Seen on the Chron's Business page yesterday evening:
Oops. The story, which does not make that mistake, is here.
Prosecutors want to keep former Enron CEO Jeff Skilling behind bars, without retrying any part of his case, and did not give an inch in the reply they filed to Skilling's appeal today.The Department of Justice filed a 218-page reply to the appeal of Skilling, who is serving a 24-year prison sentence in Minnesota on 19 convictions of conspiracy, securities fraud, insider trading and lying to auditors at Enron.
"The jury had ample evidence to hold Skilling responsible for the pervasive fraudulent conduct at Enron," the government argues. "The record demonstrates, moreover, that Skilling had a fair trial before an impartial jury and that he received a reasonable sentence for his multiple crimes. This court should affirm his conviction and sentence."
Skilling was found guilty by a Houston jury in 2006 and appealed his conviction to the 5th U.S. Circuit Court of Appeals in September. He argued that prosecutors sought to criminalize normal business practices and overreached in prosecutions relating to the fall of Enron.
Skilling's multi-faceted appeal included arguments that the government had a faulty theory in claiming Skilling denied Enron his "honest services," that the judge gave improper jury instructions, that the sentence is excessive and that the case should not have been tried in Houston, where the company imploded.
The Justice Department's fraud section disagreed with all those contentions in its response today, written by San Francisco-based prosecutor Douglas Wilson. The government argued that a court decision on "honest services" in another case does not mean Skilling's convictions should be reversed.
No real comment on the story - I thought Skilling was convicted fair and square, and I don't think he'll get anywhere with his appeal. But there you have it anyway.
Last year, on their second attempt, federal prosecutors secured convictions against former Enron Broadband Services CFO Kevin Howard. Yesterday, those convictions were dismissed.
A theory used by prosecutors and an instruction to jurors regarding deliberations prompted U.S. District Judge Vanessa Gilmore to issue a ruling Wednesday that erased five convictions of conspiracy, wire fraud and falsifying books against Kevin Howard, former finance chief of Enron's broadband division.Howard was convicted of those crimes after facing a jury for the second time last year. His co-defendant, former broadband accountant Michael Krautz, was acquitted of the same counts.
Their first trial alongside three other ex-broadband executives ended in 2005 with no convictions, a few acquittals and jurors hung on dozens of other counts.
Howard's attorney, Jim Lavine, said his client was "very humbled and very grateful" at Gilmore's ruling.
"It has been a long road for him and very hard, but he has incredible support from his family and friends," Lavine said. "He has always believed the right thing would happen eventually."
The government retains the right to try Howard a third time. Justice Department spokesman Bryan Sierra said prosecutors were reviewing their options.
The government conceded last November that four of Howard's five convictions should be tossed aside because they likely would not stand up on appeal. But prosecutors argued that the fifth count stood apart from the others and should be upheld.
Howard's lawyers responded that the prosecution's theory tainted all five counts.
Third time's the charm? Color me skeptical. For more, read Tom, who saw this coming.
Jeff Skilling won't be calling this southern Minnesota town home just yet.Late Monday, the U.S. 5th Circuit Court of Appeals issued an order postponing the ex-Enron CEO's Tuesday report date to a low-security federal prison until the panel gives "careful consideration" to his request for bail while he appeals his convictions on 19 criminal counts.
"This order is entered solely to allow this court to give careful consideration to the request for bail pending appeal," the court said.
The last-minute reprieve was a possibility up to Skilling's deadline of 2 p.m. Tuesday to report to the prison in Waseca, about 75 miles south of Minneapolis. Skilling will await word from the 5th Circuit on whether he can pursue his appeal inside or outside of prison. His appeal is expected to be filed next month.
Whatever. You can run, but you can't hide.
UPDATE: Denied!
Just a day after saying former Enron CEO Jeff Skilling could delay reporting to jail, the U.S. 5th Circuit Court of Appeals denied his request to stay out of jail pending his appeal.Skilling was ordered to report to prison immediately.
Judge Patrick Higginbotham of the 5th U.S. Circuit Court of Appeals wrote in his two-page order that "Skilling raises no substantial question that is likely to result in the reversal of his convictions on all of the charged counts."
As a result, Higginbotham denied Skilling's request for bail pending his appeal and vacated an earlier order staying his prison report date.
Although Higginbotham's order notes "serious frailties" in Skilling's convictions, it says those problems fail to raise a "substantial question" likely to result in the overturning of all Skilling's convictions, as would be required to grant bail during appeal.
Sorry, Jeff. Better luck next time.
I suppose it was just a matter of time.
Jeff Skilling, Andy Fastow and the rest of the Enron gang will have a new home very soon.No, not prison. The stage.
Enron - the Musical makes its world premiere tonight at Lambert Hall, where it will play for two weekends.
Unlike its high-flying, glitzy subject matter, the musical is a shoestring operation. Its performances will take place on the set of the current children's show Santa's Magic Timepiece. With his best Mickey Rooney "we're putting on a show" enthusiasm, producer/writer/director Mark Fraser insists that backdrop will work just fine.
Fraser, who earns his living as a manufacturers' representative, wrote the show's lyrics, too - but not the music. The show uses that favorite device of revues, comedy clubs and piano bars: parody lyrics attached to familiar show tunes.
Enron opens as the staff of accounting giant Arthur Andersen follows an alert from Enron to destroy all evidence. David Duncan, a lawyer at Andersen, croons The Sound of Shredding (to the tune of The Sound of Music).
At the peak of his power, Skilling sings (to the tune of Springtime for Hitler), "Springtime for Skilling and Enron stock!"
To the tune of Thank Heaven for Little Girls, Fastow and henchman Michael Kopper sing:
Thank heaven for off-book dealsFor off-book deals improve our balance sheet ...
They raised our stock and fooled folks on Wall Street
Those partnerships we set up were appealing
But now they're not 'cause we got caught for fraud and stealing.
And so it goes, through such ditties as How Do You Solve a Problem Like Jeff Skilling?, 76 Indictments ("came down today / with 110 execs out on bail") and Get Me to the Court on Time.
Sounds like something Mort Drucker might have cooked up for MAD Magazine, not that there's anything wrong with that. For sure, this can't be any worse than The Crooked E. It's just running this weekend and next, though, so if this appeals to you, hop to it.
Been a rather busy week in Enronland. Let's catch up a bit:
- Jeff Skilling has reached a settlement on all remaining litigation against him by former employees who lost their pensions in the crash.
The ex-CEO, who is scheduled to begin serving more than 24 years in prison next month, has withdrawn his opposition to an $85 million settlement that plaintiffs reached with former company directors and other executives two years ago.In exchange, plaintiffs resolved claims against Skilling - the last named defendant who hadn't settled - effectively bringing the litigation to a close.
"Yes, it's over. Our clients are thrilled," attorney Lynn Sarko, who represents ex-Enron employees, said. "While they are grateful that some of their retirement money was recovered, it will never make up for the destruction of their retirement nest egg."
The lawsuit, which recovered about $265 million in settlements - including the $85 million held up by a Skilling appeal - was filed on behalf of more than 20,000 employees after Enron went bankrupt in December 2001. The Labor Department later filed similar litigation, which was folded into the main lawsuit.
If Jeff Skilling has to work for a living and worry about his retirement like the rest of us once he's out of jail, then I'll feel like justice has been done.
- In response to the convictions against Kenny Boy Lay being vacated upon his death, two Senators have proposed legislation to make it easier for victims of crime to seek restitution in similar situations.
On Thursday, Sen. Dianne Feinstein, D-Calif., and Sen. Jeff Sessions, R-Ala., both members of the Senate Judiciary Committee, introduced legislation designed to clarify the legal procedures when a defendant dies in this way."We need to ensure that, in these types of cases, hard-won convictions are preserved and restitution remains available for the victims of crime," Feinstein said in a statement Thursday.
When convicted, a criminal defendant can be ordered to pay restitution to his victims, to try to make them whole. But since Lay's conviction was vacated, his estate cannot be ordered to pay restitution.
Instead, the Justice Department was forced to file a civil suit seeking to wrest control of $12.7 million worth of assets. If the government is successful, it could then turn over some or all of those proceeds to victims of the Enron debacle.
