal editorial pages said had “a good record overall.”

The Justice Department’s massive effort resulted in several dozen convictions or plea bargains, most of which have been upheld, and its breadth included Arthur Andersen and the London bankers known as the NatWest Three. In the light of unclear GAAP rules on Enron, the Task Force achieved regulation by prosecutorial deterrence.

More after the jump.

We contacted the DealBreaker energy trading desk this afternoon for a report on the state of the market, but the celtic tigers who are supposed to watch that market for us were already out getting drunk for Saint Patrick’s Day.

We rifled through the desk anyway, and came up with a few notes on what we think was supposed to be a report on the state of the market today. “Still haunted by the sudden loss of liquidity when Enron collpased, the nation’s energy markets remained stable with normal volumes Monday but traders admitted they are waiting for bad news from the financial sector which rescued it post-Enron,” the note said. At least that’s what we think it said. It was hard to tell because the page was stained with beer.

When we checked the screens we saw that April NYMEX gas futures contract had dropped like a rock. We called up and asked about it.

“Is this related to Bear Stearns? Is it because they’re selling off their energy portfolio?” we shouted trying to make ourselves heard above the din of the midtown dive.

“Get a life Carney. Not everything that happens today has to be because of Bear Stearns! Nobody thinks the price drops are related to BSC. When are you coming out and getting drunk?” our covert energy reporter said.

Soon, we answered. But the phone had already gone dead. And then we decided we’d attach a Bear Stearns tag to this post anyway.

Shareholders in Bear Stearns have been all but wiped out despite the rescue bid from the Federal Reserve and JP Morgan Chase, prompting comparisons to the collapse of Enron. CNBC has been airing videos of old interviews with former Enron CEO Ken Lay, which fell apart almost seven years ago destroying a great deal of shareholder value. Far more shareholder value, in fact, than at Bear Stearns.

Those comparisons are apt, Tom Kirkendall points out, but not for the reasons many would suspect. There’s a tendency among some—especially plaintiff lawyers and some in the media—to suspect criminal wrong-doing when a company collapses. How could so much value be destroyed without serious wrong-doing? But these suspicions are often wrong-headed, and may even be counter-productive if they encourage shareholders and regulators to concentrate on investigations or misguided regulations.

Kirkendall says that the risk of collapse from a loss of investor and customer confidence is inherent in the kind of businesses that both Enron and Bear Stearns ran.

The fact of the matter is that Enron was — and Bear Stearns and AIG are — trust-based businesses that fundamentally depend on the trust of the markets to sustain their value. Once that trust is lost, such companies lose value quickly and dramatically (a case in point — JP Morgan Chase’s proposed $236 million purchase price for Bear Stearns comes just hours after Bear’s market cap was $3.5 billion this past Friday and $20 billion as of January, 2007) Although unfortunate for the owners of such companies, such a dramatic loss of wealth does not necessarily mean that any criminal conduct caused or was even involved in the loss. Rather, such loss is simply one of the risks of investing in a company based on a trust-based business model. The sooner we all recognize and understand this risk — and avoid the mainstream media’s promotion of myths about them — the quicker we can put a stop to injustices such as this while advancing the discussion of how best to hedge the risk of such potential losses.

That pesky trust-based business model [Houston’s Real Clear Thinkers via Ideoblog]

Former Enron chief executive-cum-Bubba’s bitch Jeffrey K. Skilling today appealed the criminal convictions (19 charges of fraud, conspiracy, insider trading and misleading auditors) that got him 24 years in prison, and sought a new trial, on the grounds that the government’s case had “profound, inherent weaknesses.” Besides the vague (i.e. golden) argument that there were “serious frailties in the legal theory that federal prosecutors employed to convict Skilling,” the defense team from O’Melveny & Myers also claim that the length of their client’s sentence is unfair (it is four times longer than those of the other Enron execs, six years longer than the average federal sentence for murder). But O’M and M’s pièce de résistance—in our humble opinion—is the argument that it isn’t right to send someone to jail for 24 years just because he/she just happened to draw the shortest straw.

“Someone would have to pay for Enron’s failure,” defense lawyers said. “That someone was Jeff Skilling—the last man standing when the court meted out its punishment.” (“As you well know, Lay dodged that ‘last man standing gets the worst prison sentence’ bullet, but it could’ve just as easily been him. Are you going to penalize our client for not having the foresight to die first? That’s just bad business, gentlemen.”)

