January 26, 2007
The Practice of "Approvement"
Posted by Christine Hurt

While on my research leave this semester (gloat, gloat), I have run into some really interesting papers.  One is Conspiracy Theory by Neal Kumar Katyal, 112 Yale Law Journal 1307 (2003).  In this provocative paper that thoroughly dissects the whys, hows, and what thens of the charge of conspiracy, Professor Katyal gives a history of practice of conspirators testifying against each other.  This history includes a practice known as approvement:

Medieval law as early as 1130 recognized the practice of approvement, whereby an indicted person could plead guilty but offer to cooperate with the prosecution. The accuser had to implicate accomplices before the jury deliberation began, and the accuser was not simply to reveal "the whole truth" of the particular crime, but also all felonies to which the person had knowledge. If the accomplices were convicted, he would be pardoned, but if his accomplices were not, then the accuser was sentenced to death.

Wow. Two thoughts come to mind. First, this "downside" may encourage truth-telling, and not just testifying as an escape from punishment or out of spite or revenge. However, the results may not always correspond to the truthfulness of the testimony. The jury may not believe truthful testimony or may believe the testimony but acquit anyway. If I testify that my partner in thievery had talked about going back and killing a potential witness, the jury might believe my testimony but believe that the witness' violent, abusive spouse was the culprit. Second, what does this say about all the Enron defendants who pled guilty to charges and testified in the broadband trial or the Nigerian barge trial? Some of those questioned received letters of no prosecution, but some received reduced jail time. I did feel sorry for them because they are going to jail when their so-called co-conspirators are now acquitted, but at least they won't face the death penalty!

Permalink | Enron| White Collar Crime | Comments (1) | TrackBack (0) | Bookmark

January 19, 2007
How Law Firms Fared in "the Other Enron Litigation"
Posted by Christine Hurt

In the Enron shareholders' civil lawsuit against Enron executives, banks and law firms, we know how the two Enron defendants emerged.  Kirkland & Ellis was dismissed early on by their own motion, and Vinson & Elkins will probably be voluntarily dismissed by a motion from plaintiffs, who have decided on a post-PSLRA "deep pockets" strategy.  But there were Houston law firms involved in other litigation -- the bankruptcy litigation.

Enron's bankruptcy estate has been pursuing those claims that the company otherwise would have had.  Well, if you see all your nice transactions being shot down by the DOJ, and you knew those transactions were blessed by outside counsel, then that smells like malpractice.  Vinson & Elkins, who may escape liability to Enron shareholders in one federal court, has already paid in $30 million to settle malpractice claims against them.  Today, Andrews & Kurth (who was never formally sued) has settled similar malpractice claims after court-ordered mediation for $18.5 million.  Regardless of whether law firms escape primary liability under securities laws (as was the hope and promise of the PSLRA), the Enron tale is still a cautionary one for outside counsel.

Permalink | Enron | Comments (5) | TrackBack (0) | Bookmark

January 11, 2007
Enron Defendants Still Being Dropped Like Flies -- Now Go the Broadband Guys
Posted by Christine Hurt

By the time the shareholders get to trial, no defendants will be left.  Plaintiffs are asking today not only that Ken Lay (his estate) be dropped but also that Kenneth Rice, Joe Hirko, Kevin Hannon and Greg Whalley be dropped.  Rice, Hirko and Hannon were involved in Enron Broadband Services and were defendants in that case.  Whalley was involved in Enron trading operations.  Rice and Hannon pled guilty in 2004 to one count of securities fraud and conspiracy to commit securities fraud, respectively.    You may remember that Hannon testified against Lay and Skilling during their trial this year and asserted that the two were knowledgeable and complicit in misleading investors as to the potential of the EBS unit.  After one such release about EBS' potential, the stock price rose from $54 to $72.  Whether EBS had that potential or not is of course speculative.  Greg Whalley, who temporarily assumed the presidency of Enron and in due course fired Andy Fastow, has cooperated with prosecutors and never been charged.

