A Houston Chronicle story (here) discusses two affidavits signed by former Enron CFO Andrew Fastow asserting that he and his wife properly accounted on their taxes for payments received from Michael Kopper, another Enron financial executive, related to the special purposes entities they controlled.  The affidavits, recently unsealed by the district court in Houston, were drafted after Fastow and his wife, Lea, were indicted, and apparently were going to be part of the defense to the charges that the money was a gift.  Lea Fastow ultimately pled guilty to a false tax return count and served a little less than one year for the offense, while Andrew Fastow’s guilty plea includes an agreement to serve a ten-year prison term. The affidavits will certainly be used for impeachment by the defense for former Enron CEOs Ken Lay and Jeffrey Skilling, and former chief accounting officer Richard Causey, in the conspiracy trial slated to begin in January 2006.  What defense lawyer doesn’t want to ask the ultimate question of the government’s star witness: "Which time were you lying, Mr. Fastow, then or now?" (ph)

The Enron Task Force disclosed its witness list for the Enron conspiracy trial and stated that it will likely cut down from the 89 names disclosed.  I’d certainly hope prosecutors will call fewer witnesses than that, or the trial will drag on for months rather than weeks and test severely the patience of the twelve citizens (plus alternates) picked for the jury.  Among those on the witness list are, as expected, former CFO Andrew Fastow and former Treasurer Ben Glisan.  Other former Enron executives who entered guilty pleas and who may be called are Tim Belden, Jeffrey Richter, Paula Rieker, Mark Koenig, Christopher Calger, David Delainey and Ken Rice (see the Houston Chronicle Enron Scorecard here for background on the witnesses). 

Interestingly, one witness not on the list is former Arthur Andersen audit partner Dave Duncan, who recently filed a motion to withdraw his guilty plea.  As noted in an earlier post (here), prosecutors did not oppose Duncan’s motion, and if granted by the court, he is unlikely to be available as a witness for either side at the trial due to the availability of the Fifth Amendment privilege because the government now could use his testimony against him in a future prosecution.  Of course, Duncan’s statements made to other witnesses could be used at trial if the government can establish that he was a member of the conspiracy that included defendant’s Ken Lay, Jeffrey Skilling, and Richard Causey. A Houston Chronicle story (here) discusses the government’s disclosure of the witness list. (ph)

U.S. District Judge Sim Lake concluded after a hearing that the claims of Enron defendants Ken Lay, Jeffrey Skilling, and Richard Causey of prosecutorial misconduct based on efforts to discourage potential witnesses from meeting with defense counsel were unfounded.  After hearing the testimony from local Houston attorneys Bob Sussman and Wendell Odom, who represent several former Enron employees, the judge said that he had not found prosecutorial misconduct, although he did not rule on the defense motion to dismiss.  Neither Sussman nor Odom testified that prosecutors from the Enron Task Force acted improperly, although the government’s listing of their clients as unindicted coconspirators certainly influenced the decision to speak with defense attorneys.  The outcome of the defense argument is not surprising, given how difficult it is to ever pin down a claim of prosecutorial misconduct.  A Houston Chronicle story (here) discusses the hearing, and Tom Kirkendall on the Houston’s Clear Thinkers blog has a more skeptical view of the hearing (here) and notes that the Enron Task Force attorney hinted at a possible indictment of other former Enron employees in the near future. (ph)

In addition to the government’s motion to dismiss the obstruction of justice charge (with prejudice) against Arthur Andersen, the Enron Task Force is not opposing a motion by former Andersen audit partner Dave Duncan to withdraw his plea agreement to an obstruction of justice charge.  Duncan’s position is that he admitted to the same crime that Andersen was convicted of, and the Supreme Court’s reversal of the conviction in that case means he too did not admit to the requisite intent for an obstruction conviction.

While the government’s position on Duncan’s motion appears to be consistent with the Andersen dismissal, a Bloomberg report (in the New York Times here) hints at another possible reason for permitting Duncan to withdraw his guilty plea.  The article speculates that, by withdrawing the plea, Duncan can refuse to cooperate with the defense lawyers in the Enron conspiracy prosecution because he will once again be exposed to possible prosecution for his conduct while at Andersen, and therefore could assert the Fifth Amendment if called as a defense witness. 

While the government also will not be able to call Duncan as a witness, the effect of Duncan’s availability on its case may be insignificant.  The government already has Duncan’s statements (and perhaps grand jury testimony if he appeared before that body), and if he recounted statements made by members of the conspiracy that allegedly included Ken Lay, Jeffrey Skilling, or (in particular) Richard Causey, Enron’s former chief accounting officer, then those may be admissible as coconspirator statements.  Under Federal Rule of Evidence 801(d), statements by one conspirator made during the course of and in furtherance of a conspiracy are admissible against other members of the conspiracy as substantive evidence and not subject to the hearsay rule.  Any recitation of statements by conspirators could be admissible, even without Duncan being available to testify.  If the defense sought to call Duncan, he would assert his Fifth Amendment privilege and refuse.  This may be one instance in which the district court, already concerned about allegations that the Enron Task Force has discouraged witnesses from cooperating with defense lawyers, could give serious consideration to requiring the government to grant Duncan immunity from prosecution to make him available to the defense.

Another potential benefit to Duncan’s plea withdrawal and the restoration of his Fifth Amendment privilege is that he cannot be called by the defense to testify about Andrew Fastow, Enron’s former CFO and the likely star witness in the government’s case.  Duncan had significant interaction with Fastow, and to the extent the defense will seek to undermine his recollections and credibility, Duncan could be a good source of information for such impeachment material.  If Duncan is beyond the reach of the defense, then it may cut off an avenue of attack on Fastow. 