The Justice Department will respond with its own filing possibly as early as next month.

Jim Chanos’s take? “Maybe Jeff just misses the scandal limelight. After all, the Enron Boys were a lot more interesting than SIV-lites, “Tier 3” derivative accounting, and missing assets at money-market funds!” (And also, we imagine but cannot say for sure, because this was all over e-mail: unadulterated maniacal laughter.)

Former Enron Chief Appeals Conviction [Washington Post]
Skilling Appeal [CNBC]

The Enron legal case continues to unwind. A federal judge in Texas just allowed former Enron executive Christopher Calger to withdrawn his guilty plea to wire fraud charges. Calgar had been accused of fraud in connection with a 1999-2000 asset sale that prosecutors claimed violated a “theft of honest services” statute—a theory that’s been in question ever since the Fifth Circuit started vacating sentences in both the Merrill Lynch and broadband cases.

U.S. District Judge Lee Rosenthal approved ex-Enron executive Christopher Calger’s request to withdraw his 2005 guilty plea to wire fraud in connection with an asset sale in 1999 and 2000.

Calger was the last of a string of former Enron executives to plead guilty to crimes. Former Arthur Andersen auditor David Duncan who handled Enron’s books, withdrew his guilty plea to obstruction of justice in 2005.

But not to worry. Prosecutors apparently have a never ending supply of possible Enron defendants to chase after.

Withdrawal of guilty plea allowed [Houston Chronicle via The Conglomerate]

One of the more creative Enron lawsuits was dismissed by a Manhattan federal judge yesterday. The plaintiffs were shareholders of JPMorgan Chase who said they bought the stock because of the company’s reputation for integrity and financial discipline but had been deceived because JPMorgan Chase was helping Enron, a major client. You can see how free-wheeling this kind of liability could get—and how it would really amount to a requirement that banks police all their clients for fraud.

Ever wonder how those science fiction worlds where the banks run their own police forces get started? Well, now we know. And we’re glad we don’t yet have to welcome our new banking police masters. Yet.

We will admit that there is some evil part of our brains that is sorry to see this lawsuit go. It’s the part that is going to miss the spectacle of JPMorgan arguing that it had not overstated its own reputation for integrity. They could have done this in two ways. First, by arguing that they fully deserved a high reputation, but our lawyer friends tell us that this would have been almost impossible to prove. Second, by arguing that their reputation wasn’t really all that. You know, the “look, bitch, you knew I was a snake when you picked me up” defense. This also might not have been the way JP Morgan wanted to go, either. But it sure would have been fun to watch them squirm between the unprovable and the unpalatable.

Enron Class-Action Suit Is Dismissed [Reuters in NYT]

Ikea just isn’t what it used to be, you know? Once a cool, hip, Swedey design company, it’s basically devolved into just a run of the mill furniture store whose difficulty to get to is rivaled only by the fact that it charges over a hundred dollars to deliver something worth less than forty, playing on the fact that some of us out there can’t fathom carrying a table up five flights of steps. But there’s hope yet! Saving Animals Across Borders is auctioning off the desks of former Enron employees Ken Lay, Jeffrey Skilling and Richard Kinder! Each one has a minimum bid of $25,000 and is made with “an elegant Makore Pommelle veneer,” to say nothing of the vintage edition copies of “Heart of Darkness” and “How To Win Friends and Influence People” (for those saracstic afternoons) in each top drawer. Personally, we’re saving our money for the shredder auction, but you should feel free to bid on these pieces of history today—you’ve got ‘til Sunday!

Ken Lay’s desk goes up for grabs [CNN Money]

U.S. District Judge Melinda Harmon has denied the pleas of Merrill Lynch, CSFB and Barclays PLC to delay a $40 billion lawsuit by former Enron shareholders and investors against them; the suit will now go to trial April 9. In their argument for a delay, defense for the banks—accused of playing a key role in the company’s collapse—argued that they should wait for a pending decision from the 5th U.S. Circuit Court of Appeals. In a motion, attorneys offered:

There is nothing sinister about the suggestion that since the Fifth Circuit will be ruling on that appeal, the court and the parties should take the time to apply the Fifth Circuit’s guidance to the class definition, the parties, the claims and the defenses before sending class notice and embarking on a jury trial estimated to last many months.