The Justice Department proposed legislation last summer that sought to preserve such convictions after a defendant dies pending sentencing and appeal - and wanted it to be retroactive to July 1, four days before Lay died. That proposal never garnered a sponsor.
The Justice Department helped Feinstein and Sessions craft the legislation introduced Thursday.
"We share Sen. Feinstein and Sen. Sessions' commitment to do away with the harmful and unwarranted effects of the abatement doctrine on crime victims," Justice Department spokeswoman Jaclyn Lesch said.
Feinstein and Sessions' bill would stipulate that a defendant's conviction cannot be vacated just because the person has died.
That would allow for the defendant's estate to be ordered to pay direct restitution to victims. However, the proposal would allow a representative for the estate to appeal the conviction.
The bill also would give the federal government an additional two years to file a civil complaint to try to force an estate to forfeit assets.
I didn't care for the prosecution's attempt to push through a bill like this with retroactivity earlier. I'm a little hesitant to endorse this scheme, even though I think it should be easier for the civil litigants to pursue their cases, on the basis of the Task Force's earlier actions in this matter. I'll reserve judgment for now; as I expect this bill to die before the Senate session ends, we'll see what happens next year.
- Former Enron chief accountant Rick Causey was sentenced to five and a half years in prison. As both Tom and Loren Steffy note, he caught a bit of a break when Andy Fastow wound up getting his sentence shaved down, but he might wind up serving more time than Fastow anyway. Which is a little weird.
- Finally, the last two top Enron executives to face the music, Michael Kopper (who was once Fastow's top assistant) and Mark Koenig (who was Enron's head of investor relations), received sentences of 37 months and 18 months, respectively. Tom has more on this, including some thoughts on who deserved it more.
And so the Enron saga more or less comes to a close, pending appeals and the ongoing civil suits.
Former Enron Corp. CEO Jeff Skilling took the blow of a 24-year prison sentence the same way he took a jury's decision that he's a felon: Dry-eyed and calm.Standing alone before U.S. District Judge Sim Lake to make a statement at his sentencing hearing Monday, Skilling insisted before he learned what his punishment would be that he is remorseful about Enron's 2001 demise and its devastating fallout to employees and investors.
"I will live those days and everything that happened subsequently for the rest of my life," he said.
[...]
"All that being said, your honor, I am innocent of these charges. I am innocent of every one of these charges," the 52-year-old former business titan said with a bit of defiance in a hearing that capped an era of fraud that prompted Congress to pass sweeping reforms and stiffen white collar penalties.
Unmoved, Lake imposed a prison term of 24 years and four months — the bottom of a possible range that stretched to 30 years and five months.
He will also fork over $45 million in restitution should he lose his appeal.
Skilling's term is just a few months shy of the 25-year sentence former WorldCom CEO Bernie Ebbers began serving last month for orchestrating the $11 billion fraud that drove his company into bankruptcy.
"It's difficult to understand how 24 years for a nonviolent crime can be the low end of anything," said David Berg, a Houston civil litigator.
But others, including nine of the 16 jurors and alternates in Skilling's trial who attended his sentencing, approved.
"Judge Lake knows the law. He stood firm where the sentence will be served and when lenience was allowed, he considered that," said jury foreman Deb Smith.
Philip Hilder, a former federal prosecutor who represents several Enron defendants and witnesses, said Skilling's punishment was fair.
"It's not one that's out of the ordinary," he said.
Outside the courthouse, Skilling said with a shrug that he was disappointed, but called Lake a "fair guy" and said he would appeal.
"This is no act or anything. I believe that I'm innocent," he said.
For better or worse, that's the difference between what Skilling got and what Andy Fastow got. I have little sympathy for Skilling and believe he got a fair trial and an appropriate sentence, but the difference is striking. I'll be thinking about it for awhile.
There are still Enron issues to be worked through: restitution for former employees, and more trials, sentencings, and lawsuits. But between the death of Ken Lay and the sentences meted out to Skilling and Fastow, it's hard not to think of this as largely finished. Easy for me to say, I know.
If you've been following this at all, you'll know that Loren Steffy approved of Skilling's punishment, while Tom Kirkendall did not. What do you think?
Kenny Boy Lay's criminal record has been officially wiped clean.
Former Enron Chairman Ken Lay's criminal conviction was vacated and his indictment dismissed by a judge today.U.S. District Judge Sim Lake granted the request by Lay's estate to vacate the conviction, an outcome that was widely anticipated given legal precedent. He also dismissed the indictment used to bring him to trial earlier this year.
Lay died July 5, just weeks after a jury found him guilty on six charges of conspiracy and fraud and Lake found him guilty on four charges of bank fraud.
In his decision, Lake cited a decision in the 5th Circuit Court of Appeals that makes death, before the appeals process has been exhausted, grounds for throwing out a conviction and dismissing an indictment.
I totally understand the rationale behind this, and even though I don't like the fact that the main effect will be to screw the civil suit plaintiffs, I can't say I disagree with it. That's the way it goes.
The Department of Justice tried to trump that precedent, however, when it asked Congress in early September to pass a law that would essentially prevent courts from vacating criminal convictions if a defendant dies before going through the entire appeals process.The government asked Lake to at least wait until Oct. 23, when Lay was scheduled to be sentenced.
The proposed law does not appear to have been picked up a sponsor in Congress.
This was a two-bit maneuver by the prosecutors, and it deserved to be ignored. Tom called it for what it was last month. I don't agree with his overall evaluation of the prosecutors and their methods, but another stunt like that and I'll give it some serious consideration.
Jeff Skilling will be sentenced today. Tom has a preview of that, and he contrasts it to the fate of Andrew Fastow and Rick Causey.
UPDATE: More here.
Andy Fastow receives his punishment, and it's less than what it could have been.
Andrew Fastow, Enron's former chief financial officer, received a 6-year prison sentence today for his role in the 2001 demise of the energy company.Fastow's sentence had been limited to no more than 10 years in prison as part of his plea agreement to testify in the trial against Enron top executives Jeff Skilling and Ken Lay. U.S. District Judge Kenneth Hoyt had the option to shorten that sentence.
Hoyt said he showed mercy for several reasons, including that Fastow had provided help to the shareholders; that Fastow was persecuted and scapegoated after Enron collapsed; and because of the suffering Fastow's family endured, specifically pointing to the fact that his wife went to jail.
"The family had take a particularly acrimonious hit,'' Hoyt said.
Before the sentencing, an emotional Fastow, 44, shed tears as he told the judge today he has publicly and privately taken responsibility for his actions, and he will struggle with the fallout and shame for the rest of his life.
"I wish I could undo what I did at Enron but I can't,'' he said, his voice choking.
He said he was blessed with family and friends, but " have failed them. I have to work every day of my life to keep their trust.''
He also said "I will serve my sentence as part of my repentence that I've already begun.''
I don't know Andrew Fastow, so I don't know how much I believe that his remorse and repentance is real. I've got enough Catholic in me to believe in redemption, so I'm willing to give him a chance. Some former Enron employees also apparently feel the same way. Ultimately, what powers redemption for me is taking action to make up for what you've done. Fastow is saying the right things now, and that second article indicates he's been doing some good things, but the jury will be out on this one for a long time.
The process to eliminate Ken Lay's criminal record has begun.
Samuel Buffone, a Washington, D.C., attorney who was expected to represent Lay in his appeals, filed a motion Wednesday asking District Court Judge Sim Lake to substitute Lay's estate for the late defendant so the lawyer can appear in court on Lay's behalf.Buffone said in the motion that once the court recognizes him as the attorney for the estate, he will "move to vacate the convictions of Mr. Lay and dismiss the indictment."
[...]
Lay died on July 5, in Aspen, Colo., of heart disease. Although he was convicted, a final judgment wasn't issued because he had not yet been sentenced and through the appeals process. Rather than allow an appeal to proceed without him, the court is widely expected to throw out both the verdict and indictment, leaving Lay's record as though he were never charged.
Lay's $5 million bond - backed by his children's homes - also would be canceled at that time. With his conviction vacated, the government also will not be able to seize Lay's property through the criminal proceedings.