I’m not much of a conspiracy theorist, but this is one time when the withdrawal of a guilty plea, something the government usually opposes quite strenuously, may have an upside for the prosecutors. (ph)

The claim by defendants Ken Lay, Jeffrey Skilling, and Richard Causey that prosecutors from the Enron Task Force have been intimidating potential witnesses into not cooperating with defense counsel will receive a hearing before U.S. District Judge Sim Lake.  The judge has called two Houston defense lawyers, Bob Sussman and Wendall Odom, and four former Enron executives, including one who entered a guilty plea to tax evasion, to testify regarding their interactions with the Task Force.  Daniel Petrocelli, Skilling’s lawyer, told that judge that only five out of 100 potential witnesses have been willing to meet with defense counsel.  Some wags would point out that 5% is a pretty high number when given the choice whether to meet with a lawyer or not, but that’s not the point.  Like many claims of prosecutorial misconduct, this one will be very difficult to establish, and it is unlikely the judge will grant the defense request to dismiss the charges.  Whether Judge Lake will order prosecutors to seek immunity for any witnesses is a close question, and the hearing may well affect that decision. A Houston Chronicle story (here) discusses the upcoming hearing.

On a different front, defense lawyers have asked the Fifth Circuit to remove a reference to Enron having "cooked the books" in the opinion reversing the sentence of former Dynegy executive Jamie Olis (United States v. Olis, issued Oct. 31).  The offending statement occurs on page 15 of the slip opinion, in the section finding that the district court’s fraud loss calculation was flawed that contrasts the effect of Olis’ conduct on Dynegy’s stock price with what happened at WorldCom and Enron: "The final type of case, most analogous to the one before us, concerns fraudulent transactions that ‘cook the books’ and prop up a company’s stock but do not, aside from the exceptional Enron or WorldCom situation, render the company worthless."

A Houston Chronicle story (here) quotes from a letter sent by defense counsel for the three defendants to the Fifth Circuit: "It is the defendants’ position, and they believe the evidence will show at their soon-to-begin criminal trial, that the books were not cooked at Enron, that its stock was not inflated through fraudulent means, and that the company’s collapse was not caused by the alleged fraud."  Could this be the beginning of the "market-destroyed-a-great-company" defense?  A tough one to advance, given the admissions of a number of individuals that Enron’s accounting did not reflect reality, but it is certainly worth arguing that the fraud was not the only cause of the company’s demise.  (ph).

Despite most people voting for no retrial in the unofficial Houston Chronicle poll that appeared online following the first Enron broadband trial, (see here) the government has decided to proceed.  They  have, however, re-indicted the individuals and made it a significantly leaner case.  According to CNN (Reuters) here, the Government decided to  re-indict the Broadband Five, separating them into three trials with 31 counts instead of 170. One of the benefits of being the government is that when you don’t win the first time you can change strategy to try and be more successful at the next go-around.  But the questions remains whether this will be met with defense objections.

(esp)

U.S. District Judge Sim Lake denied a defense request for summaries of witness interviews and copies of the grand jury testimony of certain witnesses on the ground that they contain Brady material, according to a Houston Chronicle story (here).  Most trial courts view pre-trial requests for Brady material as premature, although the judges will usually insist that the government affirm its commitment to provide all exculpatory information, a procedure that provides little comfort to defense counsel but realistically is all that can be expected at this point in the proceeding.

It’s not as much fun as Ed McMahon showing up on your front door with the prize patrol, but the extensive jury questionnaire in the upcoming Enron conspiracy trial has been delivered to 400 residents of the Southern District of Texas.  The questionnaires include approximately 70 questions regarding the background and work history of the recipients, including investments and connections to law enforcement.  Needless to say, the wording of the questions has been a source of contention between prosecutors from the Enron Task Force and defense counsel, and a Washington Post article (here) notes that U.S. District Judge Sim Lake has generally favored the defense side in permitting broader, more open-ended questions designed to uncover potential bias.  Out of the 400 who received their envelopes, approximately 100-150 will be called to the courthouse in January for further examination, and from that pool the jury will be picked.  Tom Kirkendall on the Houston’s Clear Thinkers blog has an interesting post (here) on the questionnaire and course of the upcoming trial. (ph)

Defense lawyers usually tell their clients who have been charged with a crime to lay low and not make any public comments.  Former Enron CEO Ken Lay, who has a website to advance his position, will be speaking to the Houston Forum on December 13 about the downfall of Enron.  The speech, a bit more than a month before jury selection begins for the conspiracy trial of Lay, Jeffrey Skilling, and Richard Causey, is advertised on the Forum website (here) in the following way:

Ken Lay speaks on the collapse of the wunderkind company one month prior to his trial in U.S. District Court. We have heard from the Enron Whistleblower Sherron Watkins and New York Times Investigative Reporter Kurt Eichenwald, author of "A Conspiracy of Fools." Now we will hear from the man himself about the collapse that rattled Wall Street and the corridors of political power.

A Houston Chronicle story (here) discusses the planned speech, and quotes Lay’s attorney, Mike Ramsey, did not express any discomfort with the speech, noting that "Enron’s collapse hurt the community. I think Ken owes it to the community to explain his view."  Does this mean the Lay is likely to testify at the trial to  present his views to a much more important audience: the jury?  I suspect at least one member of the Enron Task Force will be in attendance to gather a little intelligence. (ph)