Enron Ethics

It makes me happy to remember the company at its zenith. Watch and remember what a great company Enron truly was.

Prosecutors Gone Wild: Bad Behavior In The Enron Trial

Having used the weekend to study the government’s reply to Jeff Skilling’s supplemental brief, I am deeply comforted.  The facts laid bare are emphatically in Skilling’s favor for overturned convictions.   The main thrust of the government’s reply to Jeff Skilling’s Brady arguments seems to be something along the lines of: “Had we been on the jury, we wouldn’t have found these things material.” 

Brady doesn’t allow for that kind of judgement.  Brady simply requires the government to turn over the evidence and let the jury sort it out.    The government’s concession that they had exculpatory material yet chose not to turn it over seems a clear violation of Skilling’s Constitutional rights.

This might be the most egregious violation – but it’s far from singular in a case that is riddled with prosecutorial abuse.   Without even discussing the legal issues, substantial violations, lies, and wrong  theories posited at trial, the Enron Task Force is guilty of acting like the criminals they accused Ken Lay and Jeff Skilling to be.  To whit:

*Prosecutors used highly prejudicial “perp walks” to poison the jury pool.

*Prosecutors used highly prejudicial press conferences about the case to poison the jury pool.

*Prosecutors pushed for the trial to take place in Houston, where the energy company was headquartered and where thousands were still furious and reeling from lost jobs, lost retirement funds, and the feeling of disgrace.

*Voir Dire was incomplete.

*Prosecutors have used that god-forsaken “un-indicted co-conspirator’s” list to keep exculpatory witnesses silent.  

*Prosecutors refused to grant immunity to those who could testify on Skilling’s and Lay’s behalf. 

*Prosecutors threatened witnesses, warning them away from testifying on behalf of Jeff Skilling and Ken Lay.

*Prosecutors suppressed evidence (ie, the Fastow Notes).

*Prosecutors used plea bargains to manipulate innocent people into confessing to crimes they didn’t commit – and dragging down others with them.  

*Prosecutors tried to have Skilling’s bond revoked for drinking too much one night. 

*Prosecutors tried to have Skilling’s bond revoked when he said “Hi” to a prosecution witness he saw while on a walk in their neighborhood. 

*Prosecutors  encouraged Fastow to lie on the stand (substantiated by the Fastow Notes.)

 *Prosecutors know the “personal reasons” Skilling left Enron, yet at trial they continued to press him to give another reason.  They allowed the jury to believe he  might have left because he feared Enron was a “house of cards” about to come crashing down.

*Prosecutors pointed out Skilling’s jury consultant during  the  trial.   Of course they had their own jury consultants but it made Skilling appear rehearsed.

*Prosecutors asked Skilling about the Photofete investment at trial which he was not prepared for because it had nothing to do with the charges against him.  

*Prosecutors implied Skilling used inside information and told his ex-wife and current wife to sell Enron stock (without prosecuting the wives for insider trading or any other crime).  

*Prosecutors pushed for a broad interpretation of the “honest services” statutes and a willful blindness concept that essentially did away with the jury having to find criminal intent. (Dan Petrocelli even tried to point out at sentencing that there was no mens rea; that Jeff Skilling never set out to commit a crime. His argument fell on deaf ears.)

*Prosecutors successfully pushed for inadequate reliance and materiality instructions.

*Prosecution successfully pushed for no jury instruction of secret side deals.

*Prosecutors swore up and down that Andy Fastow was “locked” into a ten year sentence and thus had no reason to lie.  In fact, his sentence was only six years.

*Jeff Skilling’s sentence of twenty-four years is unreasonable and punishes Skilling for the bankruptcy of Enron – which was not even an allegation the Task Force made, much less could sustain.

*Jeff Skilling’s sentence was enhanced for threatening a “financial institution”, which Enron was not.

*The District Court erred in assigning Skilling an enhancement for “obstruction of justice.”

The list goes on and on.   Jeff Skilling was never a man on trial for his life.  He was a scapegoat being used to prove a point about Enron – and about the power of the government at a time when the American people needed a hero wearing an American flag on his lapel.

Enron State: Red or Blue?

This weekend I read and even commented on a few of Loren Steffy’s Enron columns at the Chronicle, which is usually a waste of time.   However, as I was perusing, I noticed something interesting. Come with me, won’t you, on an irony tangent.

When President Bush was re-elected in 2004, the Left immediately separated themselves from the majority, even going so far as to apologize to the whole world for electing President Bush. Soon, ridiculous emails began to circulate supposedly demonstrating that Red State citizens had a lower average IQ than Blue Staters, which was appropriately debunked. Kerry voters thought of themselves as constitutionally more intelligent than their Neanderthal brethren, who could barely understand the complexity of world events like war and national security. They were just better people, the smartest guys in the voting booth. Red States were all tards and the superior Blues were all clean, beautifully pressed Harvard graduates… sort of like Jeff Skilling…which brings us back round to the Chronicle and the debate over Enron.