As noted before, one end result of all this will be to make the civil claims against Lay harder to prosecute. Stay tuned.
The subject of what happens to the allegedly ill-gotten gains Ken Lay owned now that he's dead was raised yesterday as the news of his death came out. Today, the Chron takes a closer look.
When the criminal case is vacated, so too are the prosecutor's efforts to seize assets from Lay. The government could file motions to seize assets through a civil proceeding, however. That move by the government seems likely, said David Smith, a forfeiture expert with English & Smith in Alexandria, Va., and former deputy chief of the asset forfeiture division of the U.S. Department of Justice."I don't see any way the government can get around this on the criminal side," Smith said.
The two main civil cases, a massive shareholder suit that was granted class-action status on Wednesday and the suit brought by former Enron employees can continue to seek damages, but the estate of Ken Lay will take the place of the man as a defendant.
It's not clear what will happen with the civil suits however.
When former Enron executive Cliff Baxter killed himself in early 2002, attorneys representing the shareholders decided to drop his estate from the case.
Attorneys for the shareholders could not be reached for comment Wednesday
Robin Harrison, an attorney representing the former Enron employees, said he had hoped to begin discussing a possible settlement with Lay and co-defendant Jeff Skilling, Enron's former CEO, later this summer because they were the only two parties left who had not either been dismissed or reached a settlement.
"It's too early to tell what might happen to our efforts to resolve the case," Harrison said.
If any of Lay's assets were frozen by the government the freeze would go away as the case was vacated, Smith said. That means the plaintiffs in the civil cases would have to scramble to get a lock on those assets, which would be particularly hard to do in the civil arena.
Perhaps even more significant for the civil cases, once the case is vacated it's unlikely Lay's prior indictment and conviction could be used as evidence in any ensuing trials, Smith said.
"They would have the burden of proof to prove his guilt all over again," Smith said. "It's a mess for the government and the victims, who were probably already counting the money."
I find that all very strange and a little hard to understand. Ken Lay was indicted and convicted. Yes, I know there's precedent in the common law, yes, I understand the rationale of not visiting his sins on his heirs, and yes, I agree that as long as an appeal is in process his story has not been fully written yet. It's still feels wrong to me that the plaintiffs in the civil matters that are pending against him have been dealt such a blow. I just think they should not be denied the opportunity to use what we all know and saw happened in their litigation.
Be that as it may, that's how it is. I agree with Loren Steffy when he writes that Lay's death does not bring closure to the Enron saga, but that it "opens the wound anew, and once again underscores the human toll extracted by Enron's tragedy." I can feel sympathy for Ken Lay, as Tom does, even if I disagree with the assertion that Lay was unfairly hunted by the federal prosecutors. But at the end of the day, my sympathies really lie with the people who were hurt by Enron's fall. Whether you believe Ken Lay had a direct role in causing that hurt or not, I believe they deserve it more.
Former Enron CEO Ken Lay, who was just convicted on multiple felony counts relating to the fall of his company, died suddenly yesterday at the age of 64.
Convicted Enron Corp. founder Ken Lay suffered a massive coronary Tuesday and died, according to Dr. Steve Wende, of First Methodist Houston. He was 64."He and his wife, Linda, were in Colorado for the week, and his death was totally unexpected. Apparently, his heart simply gave out.," he said in a memo to church staff.
Lay had been awaiting sentencing after being found guilty May 25, 2006, on all six counts that related to Enron fraud, including conspiracy to commit wire fraud, perpetrating wire and bank fraud, and making false and misleading statements to employees at a company meeting, as well as to banks, securities analysts and corporate credit-rating agencies.
His sentencing had been set for Oct. 23.
The Lays owned property in Colorado, the only state outside the Southern District of Texas, which includes Houston, where he was allowed to go before that sentencing.
His attorney during the trial, Mike Ramsey, said today that Lay's wife, Linda, was with him when he died. Ramsey 's own heart problems forced him to miss much of the trial.
I'm sure there will be plenty more on this soon. As you know from reading this site, I've never had a particularly high opinion of Lay, but I offer my sympathies and condolences to his family nonetheless. Rest in peace, Ken Lay.
UPDATE: Here's a fuller obituary. As for the conspiracy theories, well, I suppose this couldn't hurt.
One thing that will happen now is that the government's attempt to seize what they say were Lay's ill-gotten gains from the fall of Enron will likely be dismissed. Link via Tom, who promises more later.
UPDATE: So, does this mean that I'm not one of the "more thoughtful political blogs", or that I'm an exception to their silence? Enquiring minds want to know.
Via David Pogue's technology blog comes Enron Email.
Search through more hundreds of thousands of email messages to and from 176 former Enron executives and employees from the power-trading operations in 2000-2002.For the first time, they are available to the public for free through the easy-to-use interface of the InBoxer Anti-Risk Appliance. Create a free account, and go to work. You can search for words, phrases, senders, recipients, and more. (Lots of stuff in there. We found a copy of a message regarding Tom DeLay and political contributions for use in Texas.)
Or, use the built in tools to find offensive messages, personal messages, and others that would have triggered an alert if Enron had been using the InBoxer Anti-Risk Appliance back in 2000-2002, and can alert companies to similar risks, if they happened today.
This has been around for a few months, but I confess I hadn't heard of it before now. Since Enron is in the news again (twice!), I figure today is as good a day as any to link to it. Thanks to Linkmeister for the tip.
Last year, the Enron federal task force failed to secure any convictions in the first trial of executives of the former Enron Broadband Services. Even though that case was considered stronger than some of the others they had to try, they got a mixture of acquittals and hung verdicts. Last week, the prosecutors did a little better, convicting one out of two defendants on all charges.
Kevin Howard, former Enron Broadband Services chief financial officer, was found guilty on all five counts in the indictment that accused both men of pushing through a bogus transaction in late 2000 strictly to help the division meet earnings goals.Michael Krautz, a leading accountant in the division, was acquitted of all charges, making him only the second ex-Enron employee to be found not guilty by a jury.
[...]
The clean-cut Howard, dressed in a business suit and tie, left the courtroom stonefaced, declining through his attorneys to comment.
His attorneys vowed to appeal.
"We are surprised, we are disappointed - we don't think the evidence supported a guilty verdict," Howard's attorney Jim Lavine said. "We'll look to our next steps to appeal."
Howard faces up to 30 years in federal prison for his conviction on a single count of conspiracy, three counts of wire fraud, and for falsifying books and records.
Krautz was acquitted of the same charges.
Howard, a Houston resident, is free on $500,000 bail pending sentencing scheduled for Sept. 11, at 9:30 a.m., only hours before the sentencing of former Enron executives Jeff Skilling and Ken Lay in a courtroom next door before a different judge.
[...]
Some legal experts believe the acquittal of Krautz may actually take some of the steam out of a possible appeal by Lay and Skilling. Namely, it will make it tougher for them to argue they couldn't get a fair trial in Houston.
"I think it pulls the rug out from under any argument Lay or Skilling make about a change of venue," said Philip Hilder, a former prosecutor who represented government witness Sherron Watkins.
I never doubted that Skilling and Lay would get a fair trial. If this does undercut that argument, fine by me.
The government last year failed to win convictions against Howard, Krautz and three other former executives in the division in a trial that ended with a jumble of acquittals and nondecisions. The judge then separated the case into three trials to simplify it for jurors.Former EBS executives Joe Hirko, Rex Shelby and Scott Yeager are awaiting retrial. Yeager's trial was scheduled for this week but has been put off indefinitely because of an appeal issue; Shelby and Hirko are scheduled to return to the courtroom in September.
[...]
Even with the acquittal of Krautz, some legal observers believe the conviction of Howard is enough to keep up the prosecution's momentum for trying the remaining defendants.
"Had the government bought the bagel on this one, they may have well have walked away from other broadband trials in the wake of the Lay and Skilling success," said Jacob Frenkel, the former senior counsel at the Securities and Exchange Commission's enforcement division, who has followed the cases.
"The fact that they won a conviction against the CFO, not withstanding the acquittal, will help the government maintain its vigor and resolve to prosecute the remaining broadband defendants."