Hirko took his chances at the Broadband trial that ended in acquittal on some charges and a hung jury on others.  Four other defendants in that trial had the same fate; two defendants, Kevin Howard and Michael Krautz, were retried this year.  Krautz was acquitted, but Howard was convicted on five counts.  Prosecutors have now moved to vacate four of those counts after the Fifth Circuit ruled that the basis for those counts, theft of honest services, did not fly in the Nigerian Barge Cases.

So, now these defendants will be dismissed from the lawsuit.  This prompts a few questions:

1. Isn't it strange that two men who pled guilty to securities fraud and face up to 10 years in prison (5 for Hannon) would be dismissed from a civil suit for the same actions? How could it be possible that in a civil trial they would not be found liable? Is this an issue of proving the elements of the fraud? Or, are these plaintiffs somehow not worth the time due to low net worth? Although they made tens of millions at Enron, that money may have dissipated. Rice forfeited $13.7M to the DOJ and $1M to the SEC. How closely are Enron prosecutors working with the plaintiffs? We know that Fastow was given leniency at sentencing because of promising to give testimony in the civil suit. Could Rice and Hannon be receiving leniency in the civil suit because of cooperating in the criminal suit?

2. What does it say about Skilling's sentence, which was largely based (according to prosecutor John Hueston's statements here) on a belief that he perpetuated the EBS fraud that now the people that controlled EBS are being acquitted, having sentences vacated, and being dropped from civil suit. Was there no there there?

Permalink | Enron | Comments (1) | TrackBack (0) | Bookmark

January 02, 2007
Was Enron a Puzzle or a Mystery?
Posted by Victor Fleischer

In this week's New Yorker Malcolm Gladwell writes on Enron, intelligence, and the perils of too much information.  Gladwell makes the argument that the problem wasn't that Enron was a puzzle (where you need more clues to solve it).  Rather, Enron was a mystery - where the observer is overwhelmed by information.  Solving the mystery depends on judgment and skill in analysis.  Gladwell explains:

A puzzle grows simpler with the addition of each new piece of information: if I tell you that Osama bin Laden is hiding in Peshawar, I make the problem of finding him an order of magnitude easier, and if I add that he’s hiding in a neighborhood in the northwest corner of the city, the problem becomes simpler still. But here the rules seem different. According to the Powers report, many on Enron’s board of directors failed to understand “the economic rationale, the consequences, and the risks” of their company’s S.P.E. deals—and the directors sat in meetings where those deals were discussed in detail. In “Conspiracy of Fools,” Eichenwald convincingly argues that Andrew Fastow, Enron’s chief financial officer, didn’t understand the full economic implications of the deals, either, and he was the one who put them together.

I agree with Gladwell that Enron was more a mystery than a puzzle, and that Wall Street didn't process the information as well as it should have. 

Still, I'm not sure I'd go so far as to say, as Gladwell suggests, that the disclosure paradigm is broken.  If Enron had made all its SPE deal documentation available, hardly an analyst would have cared.  Enron was a faith stock.  But maybe an enterprising hedge fund manager would have dug in, and Enron's market price might have corrected sooner, say in 2000 instead of 2001.  Moreover, as Mike Guttentag has reminded me, disclosure tends to deter fraud not just by transmitting information to an outsider, but by changing the group dynamics inside the firm.  In any event, as always, Gladwell is provocative, interesting, and quite possibly right. 

I'm quoted towards the end of the piece, where I argue that Enron's failure to pay income taxes was a red flag.  I note, however, that while the fact of the book-tax gap was easily observable, the cause of the gap was not easily observable.  I then offer the profound comment, "The tax code requires special training." (My soundbyte skills still need work.)

I expanded on this idea in Enron's Dirty Little Secret.

What do we think of Gladwell's argument?  Is the disclosure paradigm broken?  Was Enron a puzzle or a mystery?

Permalink | Enron | Comments (14) | TrackBack (0) | Bookmark

December 13, 2006
Enron Defendants are Being Dropped Like Flies
Posted by Christine Hurt

Less than a week after moving for defendant Vinson & Elkins to be dismissed from the Enron class-action lawsuit, plaintiffs (through Lead Plaintiff CALPers) are now asking for defendant Lou Pai also to be dropped.