While sinister may not be the right word to describe it—we’re a bit more partial to ‘underhanded,’ ‘conniving,’ ‘in line with the nature of unmitigated pricks’ [Ed.’s note: some around here think that last one was too mean, and prefer, ‘in line with the schemes of evil genius lawyers’]—, the desire to wait on the Fifth circuit would certainly be in the best interest of the banks, as the Fifth is the very same one that said there was trouble with Skilling’s convictions and seems to be very skeptical about the Enron case in general. In other news, we received a tip late last night that Ken Lay was spotted on line at the UWS Gray’s Papya. Anyone got confirmation?

Judge denies motion to delay Enron suit [AP via DealBook]

The criminalization of Enron is really starting to unwind. The Houston Chronicle reported last night that the Justice Department won’t seek to overturn a fifth circuit appeals court decision throwing out most of the 2004 convictions of several Merrill Lynch bankers.

The convictions for fraud and conspiracy of four Merrill executives were thrown out last August when the court ruled that the prosecutors had presented the jury with an improper legal theory. Prosecutors had argued that the conduct of the defendants had deprived Enron of its right to their “honest services.” The appeals court ruled that since the allegations did not involve bribery or theft, and the conduct of the defendants was consistent with Enron’s corporate goals, the defendants could not be convicted on the “honest services” theory.

Since the prosecution of former-Enron CEO Jeff Skilling, who is now serving a 24-year and four month jail sentence, also used the “honest services” theory, there has been some speculation that the court’s decision might be a sign that it could overturn some of his convictions as well. When the fifth circuit court denied Skilling bail in December, it noted that there were “serious frailties” with his conviction on securities fraud and insider trading convictions.

The decision by the government not to appeal the fifth circuit ruling means that Skilling’s appeal before the same court will be able to rely on ruling as controlling law. It may be too early for Skilling to pop the cork on the champagne. But it’s probably not too early to start putting some on ice.

Government won’t challenge appeal court’s decision in Enron-related case [Houston Chronicle]

Word is starting to spread that Jeff Skilling might not have to serve out the 24 years to which he was sentenced after his trial. Over at the Conglomerate blog, Christine Hurt lifts the following sentence out of the Fifth Circuit’s December 12th order denying Skilling bail: “Our review has disclosed serious frailties in Skilling’s conviction of conspiracy, securities fraud, and insider trading, difficulties brought by a decision of this court handed down after the jury’s verdict, as well as less formidable questions regarding the giving of a jury instruction on deliberate ignorance.”

Hurt says this could all indicate that Skilling might end up serving a lot less time.

So, why was he denied bail? Well, even if the Fifth Circuit thinks that the counts of conspiracy, securities fraud and insider trading are vulnerable on appeal, there are still five counts of false statements to auditors. The time to be served on convictions standing after an appeal would have to be less than the duration of time between December 12, 2006 and the appeal. So, the Fifth Circuit might be saying that much of the conviction may be reversed, but there could still be six months to a year to serve at the end of the day. Well, that’s a lot different than 24 years. Remember that when the Fifth Circuit sua sponte released the Merrill Lynch bankers William Fuhs, Daniel Bayly and Robert Furst from prison pending appeal the bankers had already served one year and had been sentenced to 37- and 30-month sentences.

She goes on to wonder why more wasn’t made of this at the time the order was issued, joking that she’s going to file the entry under “How Did I Miss This?” Well, as much as we hate to toot our own horn, she wouldn’t have missed it if she was reading DealBreaker, which mentioned the “serious frailties” the very next day.

Re-reading the Fifth Circuit’s Denial of Skilling’s Bail Pending Appeal [The Conglomerate]

It’s been eight days (or so) since Malcolm Gladwell’s article in the New Yorker got people talking about Enron again. Consider the Enron case officially re-opened. And by “officially” we mean “under debate on the interwebs.” So it’s not legally re-opened but there is at least a chance that the public understanding of Enron might begin to change from one dominated by The Most Evil Guys In the Room image to something a bit more reality based.

Tom Kirkendall takes on Enron prosecutor John Hueston’s recent contentions to task today. It’s a long post that deserves to be read all the way through. But since you’re busy, here’s Kirkendall on the claim that Jeff Skilling manipulated Enron’s earnings.