So it's not over yet, though I daresay that pretty much everything else beyond return court dates by Skilling and Lay will be non-headline news most places. Also fine by me.
As usual, for an alternate view of the events, check out Tom Kirkendall.
Just filing this for future reference.
Conversations with panelists who sat in judgment of Lay and fellow former Enron executive Jeff Skilling revealed a spiritual group of Texans who went into the jury room teetering back and forth and came out confident the two prominent Houstonians broke the law.[...]
Once the group chose human resources professional Deborah Smith as forewoman, Delgado, principal at Golfcrest Elementary in southeast Houston, said it tried to get organized.
"We went to the indictment and to the jury instructions. We had to understand what our task ahead was, understand what we had to accomplish," said Delgado, taking a break from checking teachers out of the school for the summer.
Wendy Vaughan, a Katy roofing supplier and fitness company owner, said the group began plowing "diligently through every single count."
"We were really just ironing out places where there may be reasonable doubt," said Vaughan, 38.
[...]
The prospect of sending another human being to possible lengthy confinement was troubling, some jurors said, but not enough to skew deliberations, said Fernandez, 43.
"With me working in the (court) system, I told them, 'If any of y'all are thinking about punishment, that's not our duty at this time. Our duty at this time is guilt and innocence.' "
Jurors interviewed generally agreed the evidence and testimony of others ultimately overpowered the testimony of Lay and Skilling.
[...]
Multiple jurors named former Enron treasurer Ben Glisan Jr. and former investor relations chief Mark Koenig as the government's most effective weapons.
Glisan, who calmly pinned Enron's woes on misdeeds by Lay and Skilling, particularly impressed Delgado.
"He was the only witness who, when he was testifying, looked directly at Mr. Skilling and Mr. Lay," Delgado said. "He never took his eyes off of them."
Meanwhile, former chief financial officer Andrew Fastow's past behavior repulsed a few in the jury box.
"When you get your children involved in a scandal," Delgado said, clearly annoyed as he recalled how Fastow funneled money through his family and allowed his wife to serve a yearlong federal sentence on a tax charge without intervening. "We knew he wasn't credible one way or the other."
Lawyers on both sides scored high marks, with Skilling's defense team led by Daniel Petrocelli drawing raves for his style, organization and approach.
"I think Mr. Petrocelli comes off as very charming. I was very impressed with his presentation," said Vaughan, who added that Lay defense team leader Mike Ramsey's absence because of surgery didn't seem to have an adverse effect.
Fernandez said prosecutors did an "excellent" job.
"I was very impressed by (Enron Task Force leader Sean) Berkowitz, and I was impressed by John Hueston," she said.
Personally, I get the impression of a group of people who did their best to evaluate the evidence and deliver honest verdicts. Which, frankly, is what I expected from the beginning. I have no opinion about many of the issues that will be raised on appeal, but the question of whether a fair trial was possible before Houston jurors or not is one that I believe should be immediately swatted down.
So it's been a day now since Jeff Skilling and Kenny Boy Lay were convicted on multiple felony counts related to Enron's collapse and death. As you might expect, the Chron has wall-to-wall coverage of the verdict and reaction to it. I'll leave that to you to read; there's not much I can reasonably add to all that, but I will note that it's all pretty much favorable to the prosecution, as you might expect after they nearly ran the table. For an opposing view, I recommend Tom Kirkendall. I can't say I generally agree with Tom here, but he's been the best at presenting an alternative perspective on the matter. Read what he says and come to your own conclusion.
There is one thing I do want to address, and that's this.
If you want a date to mark the beginning of the end of the Bush Era in American life, you may as well make it this one: May 25, 2006. The Enron jury in Houston didn’t just put the wood to Ken Lay and Jeff Skilling. The jurors took a chain saw to the moral claims of the Texas-based corporate culture that had helped fuel the rise to power of President George W. Bush.
Hogwash. Enron ceased being about Bush in any non-meaningless sense in 2002. That's when this was supposed to have been a political liability for him. Lord knows I certainly fell for the idea that it would be. (Consider that another item in the Why I Should Never Make Predictions file.) I seem to recall another issue coming to the forefront in 2002 that pushed Enron off the stage and will much more clearly define the "Bush Era" for years to come. Right or wrong, most people decided a long time ago that Enron and Bush were at best tangentially related.
This trial and this verdict were about the misdeeds of two CEOs. I may not have been following the testimony obsessively, but I read enough to know that their politics and former connections weren't even a subtext. It was about what they did and what they should have done. A nice parallel to the Bush Administration, sure, but that's about it. TAPPED is right - this is gratuitous piling on to Bush by a previously deferential media now that he's down and isn't about to get back up. Not that I object to that per se, but let's just say that some of this attitude might have been nice a little earlier than now.
Anyway. Houstonist has even more reading, if all those Chron links weren't enough. And of course, we can't begin to move on from this until we know what the cats think about the verdicts.
I know I haven't been following the trials of former Enron honchos Jeff Skilling and Kenny Boy Lay, but apparently the jury is back and we're about to get some verdicts. So consider this a placeholder for when they're in, with more to come later.
Hat tip: Progressive Texan.
UPDATE: Guilty, guilty, guilty! While I was waiting for the Chron to reload (it eventually crashed - too much traffic, I guess), Tiffany just called to say she heard it on the radio. Skilling went down on 19 counts, with acquittals on 9 others, while Kenny Boy was convicted on all ten counts six counts from one trial and three more (by Judge Lake) in the other. More when the Chron powers back up.
UPDATE: Finally, here's the Chron story.
The jury heard 16 weeks of testimony and arguments and made its announcement early on its sixth day of deliberations. The eight-woman, four-man panel found Lay guilty of all six counts. They convicted Skilling on 19 of the 28 counts against him.U.S. District Judge Sim Lake set a sentencing date of Sept. 11.
Lake found Lay guilty of three counts in his personal banking fraud trial.
More from Loren Steffy and Trial Watch, which says Lay was convicted by Judge Lake on four counts of bank fraud, not three. Whatever, it's guilty all around.
UPDATE: Dwight links to a bunch of bloggers' reactions to the verdicts. (If you link to me linking to Dwight linking to these other bloggers, we'll be one step closer to Meta Blog Nirvana.) Also, Loren Steffy has two posts where jurors give their reasons for convicting. Trial Watch reports on Kenny Boy surrendering his passport and posting bond.
So the prosecution rested its case last week in the Ken Lay/Jeff Skilling trial, and after a short break the defense has gotten started. I know, I know, I've totally ignored this for some time now. I can't really say why I've not found it as interesting as I'd thought I would. I just haven't. What can I say?
Some former Enron employees were less than overwhelmed by the prosecution's case. Loren Steffy says there could have been more dirt piled on Lay and Skilling had the prosecution gotten some different rulings from Judge Lake. Tom has a good summary of the trial so far, and he expects the defense to start blowing some big holes in the evidence that was presented.
That's all I got. We'll see if I find this stage more compelling.
(Note: I had this and the next post drafted yesterday evening before the DeLay mess hit the fan. I figure I may as well publish them now before they get too moldy. Besides, the world does go on and we all need a little something besides DeLay-a-rama to keep us going with it.)
Sherron Watkins, best known for her whistleblowing memo just before Enron imploded, testified today in the trial of Kenny Boy Lay and Jeff Skilling.
A very talkative Watkins took the jurors step by step through her discovery of what she considered to be fraud at Enron, her meeting with Lay and her subsequent feeling she became a pariah at the company where she felt her job was in peril.Watkins told jurors how she trusted Lay before she went to him with her memo in August 2001. But she said he later lied to analysts in a conference call in October 2001 about the Raptors hedging structures established through Fastow's LJM side company.
"It was a blatant lie . . . to say these could have been done with anyone else," Watkins said of the many overvalued Enron assets hedged in Fastow's financial vehicles. "You don't make statements like that, they're misleading."
She said Lay also misled employees that same day.
[...]
In June 2001, Watkins went to work for then-Chief Financial Officer Andrew Fastow and was assigned to examine assets the company might sell. What she found, she said, was that Fastow's LJM had already gotten its money back with profit, leaving the failing Raptors owing Enron $500 million it didn't have to pay out.
