Maybe it would be like the Beatles attending a Rolling Stones concert when former HealthSouth CEO Richard Scrushy attended part of the Enron conspiracy trial of former CEOs Ken Lay and Jeffrey Skilling. A post on the trial blog of the Houston Chronicle (here) quotes Scrushy as stating about former Enron CFO Andrew Fastow, "I see this guy as a very dishonest man . . . I wouldn’t trust him if he said the building were on fire." Concerning the defendants, Scrushy said, "I don’t think the CEO had any idea any of that was going on." That is certainly consistent with the "honest-but-ignorant CEO" defense offered at his trial in Alabama, and whether the jury in Houston will have the same reaction waits to be seen. No word yet whether there have been any Elvis sightings, but then the trial still has a ways to go. (ph)
Category: Enron
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According to the press, Andrew Fastow told a good bit today about the fraud he committed at Enron. (see Houston Chronicle here), (Washington Post here). And although so far there does not appear to be direct hits on Ken Lay, this was not a stellar day for Jeffrey Skilling.
It sounds like the focus on Lay was regarding his comments after the company starting falling. (See Washington Post here). But one has to wonder, what should a CEO say and do when they see their company crumbling. On one hand they can’t be dishonest to the shareholders and public. On the other hand, if something negative is said it will probably damage the company more. Was this one of the moments when "silence is golden."
(esp)
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This coming week in the trial of Ken Lay and Jeff Skilling there will likely be a larger than usual courtroom crowd as Tuesday Andrew Fastow is scheduled to testify. (see Houston Chronicle here, Washington Post here). Continuing Monday will be witness Kevin Hannon, former chief of Enron broadband who is scheduled for cross-examination. For a wonderful play by play audio and transcript of the trial, check out Carrie Johnson’s reports on the Washington Post here.
Fastow has faced the blame in much of the Enron fall, and taking the witness stand as a government witness will provide him a forum to speak back. The key here is likely to be cross-examination. Will he be able to show knowledge on the part of Skilling and Lay? And what will be the effect of the "deal" he received from the government.
As the trial continues, there has been talk of Ken Lay’s funds dwindling. (see here) Some bloggers on the Houston Chronicle are not convinced,and it sounds like they will not be convinced until they see him living in a trailer. (see here) This may be the sentiment in Houston, a tough crowd for this trial.
(esp)
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The Houston Chronicle reports here that this week will start with Wesley Colwell, one of Enron’s accountants. Never charged, testifying as part of his cooperation, and not listed as a key player in the Chronicle’s playbill – it is likely that this witness will be used to support aspects of the prosecution’s financial case. Colwell, who paid more than $500,000 to settle a securities matter, received a four year suspension from the SEC. (see here)
(esp)
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International issues arise in more and more cases, so it is not surprising to see issues of this nature in cases coming from Enron matters. According to CNN Money here, three bankers who were alleged to have worked on some matters with Andy Fastow have lost a court appeal in their fight against being extradited to the United States. Their next step will be to go to the House of Lords.
Interestingly, the ability to extradite them quickly comes from the passage of a treaty pertaining to terrorism matters, a treaty that provides an expedited process for extraditions to the United States.This case raises many issues: 1) Will the United States now be attempting to extradite more individuals from outside this country who might allegedly be involved in white collar crime conduct in this country? 2) Will other countries be as forthcoming to allow their citizens to be extradited to the U.S. for trial? 3) What are the ramifications when a country refuses to extradite its citizens to the United States? 4) Will businesses outside the United States be reluctant to do business with this country out of fear that it will subject them to extraterritorial jurisdiction here?
(esp)
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Mark Koenig finally finished testifying in the Lay/Skilling trial, to be replaced on the witness stand with Ken Rice. This is not the first time Ken Rice is testifying as he previously appeared at the Enron Broadband trial. (see Houston Chronicle here) The Houston Chronicle notes that Rice is testifying against his "pal," a man who he went with on a "dirt-bike tour of Baja California, a race across the Australian outback and an outdoorsy trip to the southern tip of South America."