Moving on to Hueston’s other allegation against Skilling, the evidence that Skilling engaged in earnings manipulation is so sketchy (see more extensive discussion in the earlier comprehensive post) that Hueston resorts to attempting to tie Skilling to the alleged Global Galactic agreement between Fastow and Causey. Revealingly, only the non-believable Fastow testified during the trial that Skilling knew about Global Galactic and, even after Causey copped a courthouse steps plea deal to hedge the risk of the effective life sentence that Skilling received, the Task Force chose not to call Causey as a witness. More than likely, the reason that the Task Force did not call Causey is that Causey wouldn’t have corroborated Fastow at all, which raises a quite reasonable question — why did the Task Force prosecutors used Fastow’s testimony to convict Skilling when they knew that there was reasonable doubt about Fastow’s veracity? Indeed, what does Hueston have to say about the Task Force’s duplicity with regard to Fastow’s testimony during the Lay-Skilling trial? And again, what does Hueston have to say about the numerous witnesses who the Task Force effectively prevented from testifying who would have provided exculpatory testimony for Skilling and refuted Fastow’s testimony?

Your move Hueston.

Reacting to Gladwell’s Enron article [Houston’s Clear Thinkers]

Wow. It wasn’t long-ago that Malcolm Gladwell was a media darling. Critical remarks on his writing came from only a few sources, including federal judge Richard Posner and writer Steve Sailer’s blog. But now he’s gone and challenged one of the central myths of our times—the Myth of Enron Evil—and all bets are off. The Times’ Joe Nocera published a long, critical piece on Saturday (which we missed because, well, who reads the Times on Saturdays?).

(By the way, when we refer to the Myth of Enron Evil we don’t mean to imply that the folks running Enron did nothing wrong. By calling it a “myth” we simply mean to indicate how important it has become to the way people think. It has reached iconic, legendary almost religious status. Even though much of what people are angry at Enron for has little to do with the wrong-doing at the company.)

Anyway, here’s an excerpt of Nocera’s critique of Gladwell:

Mr. Gladwell makes much of Enron’s use of so-called special-purpose entities — those supposed “independent” partnerships that were run by the company’s chief financial officer, Andrew S. Fastow. Those entities, Mr. Gladwell argues, are incredibly complicated, and Enron’s were more complex than most. Mr. Gladwell calls them examples of Enron’s “recklessness and incompetence,” but not an example of inadequate disclosure. Even if Enron had publicly disclosed every page of every special-purpose entity, he says, it would have made no difference; they were just too convoluted.

This, however, is where he runs off the rails. Yes, the fact that the entities were run by “a senior Enron executive” is something that the company disclosed (usually in some buried footnote). And it should have raised a huge red flag. Shame on Wall Street for not picking up on it.

But Enron’s S.P.E.’s were not always used for some legitimate purpose. Mostly, they were used to hide poorly performing assets and to launder loans as income. Not all of them were structured illegally, but many of them were — a fact that Mr. Gladwell glosses over, and which Enron never disclosed publicly. Mr. Skilling, according to prosecutors, secretly guaranteed that Mr. Fastow’s partnerships would never lose money in Enron assets, violating the law. It is also a reason Mr. Skilling is in prison now.

The point is not the sheer volume of disclosure; it’s whether disclosure illuminates or obfuscates. Enron usually did the latter. In effect, Mr. Gladwell has conflated fraud with overvaluation. James Chanos, the short seller who first raised questions about Enron’s numbers, told me that until the summer of 2001, when Mr. Skilling abruptly and inexplicably resigned, “even I only thought it was a case of overstated earnings; that is all you could tell from their documents.” He thought he would ride the stock down for a while, and then, eventually, cover his position once the market corrected for the overstatement. You could find plenty of evidence of overstated earnings in Enron’s financial documents — but you’d never know that the company was a Potemkin village. The kind of information that would have led to such a conclusion was precisely the information Enron hid from investors.

But Gladwell’s over-arching point—that there may be something wrong with the disclosure model of corporate governance and that solutions demanding ever more disclosure might not help the situation—stands. (As does the point that Jeff Skilling’s 24-year sentence is groteque.)

Tipping Over a Defense of Enron [New York Times via the ledger.com]

That Malcolm Gladwell article we pointed to the other day has been taking some hits lately. Brad DeLong totally harshes on the the Free Jeff Skilling buzz here. But more interesting, Steve Sailer points out that Malcolm gets the distinction between a puzzle and a mystery exactly backwards.

Gladwell writes: “Osama bin Laden’s whereabouts are a puzzle. We can’t find him because we don’t have enough information…”

No, that’s a mystery, as the term is normally used. For example, in Raymond Chandler’s famous murder mystery The Big Sleep, detective Philip Marlowe is hired to find former bootlegger Rusty Regan. Marlowe doesn’t have enough information to find him so he goes around searching for clues. Only at the very end does he know enough to figure out where Regan is. Similarly, according to Gladwell, we need more clues to find Osama, so his whereabouts are a mystery, not a puzzle.