One of the primary problems with the Skilling/Lay trial was the jury. It was one of the major points Dan Petrocelli brought up in the appeal. Though Petrocelli shied away from saying the jury was a group of Red State tards, maybe he should have.

Enron was a sophisticated company with billions of dollars flowing through it every day, billions of dollars in assets, billions of contracts to manage. For someone who is not a specialist in the energy industry, it is easy to quickly become lost in the complexity of the business. Anyone who is not an MBA or a CPA is going to have a  steep learning curve to understand even the basics.  Yet the Enron jury was expected to understand Jeff Skilling’s testimony about hedging vehicles, accounting rules, electricity, natural gas, international projects and finance.

I am trying to think of other cases where lay people are expected to judge the performance of professionals. A medical malpractice suit, for instance, might require a jury to ascertain whether or not a surgeon made the right call. For a case like that, one would expect the attorneys to do their very best to illustrate the problem and show how the problem was approached. The plaintiff in this hypothetical case would also try to show what should have been done. But even in case like that, the ‘education’ would be very specific. The plaintiff would show that while the patient was having a myocardial infarction, the surgeon was treating a stroke – and the difference is XYZ. When attempting to judge Enron, or any huge company, it’s not enough to merely educate a jury on how energy accounting works. One must in fact re-create the company for the benefit of the jury, showing not only Skilling’s job responsibilities but also every other executive, and the junior executives, and so on. Anyone who ever touched any of the business transactions must be put into context (ie, was Arthur Andersen negligent for approving some of the challenged transactions? Or was the responsibility Skilling’s? Or the person who wrote the contract?)

Jeff Skilling said numerous times that there was no fraud at Enron. His words might have been believed if the jury had a fundamental understanding of the capitalist system (one must wonder, however idly, if the recent Bear Stearns collapse has perhaps caused a touch of Enron Juror’s Remorse?) Or if the jury understood just what Enron was doing. Or if they understood how widespread fraud would have been impossible.

The jury simply didn’t understand any of the charges against Jeff Skilling and was in no position to actually deliberate on his guilt. Yet this point is deeply contentious among the pro and anti Enron factions.

The very same people who believe that Red Staters are too stupid to live believe that the Enron jury was a lab of supreme intelligence. They were smart. They were so intelligent that they came to the conclusion of Skilling’s guilt in just five days. Why, they were the only twelve folks in the entire Red State conglomerate who actually had a brain at all!

So Texas was so stupid it elected George Bush twice, yet was ‘smart’ enough to convict Jeff Skilling and Ken Lay on extremely complex, technical charges. Texans are a group of gun-toting troglodytes, but the are so bright they can fairly judge the credibility of an executive with a Harvard MBA who managed a company worth $111 billion dollars.

I think not. And I find the presumption laughable.

President Bush Nominates Two Dems To SEC (Angers One Former Fan)

President Bush is expected to nominate two Democrats to the fill empty seats on the SEC panel.

Elisse Walter, former deputy director of the SEC’s corporation finance division, and Luis Aguilar, a former SEC lawyer, will be nominated for the vacant positions, the White House said in a statement. Both are Democrats.

By law, no more than three commissioners can be of the same political party as the president.

The worst part is this: the two Dems were recommended to Bush by Senate Majority Leader Harry Reid of Nevada in November. Harry Reid, of the scammy real estate deals. The “we are lost in Iraq” rhetoric. I just do not trust Democrats – or at least the current crop of Democrat leaders – in positions of authority. War and money are adult issues.

With these Dems seated now, as the markets are all over the place, I see a lot more regulation in the future; mission statements that include allowing shareholders to vote on executive compensation and new crackdowns on backdating stock options (which is quite legal at the moment if it’s done correctly.) I just see bad things happening at a time when we need more freedom. We need to worry less about disclosure and let executives do their damn jobs.

Of course, from where I stand, I think the SEC should be eliminated altogether (and all white collar/anti-trust laws repealed). But that’s unlikely to happen so, instead, all I can do is bitch about it. And promise to shake my fist at President Bush next time I see him.

Jeff Skilling Is Not An Architect

Thank you, President Bush, for distorting the meaning of  the word ‘architect’.  Thanks to calling Karl Rove the ‘architect’ of your 2006 re-election, there is a strange patina of negativity in the word, which I picked up again while watching a video of Dan Petrocelli, Jeff Skilling’s lead attorney, discussing the appeal.  This happened:

Enron architect wants new trial?  Really?  Caesar Pelli, the man who built the Enron towers in downtown Houston, wants a new trial?  Jeff Skilling, the former Enron CEO or President or Visionary is the one who wants a new trial.  There are plenty of accurate descriptors to choose from.  One needn’t try to get cutesy with ‘architect’ this and ‘architect’ that.  