It is common to see someone testify against their best friend in a federal criminal trial. The pressure placed upon an individual to talk or face years in prison can be overwhelming. Some argue that this government pressure results in false testimony, while others claim that this pressure just allows the prosecution to secure information that they normally would not have been able to obtain. Irrespective of the view one takes on this issue, the net result is clearly going to be that the person who is subjected to having their best friend testify against them will likely never trust anyone again. Perhaps that is acceptable if the accused is convicted. But what happens to that person if they are acquitted?
(esp) (Note – check out Tom Kirkendall’s Houston Clear Thinkers Blog here for some fascinating comments on Koenig’s testimony.
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As the Skilling/Lay trial continues, it is obvious that the defense is having to contend with presenting technical items to the jury. Mark Koenig, "Enron’s former investor relations chief," has now been subject to direct, cross, redirect, and tomorrow re-cross. (see CNN Reuters here). Tapes have been played to the jury, and how much the jury is grasping of all of this remains to be seen. Some of the articles in the media of yesterday include – "Defense: Wall Street Knew of Enron Woes Early" ( see here), Enron’s Defense Could Be Brilliant or Crazy (see CNN here),
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Houston Chronicle reports here how Attorney Petrocelli, counsel for Jeffrey Skilling, has been using the term "contract" to replace the term "plea agreement." Much of the key forthcoming testimony in the trial will be from government witnesses who have entered into deals in order to avoid long jail terms. The deals obviously require their cooperation, and this cooperation comes in the form of their testimony in this and other cases. The Chronicle quotes co-blogger Peter Henning who states, "[w]hen people hear ‘contract’ they think quid pro quo."
"Contract" seems like a sophisticated term to be using in this jury trial. Attorney Petrocelli couldn’t possibly be considering turning this term around by using a possible second meaning – that being – a contract is when you "take a hit out on someone." Somehow I can’t imagine a jury would find this twist on the term amusing.
The Houston Chronicle discusses the way Dick DeGuerin, a Houston criminal defense lawyer, approaches this subject – that being, a plea is a "legal form of bribery." In actually, this description is very accurate, as the issue was presented to an en banc Tenth Circuit Court of Appeals in the famed case of Singleton v. United States, where they reversed a panel decision finding that prosecutors are not subject to the bribery statute when they "giv[ ], offer[ ], or promise[ ] anything of value for or because of the testimony." The court held that the word “whoever” does not include an Assistant United States offering a witness leniency in exchange for the witness providing truthful testimony at the trial of another individual. The US Supreme Court denied certiorari in the Singleton case.
(esp)
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In a sure sign the the Enron conspiracy trial is a major event in American legal history, or that internet entrepreneurs will stop at nothing to create a gambling opportunity (although probably not with Rick Tocchet’s former operation), there are at least two places on which one can place a bet on the outcome of the trial. A New York Post story (here) discusses the internet gaming site betCRIS.com, which has the odds of a conviction overwhelmingly favoring a conviction (see AP story here). The site operates out of Costa Rica, and it’s not clear whether the person setting the betting line has any legal training, or has been put to sleep in the courtroom by the turgid pace of the trial. Unlike a sporting event in which all wagering closes at the start of the contest, the Enron trial is a very slow moving train, so the odds will likely fluctuate with ebbs and flows of the proceeding. CNN.Com reports (here) that Intrade Exchange, a Dublin, Ireland-based futures firm, has set up futures contracts on the outcome of the trial, with purchasers able to buy units pegged to whether Skilling will be convicted on four or more of the seven counts against him and Lay convicted on 16 or more of the 31 counts against him. Intrade has a number of futures contracts based on different types of events, including whether the U.S. will bomb Iran before June 2006 and the 2008 presidential nomination races.
Given the pace of the Enron trial, which started with a bang when Judge Sim Lake picked a jury in one day and has now had the first government witness chew up seven trial days with at least one more to come, anyone who bet the under on trial length has a sure loser (see Tom Kirkendall’s post (here) on the Houston’s Clear Thinkers blog discusses the timing issues). Rather than betting on a conviction, which is rather unseemly, an interesting exercise would be to figure out other prop bets on the trial that have nothing to do with the outcome, similar to prop bets on the Super Bowl like which team will win the coin toss or score the first touchdown. For example, who will be the first attorney to attempt a Johnnie Cochran rhyme, which defendant will testify first, or will the judge will hold anyone in contempt. Feel free to add suggestions in the comment section. (ph)
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