If you saw Enron:  The Smartest Guys in the Room, then you may recall that Pai left Enron before the trouble hit the proverbial fan, cashing in $270 million in stock/stock options to retire to Colorado.  Pai liquidated his holdings as part of a divorce settlement, a silver lining that allowed him to cash out and go home.  Pai is back in Houston now and interested in trading again -- this time in pollution credits.

Permalink | Enron | Comments (0) | TrackBack (0) | Bookmark

December 09, 2006
V&E May Get Christmas Bonus -- Dismissal from Enron Case
Posted by Christine Hurt

In a surprising turn of events, investor plaintiffs in the civil action against Enron asked on Friday that Vinson & Elkins be dismissed from the suit.  Although as recently as last summer the plaintiffs insisted that V&E were in cahoots with Enron executives and should not be dismissed, the plaintiffs have changed strategy.  Houston Chronicle article, with commentary by Nancy Rapoport, is here.

If V&E is dismissed here, every corporate attorney in Houston and the rest of the country will breathe a collective sigh of relief.  Stay tuned.

Permalink | Enron | Comments (0) | TrackBack (0) | Bookmark

November 16, 2006
Causey Sentenced to 5 1/2 Years
Posted by Christine Hurt

Not to be "all Enron, all the time," but I wanted to point out that Richard Causey was sentenced to 5 1/2 years prison time yesterday.  As you may remember, Causey was scheduled to be tried with Ken Lay and Jeff Skilling, but arrived at a plea bargain with prosecutors fairly close to the eve of trial.  Although commentators speculated that Causey would surely testify against Lay and Skilling in return for a reduced sentence, Causey never took the stand.  Earlier this week, commentators speculated whether Causey's sentence would be longer than Andrew Fastow's sentence, given that Causey's "cooperation" did not seem to be as important as Fastow's.  If Causey went to prison for longer than Fastow, this might seem to be an injustice due to Fastow's greater involvement and self-enrichment.

But, that was not to be and Causey was sentenced to a little less than Fastow was.

Permalink | Enron | Comments (0) | TrackBack (0) | Bookmark

November 15, 2006
Will the Enron Task Force Members Have to Regurgitate Their Ill-Gotten Profits?
Posted by Christine Hurt

I have a deadline this week, so I promised myself I wouldn't blog today.  However, I then saw Peter Henning's post linking to a brief filed by Enron prosecutors in the Enron Broadband trial.  (For background on the trial and current conviction of Kevin Howard, read Tom Kirkendall's October post.)  In response to a brief filed by Howard's attorney's to vacate his conviction on five counts relating to various types of fraud, prosecutors have conceded that four of the counts should be vacated, but not the fifth.  The theory behind the turnaround is that these counts were based on the "theft of honest services" theory that was debunked and limited by the Fifth Circuit recently in the Enron Nigerian Barge case.  The prosecutors concede that under the Fifth Circuit's interpretation, the honest services theory of fraud would not apply to Howard's actions.  The question remains whether Judge Vanessa Gilmore will vacate the entire conviction or just four of the five counts.

Of course a bigger question remains.  One of the threads underlying these Enron trials is that executives should not be able to artificially inflate the stock price through creative accounting methods designed to achieve just that result.  Now we want these executives, who benefitted from the inflated stock price, which harmed investors, to be punished.  Sarbanes-Oxley even requires executives who restate financials to regurgitate any compensation or bonuses received that were based on the higher financials.  What about artificially obtaining plea bargains and even convictions through creative prosecution methods designed to achieve just that result?  Now that courts are pushing back on the techniques of the Enron Task Force, do we get to clawback the benefits the members of that Task Force have received?  Do we go get the ones who "got out early" and are enjoying their huge salaries at fancy New York firms, who hired them based on their inflated win record?

Permalink | Enron | Comments (13) | TrackBack (1) | Bookmark

November 14, 2006
Enron Stigma or Enron Mystique?
Posted by Christine Hurt

In the months and years following the demise of Enron that began in November of 2001, many of our friends and former colleagues who had worked (however briefly) at Enron spoke of the "Enron stigma."  Some coined it the "scarlet E," for the large "E" that became Enron's symbol and logo.  Of course, most of our friends were attorneys and accountants.  However, the former Enron traders have found that the employment market for financial services may be more forgiving and possibly more efficient than the employment market for legal services.  In this WSJ article, former traders at Enron tell of the enormous demand for their talents, which are seen as both substantial, due to their recruitment by Enron, and tempered, due to their experiences at Enron.  In fact, some of the former traders have started their own trading operations.

