Saturday :: Jan 21, 2006

Oh Lay Lay/DeLay Low

by pessimist

There's a strong and cold wind blowing through California today. It isn't making me warm and fuzzy that I have to leave my heater off during the day - and much of the night - because I can't afford a $300 gas bill every month.

Yes, I know - supply and demand and all that. But I also remember how Enron and their co-conspirators manipulated the costs of energy supplies to make sinful amounts of profit. But there always comes a time when any action - good or evil - is called to account.

Kenny-boy Lay and Jeff Skilling are the former top officers of Enron, and their trial will soon begin. But considering some of the news out of Houston, I'm wondering if there aren't moves afoot to throw the case.

This trial isn't the only high-profile case in Texas. Tom DeLay's trial will be starting up almost simultaneously, and I plan on watching these stories as much as my time allows, for two of these men are key to the domestic political stability of Bu$hCo. Lay as a poster boy for how the lowly 99 Percenters are conducting a witch-hunt against corporate executives/GOP campaign contributors, DeLay for how the non-neo-cons are to blame for his troubles.

I'm going to focus on Lay/Skilling this trip, because without funds, Tom DeLay would still be spraying cockroaches in Sugarland.

I've been on two juries in my time, once as foreman. I have heard the judges describing to counsel what the rules are going to be for each case. I have heard both judges tell counsel that they better have all of their evidence ready as of the start of trial, for if they don't have a damn good reason for presenting evidence at a later time, it could jeopardize their case.

That's why I am less-than-secure about this news:

Prosecutors both trim, add to evidence before trial

Prosecutors cut a whole section of allegations of fraudulent circumventing of accounting standards in a series of structures known as Hawaii 125-0. But those were to be used largely against former top accountant Rick Causey, who has since pleaded guilty and will not be at the defense table in trial.

OK - this I can understand to a point. If the evidence isn't clear that Lay and/or Skilling were directly involved, it might be better just to let these charges drop. After all, they did get one jail sentence out of it so far.

But the new stretegy isn't making me warm either - and it has nothing to do with the wind out here in California:

[T]he government now plans to prove it was Skilling who, in a July 12, 2001, analyst conference call, specifically lied by saying Enron Energy Services was reorganized "to get some more efficiency" when it was really reorganized largely to conceal losses.

This charge is already weakened by a witness who has changed his story:

Mark Koenig, the former head of Enron's investor relations section, previously confessed to saying this himself when he pleaded guilty. But Koenig changed his plea agreement, saying he listed to a tape of the call and realized it was Skilling who made that statement.

Can you already hear the defense attorneys taking that one to town? It would sound like some of the comment threads we've been having lately!

But worse, the prosecution is showing that they don't quite have their act together - especially if they aren't settled on their plans:

The former executives have been complaining this week that prosecutors were late with a promised revision of what they plan to put into evidence.
"We're one week away from trial, and they are adding things. I don't think the judge will tolerate it at this late date," Lay lawyer Mike Ramsey said.

So it's up to the judge. What's he like?

Experts Praise Judge in Enron Trial

The judge presiding over the fraud and conspiracy trial of Enron Corp. founder Kenneth Lay and former CEO Jeffrey Skilling isn't overpowering, but he leaves no question about who's boss.

U.S. District Judge Sim Lake doesn't raise his voice or otherwise draw attention to himself. But he quietly commands respect, and will politely cut off rambling attorneys to keep the proceedings in his Houston courtroom going.

Lake gained attention from white-collar crime attorneys across the country nearly two years ago when he sentenced former Dynegy Inc. finance executive Jamie Olis to 24 years in prison for his role in pushing through a 2001 scheme to disguise debt as cash flow.

At the time, Lake was bound by federal sentencing guidelines that required harsh sentences for defendants held responsible for more than $100 million in investor losses tied to the crime. Those guidelines are now advisory only, and an appeals panel last year threw out the sentence because the amount was unreasonable.

Lake has yet to re-sentence Olis, but has indicated he won't side with Olis' contention that no specific amount can be attributed to his crime.

