What Does The Future Hold For Upcoming Enron Trials?

As James A. Brown prepares for his second trial on September 20 under an indictment which fails to state an offense, I have to wonder about the sanity of our government. For instance, I wonder how much taxpayer money has been spent prosecuting this man, and jailing him for a year on a perjury charge which stemmed from his testimony about a phone call he was not even a party to. How many millions? Is it more millions than seven? Because if it is, I think we can call this even.

Money doesn’t matter to the government because they have infinite resources. The defendants like Jim Brown and Rex Shelby, who have been litigating since 2004, are mere mortals; they can’t afford to spend money forever on their defenses. Of course the agents of our government know this; it is part of their strategy. It is a significant form of leverage in forcing defendants to accept plea bargains.

I also wonder at a system which ignores corruption, punishes honesty, and would cast innocent men aside in a mad stampede for the glories of history and a cushy private sector job. The fresh Brady documents that were kept from James Brown prove beyond any measure that the government KNEW that the Nigerian Barge transaction was legitimate, that all the people involved believed it was legitimate and acted ethically, and that the government deliberately and with great malice kept exculpatory evidence from James Brown. If the defense had access to this material this before trial it would have changed the entire defense—and the government certainly knew it. It is the only reason they could have possibly had to withhold it.

So why wasn’t Judge Werlein outraged? The prosecutors were lying to him! But he, like Judge Gilmore and Judge Lake, seemed to have a soft-focus lens when it came to the prosecutors. They could get away with more, their objections were more often sustained, they would allow the prosecution to immunize their own witnesses but not the witnesses of the defense, and their jury instructions were used more often than the defense’s.

If it wasn’t quite enough to have the prosecutors and judge in the tank for the prosecutors, all Enron defendants had to handle the onslaught of negative media attention. When was Daniel Bayly’s sterling reputation ever mentioned? When did anyone talk about the fact that James Brown had a reputation as a straight-shooter and nobody who knew him would believe that he had acted in bad faith? Sean Berkowitz and Bethany McLean’s romance was heating up in the Skilling / Lay trial, the media would later fawn over the new lovers’ amusing story of how they met. But who talked about the wives of the Merrill Lynch executives, or the Enron executives, who cried and struggled and tried to hold it together as their husbands desperately tried to save themselves? Who cared about the children of these men, the families and friends who loved them? They became fodder for a ruthless news cycle which cared more about sensationalizing the story than actually reportage.

In these circumstances, it is hard to believe any of the defendants came out okay. And yet they did. And some, like Kevin Howard, Rex Shelby and James Brown not only survived, they endured – or will endure – a second trial.

I hope it is different this time. We are all five years older now. A child born on the day the Broadband verdicts were rendered will enter Kindergarten this September: a lot can – and has – changed.

To most people, the word “Enron” is ancient history. It died ten bloody years ago. The passion for a witch hunt has somewhat abated – at least for these particular witches. I predict jury fatigue. I can imagine sitting as a juror on Brown’s case and wondering why in the world I should care about a $7 million deal that was done eleven years ago, and not really seeing where the big controversy is. Even if he was guilty (and he is NOT), I can’t imagine thinking that eleven years later, we should punish him.

And the Broadband Trial is going to be a snooze-a-thon. Rex Shelby was a technology guy. For most people, his testimony will be as interesting as listening to someone read aloud engineering specifications for a washing machine – except more boring because we can all visualize washing machines; it’s much harder to visualize a “concept” like the EIN. (I, however, am going to laugh and laugh and laugh as I watch the prosecutors try to monkey through the EBS technology.) So if I were a juror on that case, I’d constantly be wondering what time is lunch. Or pass the judge a note to ask the defendant to remove his shirt. Just to liven things up.

In addition to a bored jury listening to testimony that is completely irrelevant in 2010, I predict the media has been so shamed in its coverage that will be a little more benign. One former defendant tells me the story of meeting a Houston Chronicle journalist while he was out and about, and she greeted him with a hug. As if she’d never said those horrible things about him!

The Enron Task Force has failed to deliver in its lavish promises of “massive fraud” at Enron. There was no fraud. These men are innocent. They were years ago, and they are today. I worry that the prosecutors play dirty, but I pray that everyone is a little less tolerant of their shenanigans. Is it too much to hope for in America?

US Supreme Court To Hear Enron Figure’s Appeal

From the Chron:

The U.S. Supreme Court said Friday that it will hear the appeal of a former top strategist in Enron’s broadband division who says he shouldn’t be retried on insider trading charges because a jury acquitted him of conspiracy and fraud.

The notice that the court will consider Scott Yeager’s appeal puts his March retrial on hold until justices issue a ruling, his lawyers said. They expect arguments to be scheduled for February or March.