"Accounting just doesn't get that creative," she said.
Her concern was mounting, she said, when in mid-August Jeff Skilling resigned as the company's CEO.
"It told me he was a smart man ... this stuff I stumbled across, he knows it. He knows it's bad and he's getting out," Watkins said.
Testifying in the conspiracy and fraud trial of Skilling and Lay, Watkins' testimony reflected most directly on Lay.
On questioning by prosecutor John Hueston, she said she trusted Lay and thought he didn't know about the Raptors, so she decided to warn him. She wrote her famous memo Aug. 15, 2001, leaving it anonymous at first, then met with Lay Aug. 22.
Her memo stated: "It sure looks to the layman on the street that we are hiding losses in a related company."
[...]
She had about 30 minutes with Lay in which the vice president asked the then-CEO and chairman of the company to "come clean" about Fastow's side deals for the company's sake.
"I did most of the talking, He seemed kind of surprised these things could be problems," she said.
Watkins said Lay winced when he read that an employee said: "'I wish we would get caught, we are such a crooked company.'"
She said she thought Lay took her seriously. He asked if she'd told anyone outside the company about her concerns and she said no.
Watkins said she asked Lay to investigate without using Houston law firm Vinson & Elkins and Enron auditors Arthur Andersen, because those professionals had already signed off on questionable deals. But Lay did use Vinson & Elkins for the investigation.
Here's an earlier AP wire report. That story gave me the impression that while Watkins' testimony established that Lay knew, at least at some point in time, that things were not right at Enron, it also allowed for the possibility that it was the first Lay had heard of any of it, and that it was well after the real lawbreaking (done by Andy Fastow) had already occurred.
Lay's lawyer Chip Lewis focused on Watkins' sales of Enron stock during this tumultuous period. She sold around $47,000 worth of stock and acknowledged she had insider information that public did not know.Watkins said she wishes she had not sold the stock but did not admit she had committed insider trading.
"You didn't commit any crimes at Enron, did you?" Lewis asked.
"I'm not an expert at that," she replied.
Lewis asked her why prosecutors never charged her with insider trading.
"Maybe because I wasn't the leader of the company," Watkins said. "I wasn't making statements to the public ... contrary to my knowledge."
Lewis also asked whether she knew that when Lay sold millions of dollars worth of stock back to the company in the fall of 2001, whether she knew it wasn't "voluntary" and he had to to make margin calls.
"(If) you've got Aspen homes to sell, you've got other ways to raise cash," she said in response to the idea Lay was forced to sell his stock back to Enron.
Loren Steffy thinks the defense scored a "haymaker" on that part of the cross. I don't recall that bit of information from previous accounts; if it came as a surprise to the jury, it may well have had a big effect. At least she's not testifying under some kind of duress from the federal Task Force, which ought to make Tom happy. On a side note, Tom asks a good question: Will the Feds call Rick Causey to bolster Andy Fastow's testimony, or will they hope it stands on its own? I have to agree that the latter seems like a risky choice. The Legal Commentary blog thinks some corroboration of Fastow is needed, but not a "mountain" of it.
The TrialWatch blog has quite a bit on Watkins' testimony - start here and work your way back. There will now be a four day break, thanks to a combination of some scheduling problems for witnesses and the desire by the judge to give the jurors a little R&R.
UPDATE: Tom was not impressed with Sherron Watkins.
My stars, are we already at the Andy Fastow testimony part of the Lay/Skilling trial? I knew this was progressing faster than I'd thought, and I admit I've not been paying much attention to it lately (thankfully, Houstonist, Loren Steffy, and Tom Kirkendall have been), but boy did that sneak up on me. Serves me right for going out of town for a week.
I need to do a little catchup reading here, so give me a chance to get back up to snuff and I'll see if there's anything I have to add to all this. You should be sure to read Tom's post about the Lea Fastow plea bargain and how it may muck up the works for the feds, and Loren's post about the overlooked Enron Board of Directors and its role in letting Andy Fastow steal from the company.
By the way, the Andrea Yates retrial may be starting up as the Lay/Skilling trial winds down. If there's any visiting media left in town, they may want to consider extending their hotel reservations.
Ah, the memories that this must bring back.
Watching a video shot five years ago this month, defendants Ken Lay and Jeff Skilling looked up on a big screen in court Wednesday and saw themselves predict that by now Enron would be "the world's leading company."In the celebratory video, Skilling and Lay stood onstage at a February 2001 employees meeting. Lay then pulled a cord to reveal a sign with their new vision for Enron.
"We want to move from being 'the world's leading energy company' to be 'the world's leading company,' " then-CEO Skilling said to applause from employees. He noted he would change his vanity license plate from "WLEC" to "WLC."
"Five years from now I think there's a good chance we could be the leading company in the world."
Funny how things turn out, isn't it? I'm pretty sure a clip from this video is in "Enron: The Smartest Guys In The Room". It's hard to consider such a thing without thinking of the old newsreels from the 50s and 60s that projected a now-hilarious vision of what the world would be like in the future.
Not a whole lot else of interest going on in the trial. Skilling defense attorney Dan Petrocelli got prosecution witness Mark Koenig to admit to some errors in his testimony. Loren Steffy thinks they were glancing blows and not direct hits on him, while Tom thinks it's the prosecution that swung and missed. How much more fun do you think the jury room would be if these two guys were to be in it?
Next up, former Enron Broadband CEO Ken Rice, who didn't exactly cover himself in glory during that trial. That cross-examination ought to wake people up a bit. And finally, Tory has a Wall Street Journal story about "Houston's still-conflicted feelings about Enron and its former executives" that's thankfully short on the angst. Whether or not this city has "moved on" regarding Enron's collapse and its supposed effect on our psyche, at least the media seems to have mostly gotten bored with thumbsucker stories about it. For that, I'm grateful.
The defense got its first crack at a prosecution witness yesterday, and it went about as you might expect.
Daniel Petrocelli, lead defense lawyer for former Enron CEO Jeff Skilling, repeatedly asked [Mark] Koenig about his plea agreement with the government and if he ever confronted anyone else at the company about lies he earlier testified were told during analyst meetings and conference calls."You never said, 'Mr. Skilling, why are you spearheading a criminal conspiracy,' did you?" Petrocelli asked.
"No," Koenig replied.
"And you never saw a single e-mail or memo that said Mr. Skilling broke the law? Or Mr. Lay?" Petrocelli asked, referring to former Enron chairman Ken Lay, who is also on trial.
Koenig said he never read such a document and didn't know if one existed.
"You're still in a mode of trying to protect yourself, aren't you?" Petrocelli asked.
"I don't feel in the last three days I've protected myself," Koenig said, noting that he is still subject to shareholder lawsuits and will probably lose the $5 million in assets he still owns. He forfeited $1.5 million to the government last year.
Admit it: You could imagine this exact dialogue on almost any episode of Law & Order. The names and crimes may change, but the dynamic - "Why should we believe you when you've already told us you're a crook and you took a deal to save your sorry hide?" - is the same.
I think in the end, all the mind-numbing technical details aside, that's what this case will come down to. Who will the jurors believe, Koenig, Rice, Causey, and Fastow, or Skilling and Lay? Fastow is a huge wild card here. He has the potential to say the most damaging things, but he's also clearly the least honest person involved. As I said before, I think that's where this trial will get interesting. If the jurors can stay awake that long, we may be able to get a feel for how they're leaning after Fastow finishes.
That appears to be the view of Samuel Buell, a former Task Force member who's now joining in the Legal Commentary blog, and it's noted in this story about media indifference as well. Even we bloggers are apparently falling down on the job:
The much-ballyhooed blogosphere has barely weighed in on the opening of the trial.The Truth Laid Bear, a Web log monitor, confirms that Enron cannot qualify as anything close to a hot topic, notwithstanding periodic mention by local blogs such as blogHouston, Houston's Clear Thinkers and Slampo's Place, the latter of which offered readers what may prove to be an appropriate invocation to a trial struggling to make its mark in the competitive world of current events:
"Friends, as we gather here today to pass judgment on these two once-glib sons of the Great Midwest, let us resolve to never, ever forget the bitter lesson of Enron. And the lesson of Enron is, of course ... is ... um wait, it'll come to us ... the lesson was ... hold on ... lessee ... lesson ... Enron ... uh ... ."