Jeff Skilling is not an architect.  

First They Came For Arthur Andersen…

I had to double check all my calendars today because I’m starting to feel like it’s 2001 all over again. The culprit of the moment is this New York Times article which states:

A sweeping five-month investigation into the collapse of one of the nation’s largest subprime lenders points a finger at a possible new culprit in the mortgage mess: the accountants.
New Century Financial, whose failure just a year ago came at the start of the credit crisis, engaged in “significant improper and imprudent practices” that were condoned and enabled by auditors at the accounting firm KPMG, according to an independent report commissioned by the Justice Department.

My advice to KPMG: destroy evidence. Do it now, before they find something completely innocent and turn it into a felony. Shred like you’ve never shredded in your life. Take sledgehammers to your servers. Set fire to every paper document you can find. Leave your offices, taking with you everything you can carry. Shred your personal cell phone bills. Move to a new town. Scorched earth is good.

This is only the beginning of a second wave of “improper business practices” crackdown, and anyone who believes that innocence will triumph over the zeal of federal prosecutors on the hunt to make a name for themselves is seriously naive, if not deluded.

This is exactlythe setup for Arthur Andersen, and that eighty-five year old accounting firm didn’t make it out alive. Oh sure, the Supreme Court unanimously overturned every AA conviction, but it was far too late for the company, and the people who worked there.  I sincerely hope KPMG makes it through this intact, but after witnessing what happened to Enron and Arthur Andersen, my skepticism is infinitely high.

Government Reply To Skilling Brief: Yeah, So What?

At close of business today, Chron posted its report on the government’s reply to Jeff Skilling’s supplemental brief. Though I can’t find the original brief, I think it’s pretty clear from the report that I was exactly right when I said the Task Force would claim their withholding Brady evidence was immaterial.

Former Enron CEO Jeff Skilling’s claims that federal prosecutors hid critical evidence to buff up their case against him while illegally undermining his defense are overblown with “hyperbolic rhetoric,” the government said in a filing with an appeals court today.

When I see the words “hyperbolic rhetoric”, I immediately think of Judge Sim Lake saying Jeff Skilling had condemned thousands to a lifetime of poverty. Merely claiming, correctly, that the government withheld Brady evidence is not hyperbole.

[]
In a rare supplemental appeal filing earlier this month, Skilling’s lead trial lawyer, Daniel Petrocelli, alleged that more than 400 pages of FBI notes of interviews with former Enron finance chief Andrew Fastow show inconsistencies and outright contradictions between his early statements and his testimony in Skilling’s 2006 trial.

As a result, Skilling’s lawyers say, prosecutors presented evidence they knew was contradicted by information they failed to disclose.

The government responded today that claims prosecutors shirked the legal duty to give the defense information favorable to Skilling “rely on isolated snippets culled from 420 pages of handwritten notes and stripped of their context.”

If “divorced from Skilling’s hyperbolic rhetoric, each portion of the notes on which Skilling relies contains information that Skilling possessed prior to trial or that would have had minimal value” in skewering Fastow’s testimony, the government said.

Minimal value? Since when is the government allowed to make a judgement on the value of the exculpatory evidence, and by the way, is that a concession I hear? Are they saying that yes, there was some that we kept, but no biggie? Sounds like it to me.

Petrocelli tried to obtain the notes before and after Skilling’s trial to track Fastow’s statements over time, but prosecutors objected and U.S. District Judge Sim Lake denied the requests. Prosecutors gave the judge a portion of the notes and summaries in a binder that Lake examined for inconsistencies during Fastow’s testimony. The judge returned the binder to the government without comment.

Petrocelli later asked the 5th Circuit to intervene, and Judge Patrick Higginbotham ordered the government to turn over the notes last November. Petrocelli received the voluminous notes in late December with a requirement that they remain sealed from public view.

In a filing earlier this month, Petrocelli said the notes revealed evidence he called “a sledgehammer that destroys Fastow’s testimony” that infects the government’s entire case against Skilling.

Oh I still love that quote.

[]
Petrocelli cited inconsistencies and contradictions between Fastow’s FBI interviews and his testimony. In the trial, Fastow said that he and Skilling had secret agreements that a Fastow-run partnership wouldn’t lose money if it bought troubled Enron assets to boost the energy company’s earnings.

For example, Petrocelli said Fastow testified that he and Skilling discussed Fastow’s list, nicknamed the Global Galactic, that noted undocumented side deals between Fastow’s partnership and Enron. The FBI notes said Fastow “doesn’t think (he) discussed the list with JS.”

Skilling testified that he knew nothing of the Global Galactic.