“We have confidence they took the case because they want to give careful consideration to the legal issues as to whether the acquittals bar the Justice Department from trying the insider trading charges against him,” said Samuel Buffone, one of Yeager’s lawyers.

The short list the court issued Friday of appeals accepted for argument did not include that of another former broadband executive, Rex Shelby, who has a similar argument that a handful of acquittals guts the government’s effort to retry him.

But Shelby won’t know until Monday whether his appeal was rejected outright or if it’s on hold until the high court hears and rules on Yeager’s case, said one of Shelby’s lawyers, Susan Hays.

If the appeal is on the reject list to be issued Monday, Shelby faces a retrial in January as scheduled. If on hold, his retrial likely will be postponed along with Yeager’s until his appeal is decided.

“We’re not quite dead yet,” Hays said.

The Justice Department declined comment.

A third former executive, ex-broadband division Chief Executive Joseph Hirko, also had an appeal request pending before the Supreme Court. But that appeal is moot because he pleaded guilty to wire fraud last month and accepted a guarantee of no more than 16 months in prison.

Hirko is to be sentenced March 3.

The three men’s first trial, along with two other defendants, ended after three months with a few acquittals, no convictions and jurors hung on dozens of counts. Yeager alone faced more than 100 counts, most of those money laundering.

They were accused of overstating capabilities of Enron’s broadband operations to generate Wall Street buzz and enrich themselves by selling shares whose value was inflated by the hype.

Jurors acquitted Yeager of conspiracy and several counts of fraud but were hung on more than 90 counts of insider trading and money laundering.

Hirko and Shelby each were acquitted of insider trading or money laundering counts, but jurors deadlocked on conspiracy and fraud.

In his appeal, Yeager argues that he can’t be retried for 13 counts of insider trading and money laundering in a pared-down indictment because of his acquittals. He contends that prosecutors can’t allege he sold stock on inside information or moved ill-gotten money between accounts when a jury found he didn’t participate in fraud or conspiracy.

Shelby contends that because he was acquitted of several counts of insider trading, there could be no fraud. Shelby did not challenge the pending count of conspiracy against him.

Earlier this year, a 5th U.S. Circuit Court of Appeals panel rejected both arguments

My prayers are with Rex Shelby and Scott Yeager. Go team go.

Broadband Defendant To Plead Guilty

According to Kristen Hays writing for Houston Chronicle, Joe Hirko, one of the Enron Broadband defendants, is slated to plead guilty to federal felony Tuesday rather than face a jury for a second time.

Joseph Hirko was slated to be retried alongside Rex Shelby, a former top software executive, in December this year — more than three years after their first lengthy trial ended with a handful of acquittals, no convictions and jurors hung on dozens of other counts.

But Tuesday, barring any last-minute changes, Hirko is slated to enter a guilty plea to a single count of wire fraud before U.S District Judge Vanessa Gilmore as part of a plea agreement that calls for him to serve 12 to 16 months in prison, according to one of his lawyers.

“He is looking to get some finality out of this situation and hopes to return to a full and active life in the community,” Hirko lawyer Per Ramfjord said this evening.

I think what this means is that like so many of the Enron defendants, Joe Hirko was simply tired. Tired of being pursued, tired of fighting, possibly, like Tim Despain and several others who took plea deals, running out of money. In the face of another long, heart-wrenching, exhausting trial and all the stress that causes, vs. a year in prison… it might not seem like such a bad deal.

This is a perfect illustration of how the DOJ works. They will call this a victory. Though they did not comment on Hays’ story, they will eventually roll out the press releases crowing about justice. Joe Hirko will enter prison and he will suffer every single day – he will be punished for something he didn’t do. He will not feel like this is justice. In fact for him and other Enron defendants, it is the antithesis of justice.

Hirko, of Portland, Ore., was originally indicted in 2003 on charges including conspiracy, fraud, money laundering and insider trading. Shelby and three others — former co-broadband CEO Kenneth Rice, former division chief operating officer Kevin Hannon, and former top strategist Scott Yeager — faced similar charges.

Rice and Hannon pleaded guilty to securities fraud and conspiracy, respectively, in 2004. Hirko, Shelby and Yeager went to trial in 2005 alongside two other former broadband executives charged with inflating earnings by selling future revenues in a video-on-demand venture that failed.

Rice testified in the 2005 trial that Hirko, Shelby and Yeager knew when the broadband division was unveiled with much fanfare at Enron’s January 2000 analyst conference that the network wasn’t up and running. Yet he said he, Hirko and former Enron CEO Jeff Skilling touted it to analysts as though it was ready to jump into what was then a competitive broadband market.