Sure, right now the judge is a little busy. There may even be a pending back-room deal with the prosecutors to squeeze Olis a little to see what he might have on Lay or Skilling which is keeping Lake from finalizing Olis. the point is, Olis' case isn't a good one to judge the judge. What else has he done?

Lake has imposed harsh white-collar crime sentences before.

In October, 1999 he sentenced former day trader Alton Dane Hudnall to 25 years in prison for conspiring with five others to defraud 500 European investors of $53 million in a money laundering scheme. Hudnall was convicted of 26 counts of money laundering, 17 counts of wire fraud and one count of conspiracy.

OK - I like that! A case similar to Enron in some respects, only the take was orders of magnitude smaller. What else hath Lake wrought?

[I]n June 1995 Lake sentenced former Houston socialite Teresa Rodriguez to nearly 22 years in prison on 36 counts of wire fraud, mail fraud and money laundering for bilking 375 investors of $69 million.

I'm beginning to notice a pattern here - one I like a lot!

Both men face decades in prison if convicted. They have pleaded not guilty.

Skilling faces 35 counts of fraud, conspiracy, insider trading and lying to auditors for allegedly conspiring to hide Enron's precarious financial state from investors in the years before the company crashed into bankruptcy in December 2001.

Lay faces seven counts of fraud and conspiracy for allegedly perpetuating the scam after Skilling resigned in August that year. Lay also faces one count of bank fraud and three counts of lying to banks in a separate case alleging he reneged on agreements with banks not to use $75 million in loans to buy margin stock. Lake will decide the outcome of that case in a bench trial to commence shortly after jurors in the conspiracy case begin deliberating.

OK! Tough on crime! Even if the perp is a Pioneer! Doesn't that expose Judge Lake to charges of political motives, as were thrown at DeLay procecutor Ronnie Earle?

It would be much harder to make the case for that slur:

Lake, 61, a former environmental litigator with Fulbright & Jaworski, was appointed to the federal bench by President Reagan in 1988.

I'd love to hear the argument that the Judge is a partisan Democrat!

Could a case be made that the judge should recuse himself because he's not well-regarded by counsel?

Lake also earns consistently high ratings from Houston-area lawyers in the Houston Bar Association's annual judicial preference poll. In the most recent poll, about 250 lawyers gave Lake nearly 70 percent or higher approval ratings for following the law, treating attorneys courteously, fairness, efficiency and hard work and preparedness. Only one of his eight judicial colleagues in Houston, U.S. District Judge Lee Rosenthal, received higher ratings.

In more personal terms:

"He certainly has found his calling," said Stephen Dillard, a Fulbright & Jaworski partner who worked with Lake before he was appointed to the bench. Dillard said that as a trial lawyer, Lake was concise, direct, and wasted neither words nor time. Lake retained those habits as a judge, he said.

"He will be the consummate impartial jurist," noted Jay Brown, a Houston civil litigator. "He will bend over backward to be extremely fair to both sides."

"He's exactly what you would think of if you were to get a judge from central casting -- smart and respectful," said Nancy Rapaport, dean of the University of Houston Law Center. "He's got the right demeanor for a trial that's going to take this long and be that serious." It's estimated that the Enron trial will last four months.

OK, assuming the prosecution doesn't blow their case fooling around up to the last minute, and the judge can't be besmirched, there's only one hope left - the jury has to be nullified.

We all remember all the talk about jury nullification during the aftermath of the OJ murder trial, so I don't think I need to go over all of that ground again.

Here's how the strategies look to local observers:

Enron jury holds fate of Lay, Skilling

Powerful defense lawyers or not, the fate of Enron Corp. founder Kenneth Lay and former CEO Jeffrey Skilling will lie in the hands of a dozen Houston-area citizens chosen to determine the outcome of the fraud and conspiracy trial stemming from the energy company's spectacular 2001 implosion.

Last November, about 400 potential jurors among the 4.7 million residents in the 13-county area from which Houston federal juries are drawn filled out questionnaires in the first step of jury selection. That pool has been whittled to 164.