The government’s response says Skilling’s lawyers received a summary of FBI interviews with Fastow, and it said Fastow had told investigators that he had not discussed the Global Galactic with Skilling. It said he discussed it with former Chief Accounting Officer Richard Causey, who told him that he had discussed it with Skilling. Neither the government nor the defense called Causey to testify in the trial.

“Fastow never mentioned the list to Skilling and may not have used the phrase Global Galactic when speaking to Skilling,” the government quoted the summary as saying.

Perfect timing. I just got my hands on the brief. More after I read that.

Deadline For Government's Reply To Skilling

I am on the edge of my seat waiting to see the government’s reply to Jeff Skilling’s Supplemental Brief, which, of course, contained unsealed Fastow Notes excerpts and effectively proved the prosecution to be as corrupt as a Nevada gaming commissioner.   Today – Tuesday, March 25 – is the deadline for the government to file.   I expect them to minimize every accusation, distort the record, and basically pretend they aren’t in a kamikaze death spiral.

My prediction is that they claim, at least once and probably twenty times, that word omissions, alterations, additions vis a vis the Fastow notes were “not material.”  I loved watching them try to bolster Fastow, the admitted liar/wife-imprisoning/money-skimming/Enron screwing/selfish bastard as a reformed good guy on the stand.  Now, they have to repeat the act, but this time with their fingerprints all over his corruption.  They put him on the stand knowing he was lying (and from the looks of it, actually encouraging it).   How on earth will they defend this conviction?

Oh I can’t wait!  I must get my hands on it.  Hurry hurry hurry, you government bastages, and file the damn thing.

Skilling Brief Ripple Effect Reaches Nigerian Barge Convictions

Just as the Task Force gleefully rubbed their hands together and licked their chops in anticipation of bringing down the Enron executives, I am similarly situated, as they say, now that the fallout from the Fastow Notes is being felt in other prosecutions.  Do yourself a favor and visit Kirkendall’s site, Houston Clear Thinkers for your very own copy of James Brown’s Motion To Dismiss Indictment For Egregious Prosecutorial Misconduct, Brady Violations and Double Jeopardy.   If you’re anything like me, reading this is better than eating a hot fudge sundae while having your feet rubbed, after just having half a dozen orgasms with your soulmate who just got a bonus check for a millon bucks.  Oh, it’s still not as good as Jeff Skilling’s supplemental brief, but it’s still pretty darn good.

The list of prosecutorial misconduct allegations is delightful.  Of course, it had to be utter hell to live through this, but now that its coming to light, let us enjoy the Enron Task Force’s exposure.  From the motion:

*Failed to dismiss indictment even after Fastow and others informed the Task Force that no illegal guarantee had been made.

*Task Force failed to turn over exculpatory evidence, even after repeated requests by the defense.

*Named virtually every business person who touched the Nigerian Barge deal an “unindicted co-conspirator”, thereby silencing and intimidating exculpatory witnesses.

The examples of prosecutorial misconduct  abuse  goes on for a page and a half.  It’s absolutely riveting, and terrifying.   

Something I’ve been thinking about is the endgame.   What will the final scorecard look like?  I strongly believe that Jeff Skilling’s convictions will be overturned and he will be released in early April.  The Nigerian Barge/Merrill Lynch cases can not stand.  The Broadband and NatWest Three convictions are tenuous as well.  I suspect history will show that in the aftermath of Enron, only those executives who took plea bargains were the ones to serve their full sentences (minus time off for good behavior and the rehab programs that many defendants use to shave time off).   

Blogging Skilling

Remember the kerfuffle caused in the middle of the 2004 election when CBS ran a story about the un-verified documents regarding President Bush’s Texas Air National Guard service? The right-wing blogosphere was immediately on mission to investigate and ultimately discredit the documents. The scandal ended with the firing of Mary Mapes, one of the show’s producers, and Dan Rather forced to apologize on the air for running the story.

Though Jeff Skilling’s supplemental brief hasn’t had the same impact (yet), I sense that this story, like TANG, is one that the blogs will own forever more. When the supplemental brief came out on March 14, there was nary a whisper from the New York Times, USAToday, or the LATimes. The Washington Post had a one sentence reference to it at the end of a Nacchio reversal article. The Wall Street Journal printed one story forty-eight hours after the blogs had already been all over it.

If we were discussing, I don’t know, space ship sightings or some local celebrity’s unexpected pregnancy, I could see how it might get overlooked by the big papers. But this is a critical story that is still having fallout today. It impacts business, and a lot of law.

It appears that the story is of interest to other bloggers as well as myself.  The fact that its not even on the radar of the big papers is fine with me. It will be when Skilling’s conviction is overturned.  Then suddenly the big east coast dailies will have to scurry to catch up.  And again, the mainstream media will have to eat crow when they realize they’ve been scooped by the blawgs.