Gladwell goes on:

“The problem of what would happen in Iraq after the toppling of Saddam Hussein was, by contrast, a mystery… Mysteries require judgments and the assessment of uncertainty, and the hard part is not that we have too little information but that we have too much.”

No, that would be better labeled a “puzzle.” Rubik’s Cube is a classic puzzle: everything you need to solve the puzzle is right in front of your eyes, but it’s still very hard to figure out.

Brad DeLong: “Gladwell seems more than a bit thick here.” [iSteve.com]

Well. Okay. That headline may be a bit strong. But Malcolm Gladwell’s New Yorker piece on Enron certainly has definitely brought the issue of Jeff Skilling’s conviction and incredibly harsh sentence back into public discussion. At least if “people writing on the internet” counts as “public discussion.”

Some recent responses:
• Larry Ribstein asks: “So how about this angle — although we still don’t know exactly what Skilling did wrong (if anything), he’ll be rotting in jail for a generation…I’ve already pointed out a zillion times that the criminal laws were wildly inappropriate to deal with this case. Just maybe Gladwell’s found a way to say it that people will finally listen to, even if they don’t really understand it.”

• Houston attorney Tom Kirkendell is even more blunt: “Reading Gladwell’s account along side this earlier post on the case against Jeff Skilling, is there really any meaningful doubt that an enormous injustice has occurred in regard to the conviction and sentencing of Skilling to 24 years in prison?”

• Michael Statsny says there probably isn’t some legislative solution to the problem of a Gladwellian mystery: “Inevitably, disclosure requirements just increase the amount of bureaucratic information produced. What you want is only the pertinent information revealed, but you can’t legislate that, so you get lots of verbiage instead.”

• And there’s more from Point of Law and Conglomerate.

One of the great talents of Malcolm Gladwell is describing something lots of people have been talking about for a long, long time in a way that makes it seem freshly insightful. The latest New Yorker essay is a perfect example of this form. Gladwell argues that what really made Enron’s financial statements inscrutable was not the failure to disclose financial chicanery but overdisclosure. In Gladwell’s words—Enron was not a “puzzle” (ie, a problem of too little information) but a “mystery” (too much information). That’s something a lot of people have been saying about our current disclosure and governance regime but without Malcolm’s nifty trip through World War II Nazi spies. Reading him makes you realize that this is why he is a best-selling author and highly paid journalist for a medium-brow weekly magazine while, say, we are not. We would have to got straight to the point and told you the problem was cumbersome disclosure.

One other point bears noticing about Malcom’s article. First, he flat-out says the prosecutor’s theory of the Enron case was wrong. And he does this after telling the story of the sentencing in a way that is clearly sympathetic to Jeff Skilling and illustrates the arbitrariness of his sentence. Do we smell a Jeff Skilling comeback in the air?

Open Secrets [New Yorker]

That Andrew Fastow was only sentenced to six years in prison on September 26—a term that may be reduced to five, if his purported anti-anxiety drug addiction is deemed worthy enough for an in-prison drug treatment program—has a lot of people’s knickers in a twist. And probably likely so, if we’re to believe the hype behind this whole “Enron scandal” situation. Everyone has a lot of questions and answers are few and far between (except the obvious one, which is “Yes, he’s still alive and has been hiding out in a bunker on the Jersey Shore). Luckily, Peter Elkind sheds some light today at Fortune and, use of the word ‘synergistic’ notwithstanding, gives a pretty convincing explanation, save for one huge oversight*:

Give credit to a very synergistic bit of lawyering by San Francisco criminal defense star John Keker. As it turns out, Keker not only represents Fastow but is also the personal criminal defense attorney in an unrelated federal investigation for Bill Lerach, the controversial plaintiffs attorney who represents Enron shareholders in their massive class-action lawsuit.

In an 11th-hour deal benefiting both of Keker’s clients, Fastow agreed to aid Lerach’s Enron class action, which has already collected a record $7.3 billion in settlements (mostly from the big banks that helped Enron cook its books). Fastow provided detailed debriefings to the plaintiffs’ lawyers, naming Enron bankers he considered complicit, and he agreed to sit for deposition.