I guess my mentions weren't periodic enough. Well, I knew the risks when I went out of town this past weekend.
And finally, Tom gives a little context to Jeff Skilling's famous "asshole" comment. As always, it's good stuff.
We're on day two of the prosecution's case, and if we've learned anything from yesterday's testimony by Mark Koenig, it's that this trial is going to be wicked long. Basically, the Princess Bride/Good Parts Version of the story will begin when Fast Andy Fastow takes his nothing-but-the-truth vow. Tom Kirkendall explains why this may be a problem for the Feds.
If you read one thing related to the Enron trial today, I recommend it be this blog post by defense attorney/color commentator Kent Schaffer about those who pled out and will testify for the state. I don't doubt for a minute that many bad things happened at Enron. I think the defense "run on the bank" strategy is hooey; plenty of companies overstate earnings or understate losses and get their stock hammered as a result but stay in business. I don't think anyone questions Fastow's criminality, and whether or not Skilling or Lay knew about it they damn well should have. They, their cronies, and if there's any justice in this world the entire Board of Directors should spend the rest of their lives fending off civil judgments because of their venality, greed, and incompetence.
But that doesn't mean that Skilling and Lay broke the law. Maybe that's an indictment of the law, but it concerns me when I see progressives leading a pitchfork and torch brigade to a courthouse. I'm sure I've been guilty of this myself. It's easy to get caught up in that in a case like this. Still, Skilling and Lay may be reprehensible people, but that doesn't lower the government's burden of proof and it doesn't mean the government might not have strongarmed a few confessions from risk-averse or financially strapped Enronites. As with all defendants, I want these guys to get a fair, thorough, and by-the-book trial so that when the verdict is read, we can all feel confident in whatever it is. And I want Fastow's testimony to come sooner rather than later. Too bad I can't TiVo this thing and skip forward to it.
Gads. I can tell that it's going to be impossible to keep up with all the Skilling/Lay trial happenings. Opening arguments are already over, and the first prosecution witness is testifying as I blog. Just subscribe to the feeds for the two Enron blogs plus Loren Steffy's Full Disclosure and you'll be in good shape.
Well, okay, you'll also need to follow Tom Kirkendall's analyses. Here's his pregame review, and here's his recap of the opening arguments. The defense team is talented and aggressive, and he thinks they did pretty well yesterday. One place where I think they may have stumbled a bit is captured in this Trail Watch post, from the opening statements by Skilling's lawyer Daniel Petrocelli.
"What is Jeff Skilling's motive?", asked Petrocelli. The indictment said he committed crimes for money and prestige. "In 1999 he had more money than he ever dreamed of having," Petrocelli said. He said he already had plenty of prestige.
For what it's worth, that's an argument that would cut no ice with me. It's called "greed", and even though Attorney Petrocelli also said that Skilling wasn't greedy, the question I'd have for him is if Skilling had all the money and prestige he ever needed, why didn't he quit in 1999? Especialy if he was (as you also claim) "uncomfortable" running Enron? Lou Pai, the former Enron exec whom the "Smartest Guys In the Room" film fingered as the reason why Enron and strippers went hand in hand, retired with his millions (and as I recall, a stripper girlfriend) to Hawaii a couple of years before the implosion. That's what someone who has "more money than he ever dreamed of having" does. Why didn't Skilling take his fortune and disappear into the sunset? One might say that as long as he was doing a CEO's job and getting a CEO's lavish pay, he still had room in his heart for more money and prestige.
Just my opinion. I'll close here with Dwight's behind-the-scenes look at the logistics of blogging a big trial. And Dwight, in the event that Judge Lake does shut down the courthouse's WiFi network, there are alternate technologies available to your blogging crew.
Jury selection for the trials of Kenny Boy Lay and Jeff Skilling is underway, and if Judge Sim Lake has his way, it'll be all over today as well. Here's some background on the process.
The Chron is gearing up its blog machinery for the event. There's an Enron Trial Watch blog, which is mostly being written by reporter Mary Flood and which seems to be staging ground for some stuff that will wind up in news stories. There's a lawyer-written group blog called Enron Legal Commentary that appears to be serving the Tim McCarver role to the Trial Watch's Joe Buck. And of course Loren Steffy is there, too.
I have no idea how this trial will resolve itself. After the prosecution's fumble in the Enron Broadband case, I'd have to make the defense a slight favorite, their whines about biased jurors notwithstanding. (They can renew their change-of-venue motion after jury selection is complete, as my dad the former judge reminded me this weekend.) One thing I do feel confident about is that no matter what does happen, Kenny Boy will not reclaim his reputation. How could he? Even if the defense proves that everything he did was legal, in the end his company wound up in a ditch, and it happened on his watch. At the very least, no one is ever going to think of him as a dynamic CEO any more. And if he wants to be thought of as a great philanthropist/humanitarian again, I say actions will speak louder than words. Let him donate a big chunk of whatever wealth he's got left to charity, and find himself a project that he can dedicate himself and his time to, like Jimmy Carter and Habitat for Humanity. That's how you fix a broken reputation: Penance.
The Skilling/Lay trial will stay right here in Houston.
As expected, U.S. District Judge Sim Lake ordered late Monday that the request from ex-Enron chairman Ken Lay and ex-CEO Jeff Skilling to move the case be denied.The pair face charges of conspiracy and fraud.
Lake said in this week's order that in 2005 he set out the law regarding moving trials and why he thought there were not sufficient grounds to undergo the cost of moving this case when so many people around the country also knew a lot about Enron.
[...]
Lake sent out 400 questionnaires to potential jurors asking what they knew about the case, how they felt about Enron and the defendants and what contact they've had with legal and financial matters.
Upon receiving responses from the vast majority of the 400, the judge then dropped some potential jurors for hardship. Then the lawyers agreed to drop another 109 people who appeared too biased. The lawyers also agreed to drop additional possible jurors for more hardship problems -- like being in college or taking care of a child or sick relative.
About 150 people were left in the pool after all the cutting and they been called to appear in court Monday.
The defendants have acknowledged that about 70 of those have said nothing that could even suggest any bias or feelings about Enron. But the defendants worry there could be hidden bias.
I never doubted this trial could be held here. Let's get it on already.
From the Sunday Chron: Mixed feelings from former Enron employees regarding the upcoming trials of Jeff Skilling and Kenny Boy Lay.
Some former employees harbor more sympathy for Lay, who was widely regarded as a fatherly figure in Enron's halcyon days, than for Skilling, the whip-smart and hard-charging Harvard MBA.Tracey Michel spent six years in Enron's information-technology department and has always seen Lay as undeserving of the charges the federal government brought against him, though she adds that "might be naive."
"But if they do find them guilty, I hope they serve time," she said of both men.
Michel, though, keeps in touch with a number of former colleagues and said many remain bitter.
"The majority feeling is they're guilty and they're going to get them, especially with Rick Causey now folding," she said of Enron's former accounting chief who recently reached a plea deal. "Plus, just the plea bargain with (former chief financial officer) Andy Fastow, they must have some information — definitely something for Skilling, if not Ken Lay."
Skilling still does have fans, although some don't feel they can be public about it.
One former Enron employee questions what standard is being used to call Skilling "one of the bad guys."
"Where's the $6,000 shower curtain? Where's the $15,000 umbrella stand? This wasn't Tyco. These guys didn't enrich themselves in that way," the ex-worker said of Lay and Skilling.
Fastow, he said, was enriching himself on the side, "but he gets a deal."
Rod Jordan, who founded the Severed Enron Employee Coalition to support employees and retirees in efforts to recover money they lost, said he talks to former workers often. Their feelings on the upcoming trial vary.
"There's a few that I've talked to before that are still very interested, and there's some that don't want to hear about it," Jordan said. "They're more interested in, 'Are we going to get any money out of the class actions?' "
Meanwhile Tom highlights what the Skilling/Lay defense will look like.