The most interesting part of the article details the current project of Lou Pai, an executive who sold his Enron stock for hundreds of millions of dollars and retired before any of the problems surfaced.  Pai attempted to buy at auction Enron's pollution credits from the bankruptcy estate.  Because of his obvious insider status, the credits were sold to a third-party, who then sold them to Pai.  Pai is now involved in a Houston-based trading firm that creates markets in pollution-emission credits.

Permalink | Enron | Comments (1) | TrackBack (0) | Bookmark

November 10, 2006
Fastow's Curtain Call in Civil Court
Posted by Christine Hurt

Andy Fastow, who seems to have arrived at a second-best result in his Prisoner's Dilemma, gave 7 1/2 days of deposition testimony last week in connection with the shareholder's suit against Enron and the banks that loved Enron.  (Note that Vinson & Elkins is also still a defendant.)  From this NYT story, it seems that Fastow's testimony revealed little new information, but seemed to corroborate and substantiate facts already known.  Although the banks didn't seem to blink, Arthur Andersen decided to fold and settle on November 1 for $72.5 million.  (I have to add, as I've said before, that I'm not sure that causation can be proved in Enron after Dura, which I think may speak more negatively to Dura than to Enron.)

Readers will remember that Fastow agreed to provide this testimony on behalf of the shareholder plaintiffs (led by Bill Lerach), with Lerach paying Fastow's attorney Craig Smyser (Smyser, Kaplan & Veselka LLP).   The agreement to appear in the civil case was part of his plea agreement in the criminal case, and part of his cooperative efforts that encouraged Judge Kenneth Hoyt to trim his 10-year agreed sentence to six years.

Permalink | Enron | Comments (0) | TrackBack (0) | Bookmark

October 25, 2006
Is Defending Skilling Defending the Indefensible
Posted by Christine Hurt

Obviously there was some back and forth in the blogosphere yesterday about Jeff Skilling's sentence:  Dave Hoffman (see my comments there); Larry Ribstein (responding to Dave); Ellen Podgor and Peter Henning; and Geoff Manne (with the best title).  Nancy Rapoport has an article on Jurist also impressively titled, "A Fish Called Jeffrey."  In blogging about Enron and in presenting my paper The Undercivilization of Corporate Law, I've found that when one speaks out in support of Skilling, Lay or other Enron defendants, one gets some "pushback" to say the least.  I've tried to sort out some of the arguments that get thrown out at the defenders of our modern-day indefensibles.

1.  The "How Can You Defend Fraud" Argument

In speaking out against Skilling's sentence, one might be disputing one or more very different findings by the court:

a.  What subordinates of Skilling are accused of doing is in fact a crime.  For example, that Andy Fastow's use of special purpose entities to line his own pockets was a crime.

b.  Skilling knew or turned a blind eye to subordinates, who were committing crimes that were explicitly or implicitly endorsed by him. 

c.  What Skilling himself is accused of doing is in fact a crime.  For example, that changing financials by one penny a share under fairly flexible rules is accounting fraud.

d.  That a jury can find that Skilling committed crimes or knew/should have known about the crimes of others based on the testimony of witnesses who benefitted greatly from so testifying.

e.  Willful blindness is a valid theory of criminal guilt.

f.  That the various prosecutorial tactics utilized in the Enron trial were just.

g.  That even if the practices is not just, they are warranted because the individuals eventually brought to justice are guilty.

h.  The sentencing guidelines justly calculate a sentence using important variables, including whether a defendant cooperates or shows remorse and whether the defendant utilized a sophisticated means for the crime.

i.  The harm done by Skilling's actions (or the actions of his subordinates) was $80 million.  Using recognized theories of causation and financial modelling, we know that the accounting fraud decreased shareholder wealth by $80 million.

j.  A 24-year sentence is proportionate to the crimes committed and will effectively deter would-be corporate fraudsters in the future.