Experts say that makes jury selection a critical step in trying to ferret out people who will decide guilt or innocence based only on evidence they see and hear. "Cases are, for the most part, won or lost during jury selection. You can still lose a case -- but for the most part, jury selection is the time to advance your themes," said David Berg, a Houston civil litigator and author of The Trial Lawyer: What It Takes to Win.

The manouvering has begun, with the defense firing the first shot, claiming that mambers of the pool are clearly biased against his client:

Daniel Petrocelli, Skilling's lead trial lawyer says "a significant number" of potential jurors who expressed intensely negative views toward Lay and Skilling remain in the pool.

He said in court papers that potential jurors called Lay and Skilling "guilty -- criminally and morally," and "guilty and personally involved in this whole mess." Some jurors called Skilling "the devil," and "a high class crook" while Lay was labeled by some as "a snake in the grass", "a selfish, greedy man" and "holier-than-thou."

If true, I can hear the clerks working up the appeal papers now.

But things aren't so secure that the defense doesn't have a back-up plan in place:

The defense teams want the trial moved out of Houston to find a fair panel because of those responses and a "rage of adverse publicity" surrounding former Enron chief accounting officer Richard Causey's decision last month to plead guilty to securities fraud rather than face trial alongside Lay and Skilling.

Hmmmmmm... Causey pled guilty rather than go to trial with Lay and Skilling. Causey was the 16th ex-Enron executive to plead guilty and agree to cooperate with the government. "Unlike his former peer, Causey didn't skim millions of dollars for himself from shady deals and therefore would bring less baggage to the witness stand."

Mark Koenig (cited above) did also, as did Chief Financial Officer Andrew Fastow, his assistant Michael Kopper, former Enron treasurer Ben Glisan, and many others are facing having to make that same choice.

Considering that of six trials already conluded - with five already convicted and one acquitted [more here] - there isn't much of a defense for most of the Enron executives. It also doesn't help that two ex-Dynegy execs in on the scheme pled guilty.

Thus, one can understand the desire of the defense counsel to move the trial out of Houston, as there is already a lot of circumstantial evidence - much os which will likely become factual evidence as testimony begins - and overt hostilty against the defendants (something that doesn't seem to be of any importance in the Padilla case, but I digress).

But never fear, the Multinational Corporate Media rises to the defense of one of its own. CBS' legal consultant, Attorney Andrew Cohen, agress that the trial should be moved, as does Forbes' Greg Levine.

But - as a good jurist should - Judge Lake isn't hearing the media clamor to move the trial:

A year ago U.S. District Judge Sim Lake denied the first defense request to move the trial from Houston and has yet to rule on the second request. But he indicated in a recent hearing that the second request will be denied as well when he asked defense lawyers and prosecutors if any more hearings were needed before jury selection begins on Jan. 30.
[from embedded link]It is highly unlikely that U.S. District Judge Sim Lake would move the trial at this point. Prosecutors argue that nothing has changed since the judge last told the defendants the case would not be moved.

Back to jury tampering - I mean, nullification. Defense counsel want to bully question each juror in a search for bias:

Barring a change of venue, the defense teams want to question potential jurors individually. That's the practice in selecting jurors for capital murder cases in Texas. Individual questioning often makes for lengthy jury selection, but attorneys can ask more specific questions based on each potential juror's questionnaire answer.

I doubt this tactic is going to work very well:

But in federal court, judges commonly handle what's called voir dire, asking general questions about bias to the entire pool, letting individuals raise their hands to indicate "yes" and "no."
The judge also has repeatedly denied defense requests to question jurors individually.
Unless Lake changes his mind, he will ask the questions, and allow attorneys to inquire further privately based on potential jurors' initial responses.

Ah! If only Lance Ito had shown such judicial 'activism'! But I digress.

A legal expert explains what the defense counsel might have been hoping to accomplish:

Nancy Rapaport, dean of the University of Houston Law Center, said that if Lake handles the overall questioning, he takes control and defense lawyers and prosecutors can't start arguing their cases during jury selection. "If a judge is asking the questions, then a lot of that pretrial jockeying for position doesn't happen," she said. "This is a way to set the tone for the whole trial."