Four years of investigations and intense news coverage have made Enron a synonym for fraud and sleaze. But when the trial of former top executives Jeffrey Skilling and Kenneth Lay begins Jan. 30, defense lawyers will make a bold argument: Everything their company did was legal.
That ought to at least keep things interesting, unlike the techno-snoozefest that was the Broadband trial. We'll see how it plays out.
The movie Enron: The Smartest Guys In The Room, based on the book by the same name, is now out on DVD for your home viewing enjoyment. Good timing for them, what with the Lay/Skilling trial fixing to get underway and all.
A darkly comic dig into one of America's biggest corporate scandals, the film earned $4 million in theaters.Smartest Guys was also a huge hit with critics, scoring 97 percent favorable reviews on review tracking site rottentomatoes.com. It's also on the short list of documentaries vying for an Academy Award nomination Jan. 31.
[Director Alex] Gibney has moved on to other projects, including a documentary on gonzo journalist Hunter S. Thompson. But he also helped hone Smartest Guys' DVD, whose extras include his commentary track, a making-of featurette, deleted scenes, a look at Enron's in-house skits and a "Where Are They Now?" update on major players.
He and some colleagues even have "kind of an Enron self-help group. We get together and talk about how we can't get this story out of our heads. It's the story that will not die."
I've already got a screener DVD of the movie (my review is here, if you're interested), but the "Where Are They Now?" update might be enough to entice me to get the real thing.
I like Gibney's take on the topic of the jury pool, which was in the news again today.
"I've always thought you're supposed to be tried by a jury of your peers," Gibney said. "Ken Lay has a Ph.D in economics, so you'd presume his peers would be very intelligent people, and why can't they find them in Houston as well as anywhere?"
As Lair notes, there are other options as well.
Anyway. As noted in my review, I enjoyed the movie. It's worth putting on your Netflix queue if you haven't seen it yet.
With jury selection in the Lay/Skilling trial imminent, the Chron asks will they get the presumption of innocence?
"As a practical matter, we all do have opinions of whether someone famous has done something wrong or not," University of Houston Law Center professor Robert Schuwerk said. "But presumption of innocence has nothing to do with what goes on outside the courtroom."Lawyers for defendants Lay and Skilling are deeply concerned that come Jan. 30 when 100 potential jurors are seated in a federal courtroom, the presumption of innocence might not be there with them. Several outside observers also share this worry.
[...]
U.S. District Judge Sim Lake and Enron Task Force prosecutors are confident an unbiased jury can be sworn in in Houston. The judge says it can be done in one day.
Schuwerk is one of those who believes a fair jury can be found in this case or just about any case that comes through our judicial system.
"I don't think the presumption of innocence is dead or that it will be hard to find people who will indulge the defendants in this case," Schuwerk said.
There is a big difference between the snap decisions people make day to day and what jurors do when they take a solemn vow to consider only the evidence in court, he said.
''I think people who end up sitting on juries can do it. Lots can't; that's why they have (jury selection)," Schuwerk said.
But Steve Sheppard, a University of Arkansas School of Law professor who has written on the presumption of innocence, thinks pre-trial media coverage makes finding open-minded jurors increasingly difficult.
''One of the most fundamental problems is that though the law demands the presumption of innocence, the culture generally presumes" otherwise, Sheppard said.
''A lot of people are working hard to create presuppositions; the jurors may not even be aware of it," he said. ''All the media attention in the Enron case makes this one harder still."
For what it's worth: I think Lay and Skilling bear a lot of responsibility for the collapse of Enron. Not all of it - certainly Andy Fastow had a big role to play, and so did the Board of Directors for their clearly shoddy oversight. Others had a hand as well. The question is whether or not their actions or lack of same is a violation of criminal laws, and whether or not it can be proven sufficiently. That, I have no real idea about, and can't know until I see all the evidence. I think I could judge them fairly, and would say so in voir dire if I'd been called to be on the panel. I think enough people will hold similar views to get a jury empanelled.
This won't be an easy case to prove, and the Idiot Defense will be compelling. Whatever happens, don't be too surprised. Link via Tom.
And the deal for Rick Causey is five to seven years in the clink in return for "cooperation" against Skilling and Kenny Boy.
Causey pleaded guilty to securities fraud during a re-arraignment hearing before Judge Sim Lake today. The plea deal calls for a sentence of seven years in prison that could be reduced to five years if he cooperates "fully" with the government. He also agreed to forfeit $1.25 million.Such cooperation includes debriefing prosecutors on events that led to the company's collapse.
The charge Causey pleaded guilty to normally carries a sentence of up to 10 years. Causey's attorney said he was also working on a settlement agreement with the Securities and Exchange Commission. April 21 was set as a tentative sentencing date for Causey.
[...]
Lay and Skilling weren't in the courtroom for the proceedings but their attorneys were present. Judge Lake agreed to delay the start of the Skilling-Lay trial; jury selection will begin at 9 a.m. on Jan. 30.
Daniel Petrocelli, an attorney for Skilling, said today that Causey pleaded guilty "for one reason and and one reason only," to protect his family.
That's all the reaction so far from the Skilling and Lay defense teams. I'm sure there will be more soon. For now, this is a big win for the prosecution. I'll wait to see what they do with it before I have any further thoughts.
At 2 PM today, former Enron chief accountant Rick Causey will take a plea rather than go to trial.
It wasn't known what the exact terms will be but the deal includes cooperating with the government — which may include testifying in trial — in exchange for the chance at a lesser jail sentence.Causey was scheduled to go to trial Jan. 17 along with former Chairman Ken Lay and former CEO Jeff Skilling. All three men previously have pleaded not guilty to charges ranging from fraud to conspiracy related to schemes that led to the company's 2001 bankruptcy.
The former chief accounting officer lacked the status and salaries of his two co-defendants, but a plea deal will likely make him the government's new star witness.
Like former Chief Financial Officer Andrew Fastow, who agreed to cooperate with the government in 2004, he has intimate knowledge of the company, particularly in its last days before it filed for bankruptcy.
Causey was responsible for the company's public accounting statements, reported directly to Skilling for years and took part in conference calls with Lay in fall 2001 as Enron fell from being one of the world's largest companies to one of the country's largest bankruptcies.
Unlike Fastow, however, Causey doesn't have the taint of having tried to personally enrich himself through side deals, as Fastow admitted in his plea agreement.
"To have another high ranking officer who knows the numbers but who hasn't been demonized the same way Fastow has serves the government's case very well," said Robert Mintz, a New Jersey-based legal expert who follows the case. "From the standpoint of wanting to go into the trial from a position of strength, this is not what Skilling and Lay were hoping for on the eve of trial."
All of this certainly looks good for the Enron Task Force, and as Tom notes in his overview of Causey's situation, he had more to worry about than Skilling or Kenny Boy due to his closer connections to Fastow and his side agreements. It's a little early to celebrate, though, if you're on the prosecution team. Remember the Enron Broadband trial, and how that was supposed to be an easy win for them? This case is certainly no less complex than that one, and there's the specter of Causey pleading out because he had no choice financially, thus making him less effective on the stand than one might hope:
David Berg, a Houston defense attorney who has followed the case, said the Lay and Skilling teams may try and compare Causey to David Duncan, the former Arthur Andersen executive who pleaded guilty in connection to the 2002 document shredding case. The U.S. Supreme Court overturned a guilty verdict against the accounting firm and Duncan's guilty plea was withdrawn."Duncan pled guilty, but when he got on the stand it was pretty clear he was innocent," Berg said, referring to testimony Duncan gave under cross examination. "I think the main hope of the defense will be to make the case that Causey cratered under pressure, that he just pled so he could avoid a long jail sentence."
Tom notes the same thing in this WaPo piece:
For friends of Causey, including his next-door neighbor Steve Huey, word of the advanced plea negotiations is bittersweet. They say Causey is devoted to his three children, the youngest of whom is in eighth grade, and is a devout Catholic who helped raise funds for a new church in the Woodlands, an upscale suburb of Houston."I don't think Rick has ever believed he did anything wrong," said Huey, who shared a Christmas Eve dinner with Causey and his wife, Elizabeth. "I think that Rick's concern is over the family and what the eventual outcome will be for the family. As you get closer to trial, you start to weigh the options and weigh the odds and the resources the federal government has."