*Off-off Broadway plays don’t make it to 42nd street with their chief consultant cooped up for very long in the slammer, now do they, people? Honestly, let’s quit the ballyhooing and get real—those Tonys aren’t going to win themselves.

Why Enron’s Fastow may only serve five years [Fortune]

“Enron: The Musical.” Opening on Friday on a stage way, way off Broadway — at Lambert Hall in Houston — the revue is a send-up of the rise and fall of the infamous energy company.

In two acts, six local actors each play up to 10 roles, including those of the former chief executives Kenneth L. Lay and Jeffrey K. Skilling, and the former finance chief Andrew S. Fastow. The songs are show-tune parodies — “Thank Heaven for Off The Books Deals,” for example, instead of “Thank Heaven for Little Girls.” The writer-director-producer is Mark Fraser, whose day job is selling janitorial supplies.

First Time as Tragedy, Second as a Musical [NY Times via DealBook]

Is there some special shame that attaches to being convicted in one of the biggest financial scandals of the era and yet still being a nobody? Probaby not. If he took the Ken Lay out, we’re betting he’d just end up in whatever ordinary Hell accountants usually go to.

Former Enron Corp. Chief Accounting Officer Richard Causey was sentenced to 5 1/2 years in prison for his role in the fraud that destroyed the company, an 18-month reduction from the term offered in his plea deal.

Causey, 46, was charged with more than 30 counts and faced trial alongside former Enron Chief Executive Officers Kenneth Lay and Jeffrey Skilling, both convicted in May of spearheading the fraud that forced the company into bankruptcy in 2001. Skilling was sentenced to 24 years in prison. Lay’s conviction was thrown out because he died before his appeal.

Former Enron Accountant Causey Gets 5 1/2-Year Term [Bloomberg]

They’re back from the dead. There are lots of them. And they are everywhere.

This morning’s Wall Street Journal follows up on the announcement that top Enron trader Jeff Shankman is launching an energy trading hedge fund by tracking down a host of Enron alumni. It turns out that the crooked E on your resume is not exactly a scarlet letter.

While most markets besides gas and power weren’t big moneymakers for Enron, ex-traders today are piggybacking on the company’s early investments in everything from pulp-and-paper products to coal trading. And they are finding their background a selling point, much as the collapse and bankruptcy of junk-bond pioneer Drexel Burnham Lambert launched dozens of careers elsewhere in the 1990s.

“Employers look at having worked at Enron as a risk-management experience, and they think people might have learned from the Enron mistake and those traders might have become better,” says Michael Karp, chief executive of Options Group, an executive-search firm that works for many banks and hedge funds. The traders’ renaissance comes as some Enron executives from other areas of the company have forfeited assets and begun serving prison terms. Even Enron trading veterans whose reputations were tarnished by criminal and civil probes are making inroads.

Trading on the Enron Mystique [Wall Street Journal]

Even as news broke today that energy trading had claimed another hedge fund casualty, a veteran hedge fund trader with a past to pause over is preparing a to launch a new hedge energy trading fund, according to Bloomberg.

Jeff Shankman, the former chief operating officer of global markets at Enron Corp., plans to raise as much as $250 million in the next six months for an energy hedge fund, according to two investors who received marketing documents on the proposal.

Trident Asset Management LLC, based in Houston, was founded this year by Shankman and Andy Weathers, a former trader at CenterPoint Energy Inc., and will start trading this month, said the investors, who declined to be identified because details are still confidential. Shankman didn’t return messages left requesting comment. Weathers declined to comment.

A four-year rally in prices for raw materials has spurred investment in commodity-trading hedge funds. They oversee $22.5 billion globally, up from $12 billion a year ago, according to London-based NewFinance Capital LLP, which invests in such funds. Trident’s Cayman Islands-registered fund will trade U.S. natural gas, crude and refined oil, according to the investors.

“The problem facing investors is differentiating between these funds given the dearth of single-manager funds that have launched over the past year,” said Neil Campbell, a fund manager at London-based Habibsons Bank Ltd., which invests in commodity funds. “It’s getting harder to pick the right ones.”

Shankman, 39, headed trading in markets from commodities to foreign exchange and equities at Enron, the world’s largest energy-trading company before it went bankrupt in 2001. He then started Monotech International Inc., a Texas-based building- construction company.

We think we’ve said this before. There are no second acts in American life, because its just the first act played over and over again.

Shankman, Ex-Enron Executive, to Start Hedge Fund [Bloomberg]