Hirko, Shelby and Yeager each testified that the network and the software worked, but was being implemented in phases.

Incidentally several other software engineers testified to the same thing. It wasn’t just the three people who were on trials for their lives who might, one assumes, say anything to save themselves.

Enron’s stock jumped $13 a share the day of the conference.

Of the broadband defendants, only Rice and Hirko directly addressed analysts at the conference. During the trial, prosecutors alleged that analysts saw a video of Shelby touting the network’s software as if it worked, but the defense teams revealed that the Shelby video was added to an archived videotape of the conference after the fact.

Skilling’s role in the broadband trial was limited to jurors viewing his analyst presentation on that videotape. However, his descriptions alternated between what the network could do at that time and what it would do in the future.

Rice also testified against Skilling in the ex-CEO’s 2006 trial, saying the broadband division struggled with losses throughout 2000 and brought in cash through asset sales rather than operations. The division never made a profit, and cratered along with the parent company.

Hirko was acquitted of insider trading and money laundering counts, while Shelby was acquitted of a few insider trading charges. Yeager, who had faced more than 100 counts, was acquitted of conspiracy and fraud. Jurors deadlocked on everything else.

Hold on. One hundred counts? For lying about a piece software? Does that honestly sound like the behavior of reasoned, impartial jurists?

The government reindicted all three on fewer counts and split them into separate cases. The defendants later asked the 5th U.S. Circuit Court of Appeals to throw out all or most remaining charges.

Their lawyers argued because the acquitted counts were interrelated with those on which jurors were deadlocked, all or most remaining charges should be erased.

The government countered that the remaining cases weren’t tainted, and that jurors acted “irrationally and inconsistently.”

Love that phrase. Of course, had the jurors found them guilty, the praise would have flowed like champagne.

In March this year, an appeals panel rejected the defense arguments, clearing the way for retrials.

If Hirko enters his plea and Gilmore accepts it as expected, Shelby will be retried alone on Dec. 1. Yeager’s trial is slated for next March.

The other two defendants in the original trial were retried in 2006. One was acquitted, and former broadband division finance chief Kevin Howard was convicted. A different 5th Circuit panel later erased his convictions because prosecutors misused a theory to prove his guilt, and he is slated to be tried a third time next year.

Rice went to prison in July last year and was recently moved to a federal community corrections program in Houston, a common step between prison and release. Although his term was two years and three months, he participated in a drug and alcohol treatment program available to all non-violent inmates that, if completed, allows for up to a year to be shaved from a sentence.

Hannon is serving a two-year term at a prison in Bastrop.

Skilling was convicted of 19 crimes at his 2006 trial and started serving a 24-year, four-month term at a prison in Minnesota in December that year. He is awaiting a ruling from a 5th Circuit panel on his appeal to throw out his convictions.

My heart breaks for Joe Hirko.


Retrials of Three Enron Broadband Execs Postponed

Kristen Hays, writing for the Houston Chronicle, reports that retrials of three former Enron broadband division executives have been postponed by several weeks as they seek an appeal before the U.S. Supreme Court.

Last March, the 5th U.S. Circuit Court of Appeals denied appeals from Joseph Hirko, Rex Shelby and Scott Yeager to throw out most remaining charges against them after their first trial in 2005 ended with a handful of acquittals and jurors hung on dozens of other counts.

The trio are now seeking an appeal before the Supreme Court with retrials scheduled in November for Hirko and Shelby and in January for Yeager.

Federal prosecutors told U.S. District Judge Vanessa Gilmore today that they have until mid-October to file a response to the defendants’ request for a Supreme Court review.

The earliest the high court could say whether it will hear the case would be mid-November about two weeks into the Hirko/Shelby trial that had been slated to start Nov. 3.

An annoyed Gilmore noted that the government’s request that she postpone the November trial — which forced a delay in Yeager’s January trial — “arrogantly” assumed she had no cases to accommodate except Enron cases.

“This isn’t my only case and it’s not my most important case,” the judge said.

She had already denied a Hirko/Shelby defense request for a delay to accommodate another trial involving a client of Shelby’s lawyer, Ed Tomko, which is slated to start Monday in Gilmore’s court.

Tomko had been concerned that his September trial would stretch through October, leaving little time between it and the Hirko/Shelby case.

However, Gilmore postponed the trials to accommodate the possibility that a Supreme Court decision to review the cases would interrupt or delay them anyway.

She scheduled the Hirko/Shelby retrial for Dec. 1, and pushed Yeager’s trial to March 24. Kevin Howard, a fourth former broadband executive facing retrial — his third round before a jury — had been scheduled for trial on March 24, and his case will also have to be postponed, Gilmore noted.