Rapaport also said that although Houston is Enron's epicenter, she believes that once jurors are chosen, even those who express strong opinions will base a verdict on the evidence -- or lack thereof.

As good jurors should.

One one of the trials I sat on had jurors who developed bias against the plaintiff as it progressed. Others changed positions, but in the end, it was details presented in court that decided the verdict. So it should be in the case of Lay and Skilling.

This brings us back to the prosecutors, who have yet to make their case since the trial hasn't started, but are still reported to be changing their strategy and the charges they will prosecute.

I trust you begin to sense my disquiet. Others share that feeling:

No one will be happy until Enron's sorted out
ROBERT TRIGAUX, St. Petersburg Times Business Columnist

It's almost the Super Bowl of corporate ethics.

If the top Enron guys win, then it's still open season for executive self-dealing and, fairly or not, a sad sign that the super rich can wiggle out of any legal entanglement.

If they lose and face serious fines and jail time? Maybe that's a signal that this country will stop winking at corporate corruption. Maybe there's some reason for investors to feel a bit more confident when buying the stocks of corporations.

At one point, Fortune magazine reported, Skilling declared, "I am Enron." Can anyone who has followed the Enron investigation in good conscience believe Skilling and Lay played no part in this empire of cards?

Jack Ballinger of had this to add about Lay: "I'm guessing that when Causey "participated with Lay on conference calls and analyst meetings", Kenny boy was dealing with something other than baseball scores and gossip about Lindsay Lohan."

I guess he'd be bounced by the defense if he were in the jury pool! Back to our article:

Prosecutors will be under intense pressure to put Skilling and Lay away. What kind of message will America's jilted investors - and the thousands of Enron employees who lost their pensions - hear if Skilling or Lay walks?

One commenter over at The Stacked Deck had this to day:

Why is Martha Stewart with the crooks who cheated at the expense of employees, customers and shareholders.... Do you honestly believe Martha Stewart should be in rank with Enron, Tyco, Worldcom crooks? She only sold her shares of Imclone before it tanked.

Another commenter added: "The Enron execs hurt a lot of Americans ... Martha really only hurt herself (and her broker)!"

No bias against Lay and Skilling here! Don't you DARE move along!

So - is the defense out of cards to play? Not if Greg Burns of the CHICAGO TRIBUNE is right:

Enron case likely to test ‘idiot defense’

Former Enron chief Kenneth Lay has vowed to tell jurors from the witness stand that he knew nothing about crimes committed at the energy company. In a campaign of public appearances since his indictment last year, Lay has conceded only that he erred in trusting Andrew Fastow, the ex-Enron chief financial officer now cooperating with the government against him.

No chief executive “knows everything going on in his company,” Lay said in one of his speeches, so no one should expect him to take responsibility for the crimes of an executive he portrays as Enron’s chief villain. “I did not know what he was doing.”

It’s a risky approach, legal experts say. In the crackdown on corporate fraud, claiming innocence by virtue of ignorance has a checkered history. Also known as the “dummy” or “ostrich” defense, it has led to the convictions of such high-profile corporate criminals as Adelphia’s John Rigas and WorldCom’s Bernard Ebbers.

Michael Clark, a former federal prosecutor who has become a defense attorney, said directions given at the end of the trial could prove critical, particularly if U. S. District Judge Sim Lake provides an “ostrich instruction,” telling jurors to convict if the defendants tried to avoid knowing the obvious. That sort of “reckless indifference” could be a “real issue” for Lay.

That doesn't dound like it's going to go well for Lay, does it?

But Wait, Kenny-boy! All is not yet lost!

At the same time, the length of the trial — an estimated four to six months — could work in Lay’s favor. Over a long period, Clark said, jurors tend to “focus on the individual rather than the crime” and “begin to resent their lives are being disrupted.”

Is that why Brenda Moran was getting lots of calls asking her to move to Houston ASAP?

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