With all due respect, the jails are full of people who don't believe they did anything wrong. That by itself means nothing. I certainly hope that what we've got here is the feds using one guilty person to put the screws to two others, but we'll have a better idea of that soon. What we probably won't have soon is the start of this trial, as I'm sure the defense will renew motions to move the proceedings elsewhere. Stay tuned.
Hope everyone who celebrated Christmas yesterday had a good one. The one piece of news from the day was this story about former Enron chief accounting officer Rick Causey talking to the feds about possibly taking a plea.
Causey has been in plea talks in the past, so it would not be a surprise to anyone should he reach an agreement with the government, said Kent Schaffer, a Houston defense attorney who has followed the case. A plea deal is unlikely to postpone the trial."Typically a defendant pleading out won't be grounds for other defendants to delay the trial, especially in a case like this where it was no secret negotiations would go on intermittently," Schaffer said.
[...]
"I've talked to Rick Causey myself, and I don't believe he willfully did anything wrong," said Mike Ramsey, lead attorney for Lay. "I don't believe he would agree to plead guilty to a crime when he didn't commit one."
Skilling attorney Daniel Petrocelli also cast doubt on a Causey plea.
"Over the past year, I've spent a lot of time with Rick Causey. He is an honest man and consummate professional, who worked his heart out for Enron," Petrocelli said. "He never — let me repeat — never committed any fraud or criminal conduct of any kind. He knows it, and the government knows it."
Causey's name is first on the indictment at the center of next month's trial but last on the minds of most people. As chief accounting officer he lacked the status — and the salary — of former CEO Skilling or former Chairman Lay.
But he is an essential link between the government's likely star witness, former chief financial officer Andrew Fastow, and the other two executives.
Causey and Fastow worked closely together, dividing between them the oversight of key financial and accounting operations at the energy giant.
As he has done all along, Tom Kirkendall provides a counterweight to stories about the Enron Task Force and its prosecutions. His thoughts on the possible Causey plea and how a Wall Street Journal reporter who is covering this case may be a little too vested in a particular outcome are here and here.
Kenny Boy Lay gives full embrace to the Idiot Defense in a speech to the Houston Forum.
Just a month before his Jan. 17 federal trial on seven conspiracy and fraud charges, the former Enron chairman drew polite applause with his luncheon address titled "Guilty, until proven innocent," in part a call to arms to Enron employees to defend the honor of the company and Lay himself.Lay quoted Winston Churchill, saying, "Truth is the great rock," and in his case, prosecutors have submerged it in a "wave of terror."
Lay promised he'll testify and asked other Enron employees to join him in creating a "wave of truth."
"Enron employees really have only two choices. Either we stand up now - and prove that Enron was a real company, a substantial company, an honest company, a company that had a vision and values ... or we will leave this horrific legacy shaped by others," he said.
[...]
Lay's talk to the Galleria-area crowd foreshadowed the defense he and his co-defendants will put forth, attacking both Andrew Fastow, Enron's former chief financial officer, and the Enron Task Force.
The former chairman of Enron told the sold-out crowd of about 500 at the Houston Forum that Enron was a great company and would still be great if not for the illegal conduct of a few - namely Fastow and his protege, Michael Kopper, who Lay said committed "despicable and criminal deeds."
"We did trust Andy Fastow, and sadly, tragically, that trust turned out to be fatally misplaced," he said. Lay said it was the misdeeds of Fastow and cohorts, hidden from Lay, that led to the company's 2001 bankruptcy and the dissolved dreams of thousands of employees.
Lay said most of what has been reported about Enron has been false or distorted, and attributed its collapse to the financial community and Enron's trading partners losing confidence in the company. He clearly signaled they will use the "run on the bank" argument Skilling made to Congress.
There's more, including attacks against the prosecution, all of which you can read here. I call this the Idiot Defense because his basic thesis is going to be that he had No Idea Whatsoever that Fastow and Kopper were stealing everyone blind. You could've paid me an awful lot less to be that incompetent as a CEO.
In both blog and column, the Chron's Loren Steffy is unimpressed. Tom Kirkendall, who's been a consistent critic of the Enron Task Force, thinks it's not so simple:
Mr. Steffy's skeptical reaction to Mr. Lay's proclamation of innocence is quite common, but misses the difference between being held responsible in civil context as opposed to a criminal one. Few people -- probably not even Mr. Lay -- would contend that Mr. Lay should not share at least some responsibilty in a civil lawsuit for Enron's demise. However, absent the state making a clear presentation of an alleged criminal act, the responsibility for Enron's descent into insolvency should be sorted out among all responsible parties in a civil lawsuit, not a criminal case against a few of the more prominent responsible parties. In that regard, the Enron Task Force's indictment (download pdf here) and current statement of its criminal case against Mr. Lay and his co-defendants (download pdf here) reveals that the Task Force's presentation of criminal charges against Mr. Lay is anything but clear. Indeed, a lack of coherence in the presentation of criminal charges against Enron-related defendants has been a recurring problem for the Enron Task Force.
In theory, I think Tom is right, but in practice, I'm not at all convinced that the civil justice system will mete out sufficient retribution for those who caused so many people to lose so much. Has anyone sued the Enron Board of Directors, who (as The Smartest Guys In The Room made clear) knew about and approved of many of Fastow's shady deals? Even if all the right people get served, I'm not convinced they'll be made to pay. It's too easy to shelter assets from judgment - OJ Simpson still has a mansion in Florida, after all. I share some of Tom's concerns about prosecutorial overreach and criminalizing normal behaviors, but I'm left wondering what else there is to do.
Anyway. I'm more than a little fascinated by Lay's call to arms of ex-Enron employees. If the comments in Steffy's blog post are any indicator, that won't go over very well. It's an interesting move, and I suppose it won't cost Lay anything if it flops, but I still think he's a little deluded to make it.
Missed this earlier in the week, but as always Tom was on top of it: The defense team for Jeff Skilling, Rick Causey, and Kenny Boy Lay have filed a motion to dismiss all charges on grounds of prosecutorial intimidation of defense witnesses.
Actions of the Enron Task Force have deprived Lay, Skilling and Causey "of their constitutional rights both to secure and confront witnesses, thereby stripping defendants of their ability fully and fairly to prepare for and defend themselves at trial. Put simply, witnesses are afraid to talk to us," the request stated.A redacted version of the request made of U.S. District Judge Sim Lake was made public today, though the lawyers filed the originally sealed motion last week. Some of the key evidence cited in this motion has not been made public.
The motion refers to an e-mail from a task force member telling a lawyer for a cooperating government witness to stop talking to Skilling's lawyer or "get rid" of him. The judge has viewed that e-mail and has so far barred the lawyers from revealing its full content.
[...]
According to the motion, those attorney affidavits state the lawyers or their clients were told by the government that Skilling's and Lay's lawyers were "bad news," and their clients would "pay" or the government would "go after" them if they cooperated with the defendants.
One lawyer allegedly says the Enron Task Force made a "veiled threat" to an attorney about it being "dangerous" for his client to help Enron defendants. Prosecutorial misconduct has been a common complaint from the defense lawyers in this case.
Prosecutors are not allowed to comment on the case while it's ongoing.
Lake said last week that he thinks there is a problem that many witnesses in the case at least perceive a threat from the government's Enron Task Force. But the judge said he had "not made any finding that the government has engaged in any illegal activity."
Lake last week asked the lawyers to agree on a way he could counsel witnesses that they are free to aid the defendants should they wish to do so.
He said he would be willing to have them come to court and hear it from the judge himself.
Towards that end, Judge Lake sent a letter to 38 defense witnesses telling them they have nothing to fear and inviting them to come talk to him. This solution was suggested by the Enron Task Force, so it's not quite what the defense had in mind.
Tom has provided a copy of the motion to dismiss for anyone who might like to download and read it. There's more in his post and in his followup on the Lake Letters, and also in this WaPo story. Finally, Stace weighs in as well.
I'm still puzzling through this story from yesterday.
It's not the Super Bowl or the All-Star Game.But the big Enron trial coming up i