This must be absolutely maddening for the Broadband executives. The terrors of trial, the economic hardships, the humiliation of public scrutiny… Kevin Howard will have had three trials on the same charges. Yet they endure. They continue to fight, which I think is definitely a measure of their characters.

Rex Shelby Update

How on earth did I miss this?  It’s a press release, I think, from Rex Shelby’s attorney’s office, but there’s some new information in it that piqued my interest.

Two former Enron executives that are up for retrial are asking that the trial be blocked based on new information that has come out in a former prosecutor’s book. Rex Shelby, former engineering and operations chief for Enron Broadband, is represented by Ed Tomko of Curran Tomko Tarski in Dallas, Texas. They claim that passages from a recent book published by John Kroger, a former Enron Task Force prosecutor, “add to the evidence” that the Task Force went on a “broad fishing expedition” to get evidence and they are claiming that prosecutors “presented false evidence and incomplete and misleading testimony.”

This shows a continuation in the efforts of those indicted by the government to show that the U.S. Department of Justice’s Enron Task Force withheld evidence and testimony in order to receive convictions in the cases brought against the executives of Enron. Shelby is not alone in this quest. There have already been several trials, retrials and acquittals in the cases against the many Enron Broadband executives. Ed Tomko, the lawyer for Rex Shelby, asserts that in reading the excerpts and passages from Kroger’s book it appears he made up his mind to achieve convictions of these executives and ignored the complexity of the technology involved, withheld witness testimony that would support their case and “withheld evidence” that the executives could have used in their defense.

This demonstrates the continued complexities surrounding Enron. With the increased scrutiny placed on corporations and the intense focus on the sub-prime and mortgage lending crisis, there will be future developments.

I love seeing the prosecutor’s own words used against them. John Hueston’s essay about the Enron case should be used by every single defendant out there. He writes in the first paragraph that there was no proof that either Jeff Skilling or Dr. Lay did anything wrong so he’d have to work extra hard to secure a conviction.

I’m sure John Kroger – the Lesser Prosecutor – is equally as arrogant. I’ve not read his book but I’m glad that at least Shelby and his co-defs have. And I’m not shocked at all that they’ve found exonerating evidence in it.

John Kroger: Opponent Worked For Enron

John Kroger is what I call the “lesser prosecutor” in the Enron case (he prosecuted the Broadband Trial, which as of this date has produced exactly zero jury convictions). He is presently running for Attorney General in the great state of Oregon. While local politics aren’t very interesting to me, I find Kroger’s tactics fascinating. Apparently he’s been spreading rumors that his opponent, Rep. Greg Macpherson, formerly worked [as an attorney] for Enron or it’s subsidiary, Portland General. One can enjoy this on two levels: the nonspecific rumor itself, and the fact that Portland General was never accused of any wrongdoing whatsoever. Macpherson worked for a private law firm that did indeed do work for Portland General – but he never did. And even if he did, so what?

I think Kroger is angling to get the word “Enron” in the news right now because his prosecution was his most glitzy achievement to date, and his only route to any name recognition. Also it sets up a nice counterpoint: the Enron prosecutor and the Enron defender duking it out for the AG position.

I find Kroger’s tactics and his camera-loving a bit of a turn off.

Of course, the central issue here is this: all one has to do is mention the word Enron to raise tempers. I think this speaks to what I am trying to do – trying to shed light on exactly what Enron was so that it can’t be used as a throwaway term for every bad, dirty, fraudulent act that comes down the pike. Enron was a good company. It was run by good people. There was no fraud or conspiracy at Enron.

And if someone in my community were running for public office and had the word Enron on their resume, it would certainly enhance their chances of winning my vote.

Updated to add video

Today In Enron History

April 18, 2000 was a pivotal day regarding Raptors.  It was the day the SPE was approved by many executives, but notably not Jeff Skilling.   A document used as an exhibit for the prosecution during the trial shows that six executives signed the agreement – but the space next to Jeff Skilling’s name remained blank.  At trial, Skilling said he would have had no trouble at all signing the document but he never saw it.

April 18, 2005 the jury was seated for the Enron Broadband trial.  Five men from the fledgling division were accused of 170 counts of conspiracy, wire and securities fraud, insider trading and money laundering: Joe Hirko, former co-chief executive officer of EBS; Scott Yeager, former senior vice president of business development for EBS; Rex Shelby, former senior vice president of engineering and operations for EBS; Kevin Howard, former vice president of finance for EBS; and Michael Krautz, former senior accounting director for EBS.

During jury selection US District Court Judge Vanessa Gilmore told the potential jurors that the accused men defendants “want to know as the kids say, whether you’re going to be hating on them.”