I don't dispute all of those building blocks to the sentence, but I definitely don't agree with them all.  To applaud the sentence, I think I would have to agree with all of them.

2.  What About Drug Dealers? or Why Don't You Complain When Young Drug Users Get Sent Up the River?

I think this is a red herring.  First of all, I don't agree with the sentencing guidelines as applied to federal drug offenses, either.  The reason I don't write articles or blog posts about the injustices of the drug laws is because that is not my field.  I don't teach Criminal Law and don't have the time to get up to speed in every area of the law that seems inconsistent or unfair to me.  That may seem cold, but that's how life goes.  I'm outraged by a lot of U.S. laws and policies in various areas, but I leave the hard-core academic dissection of those laws and policies to others.

Second, I don't see a zero-sum game here.  If I defend Skilling's sentence, how am I ratifying the sentences of drug dealers?  Shouldn't those who hate the drug sentences jump on the "overcriminalization" bandwagon instead of sneering at us corporate geeks who came late to the protest party?  I think the strawman corporate law professor who is content to see young people put in federal prison for the rest of their lives for using or selling drugs does not exist.

Third, I do think that the current corporate misconduct cases highlight prosecutorial discretion abuses and disproportionate sentencing in a way that the less-publicized drug cases do not.  When a non-criminal law person hears about a lengthy sentence for what seems to be a smallish drug crime, then that person may rationalize the outcome in several ways.  Perhaps we might assume that there are facts not reported that support the sentence.  More likely, a person might assume that the reason for the extreme outcome is that the defendant was poor and without resources to successfully defend the case.  Even with the best public defender in the country, resources are still necessary for experts, scientific evidence, etc.  In addition, a person might also assume that the disproportionate outcome was the product of jury bias if the defendant is non-white.  Therefore, injustices in the prosecution of federal drug crimes might be categorized as socioeconomic and discrimination problems.  Because these problems are well-known and advocates highlighting these problems seem to have reformed the system as much as they ever are going to under current conditions, then outside observers may just shake their heads.  These stories may not prompt anyone to question basic prosecutorial practices and the sentencing guidelines.   However, when we see white, wealthy, educated, male business people receiving extreme sentences in cases in which we know all the business facts, corporate law professors may be inclined to say, "Wait, there must be something wrong here that is not just a product of unequal resources but something much bigger."

3.  If you are outraged about (white) white collar criminals receiving disproportionate punishments, then you are a victim of your own race and class biases.

Hold on there.  My friend Miriam Cherry writes at Prawfsblawg:  "Without being too banal, I suppose it boils down to social class, race, and the artificial abstraction of harm associated with white collar crime."  I guess this argument is an extension of the "why don't you speak up when drug dealers go to jail" argument.  If white collar criminals are white and drug defendants are black, then by being sympathetic to white collar criminals, we are showing our own preference for white guys.  Does this go back to Skokie?  If you want the NAACP and the ACLU to have free speech, then the KKK has to have free speech, too.  So, if you're outraged about young black people being sent to prison for smallish drug crimes because of the stupidity of the sentencing guidelines, then you can't be happy that a white guy finally feels the pain, too.  However, you might be able to see the silver lining -- now that white guys are feeling the pain, maybe more people will open their eyes to the injustices that affect everyone.

4.  Maybe if you had lost your retirement because of Jeff Skilling, then. . . .

I also don't buy this argument.  Yes, employees of Enron who had much of their retirement accounts invested in Enron stock saw all of that disappear.  No, they were not required to have their accounts full of Enron stock, but they were encouraged to do so by Ken Lay's statements and by the fact that the stock had risen quite high, making it look like an attractive investment.  Of course, we can say that no one should be that undiversified, particularly when your human capital is undiversified, but that fact was not being stressed to employees.  And, when the stock was plummeting, their accounts were frozen for a short but important time period.  And there were some employees who were historically employees of stable utility companies who were acquired by Enron who did not understand that their retirement plans were no longer in a stable utility company stock.  I think that what the leaders of Enron did was wrong and that the result for many people was horrible.  I can repeat all the finance theory that puts the risk of loss on the risk-takers (Why did so many people who were so close to retirement have so much stock in their accounts?  Many Enron employees also benefitted from the high stock price by selling.  Many Enron employees chose not to sell as the stock was on slow decline because they didn't want to pay taxes on the gains.)  All of that does not take away the pain of the loss.

However, we do have a civil system and a lawsuit that is underway to attempt to get compensation to the injured.  So, if I had lost my retirement because of Jeff Skilling, I would be a plaintiff in the civil lawsuit.  (And remember that anyone who was in the market in 2001 lost a significant portion of their retirement during that time.  My mother's retirement account was full of Texas Instruments stock, and she lost quite a significant portion of her account during that time.)  I have no problem with the financial penalties assessed against Skilling and hope that they eventually do make their way to the victims.  However, putting Skilling in jail does not replenish those retirement accounts.

5.  What Lay and Skilling did was just as bad as what serial killers do.

No it's not.  The penal code has long reflected the various values that we as a society put on certain types of property and liberties that we hold.  At the top of that list is life and bodily integrity.  Therefore, we have differing punishements for theft, theft in someone's home, theft with a weapon, and theft when someone gets killed.  Murder has always been at the top of any list and is the only class of crime for which the death penalty currently can be assessed (and then only a subcategory of murder).  From time to time, anomalous provisions will reflect an idiosyncratic value attachment, such as a Texas statute making it a felony to steal any part of a cow.  Cattle at one time were very valuable and therefore a stiff penalty was needed.  Are we now saying that we value retirement accounts over life or bodily integrity?  (I can see over a cow, but not over life or bodily integrity.)  If we are now saying that our greatest fear isn't death or bodily harm but that we will have to live without our retirement accounts, then maybe there's something really, really wrong about our society.  Maybe greed is not isolated to the executive suite.

"Lawstudent" commented to Dave's post with this:  "Could someone please explain why there should be a magic dividing line between violent and nonviolent offenses? To me, proportionality should be based on harm, not violence. Surely there are non violent harms that are greater than violent ones. I would rather be punched in the face than loose my life savings at mid life or retirement. In fact, I would probably rather be robbed at gunpoint for my pocket money than loose my life savings."

I think Lawstudent is making this argument.  And maybe in our lives where the threat of violent bodily harm or death is fairly abstract that the threat of losing money makes that possibility seem sharper some how.  Yes, I would take a punch in the face rather than having a $200k retirement fund drained.  (For economists, yes I would take $200k to be punched in the face.)  I don't think the second example is the same though.  Yes, I would let myself be robbed at gunpoint to save my $200k retirement fund if I knew that the robber would not shoot me.  However, I'm not sure that I would take $200k in order to put myself in a situation where a robber has me at gunpoint and the outcome is uncertain.  To put another way, if a robber has me at gunpoint, will I give $200k to get out of that uncertain situation?  We know that most people with no armed combat training give whatever they have to offer.

And, to finish the point, according to the Texas Penal Code, the punch is a Class A Misdemeanor and the aggravated robbery is punishable in a range of 5-99 years, not a minimum of 24 years.  No state crimes have that minimum according to the Texas Penal Code.  In fact, some crimes are capped at 20 years (all crimes besides first degree felonies).  So Skilling could not have been put in jail in Houston for over 20 years for manslaughter, murder under the influence of passion, trafficking children under 14 or other humans where death results, or having sex with a child.  He also could be sentenced to jail for as little as 2 years for any of those crimes.  (Obviously, if these crimes were against multiple people, then the penalties could run consecutively.)

O.K., I guess that's enough.  I better put on my Teflon armor. . . .

Permalink | Enron | Comments (5) | TrackBack (0) | Bookmark

October 23, 2006
Skilling Sentenced to 24 Years
Posted by Christine Hurt

This just in:  Jeff Skilling was sentenced to 24 years in prison.  Skilling will not be allowed free on bail awaiting appeal but has some time before he will be told when to report to prison.  The play-by-play of the hearing is on the Houston Chronicle blog.  Judge Lake explained that the sentence was proportionate to the crime because Skilling effectively sentenced "hundreds, if not thousands," to a "life sentence of poverty."  I think I would quibble with that statement, but I guess that's for another post.

Note that Skilling gets the pain of a long sentence without even the solace of "one for the record books."  To be known as the holder of the longest white-collar crime sentence, Skilling would have had to receive a sentence of 25 years and a day.

Permalink | Enron | Comments (0) | TrackBack (0) | Bookmark

Posted by Christine Hurt

The media is describing today as "the end of an era" as Jeff Skilling receives his sentence from Judge Sim Lake at a hearing beginning at 1:00 p.m. CST in Houston.  At the beginning of the hearing, 10-12 employees of Enron will testify as victims before Judge Lake hands down the sentence.  I understand that risking one's human capital (and to some extent one's retirement capital) is more serious than risking one's financial capital due to lack of diversification opportunities, but I do see most Enron employees as risk-seeking.  During the 1990s, I knew many workers who were recruited to Enron:  attorneys, accountants, software engineers, traders, legal assistants, and secretaries.  They all went to Enron because of the lure of big money.  Enron paid more, and Enron rewarded people at all levels with stock.  The work was grueling (at all levels), but the rewards were high.  I'll be interested to see what is said in these 5-minute testimonials.

In the Houston Chronicle this morning, my colleague Margareth Etienne, who submitted a brief in support of Skilling, is quoted as arguing that Skilling should not be punished for exercising his right to a jury trial while others at Enron pled guilty and received a "plea discount."  Professor Jack Coffee is also quoted as agreeing with the idea that defendants are punished for proceeding to trial and thereby taking up a judge's time.  Other Enron defendants who seem as culpable as Skilling or more received reduced sentences for providing testimony, specifically Andy Fastow, who received six years in prison for "cooperating."  The Chronicle does report that both sides reached an agreement on the amount of damages caused by Skilling's conduct, a significant factor in sentencing under the Guidelines.

To whet readers' appetites while waiting until the 1:00 hearing, here are gameday comments by Larry Ribstein and Tom Kirkendall, as well as a round-up of Enron commentary on WhiteCollar Crime Blog (by Ellen Podgor and Peter Henning).

Permalink | Enron | Comments (3) | TrackBack (0) | Bookmark

October 02, 2006
Rapoport on Olis, Fastow & Skilling
Posted by Christine Hurt

I missed all the excitement last week surrounding Jamie Olis' sentence reduction to six years and Andy Fastow's subsequent reduction from his bargained-for sentence of ten years to six years.  Fortunately, other bloggers chimed in.  Nancy Rapoport, former Dean of the University of Houston, author of a book on Enron and featured commentator in the Enron movie, was interviewed by Loren Steffy of the Houston Chronicle.  The podcast is linked here.

Permalink | Enron | Comments (1) | TrackBack (0) | Bookmark

September 26, 2006
Fastow's "Last" Good Deed
Posted by Lisa Fairfax

As he makes his way to serving out his prison term, Andy Fastow apparently has agreed to help lawyers representing Enron shareholders in their suit against investment bankers.  Last year the district judge overseeing the shareholders’ case against the bankers dismissed several banks from the suit based on the view that shareholders had to prove that banks were directly involved in the manipulation of Enron’s financial statements or otherwise directly involved in misleading investors.  That standard of proof is higher than what shareholders wanted—the ability to show that bankers aided and abetted Enron’s actions.  However, Fastow has agreed to be deposed so that he can provide specific details about the role bankers played in Enron’s demise.  While analysts disagree about whether jurors will credit Fastow’s deposition given his admission of wrongdoing, Fastow is certainly bending over backwards to help out.  Now the cynic in me wants to say that Fastow’s helpfulness stems only from his desire to gain leniency in the sentencing process.  However, Fastow has indicated that he is motivated by the desire not to be a scapegoat as well as his view that banks really were involved in manipulation and hence should face some repercussions for that involvement.  Cynicism notwithstanding, I also think Fastow is motivated by genuine regret and a desire to salvage his (and his family’s) reputation.

Permalink | Enron | Comments (0) | TrackBack (0) | Bookmark

Recent Comments
Popular Threads
Search The Glom
The Glom on Twitter
Archives by Topic
Archives by Date
January 2019
Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31    
Miscellaneous Links