Wednesday, May 11, 2005
Lest we forget about the various Enron proceedings that are taking place, here's a short update:
Enron Broadband Services Trial: A funny article in the Houston Chronicle (here) expresses the frustration of the reporter, and probably the jurors, as the trial descends into tech-speak -- but then, the case is about whether the various statements by the five defendants were misleading about the state of Enron's broadband services. The current witness is a tech specialist, with both the direct and cross-examinations getting into the knotty details of the software. Imagine having someone from a tech helpdesk testifying. It has gotten so bad that one lawyer compared the case to a "civil trial," truly damning words. The bad news for participants is that the case is likely to last at least another four weeks.
Merrill Continues to Pay Attorney's Fees for Convicted Employees: The Enron Nigerian Barge trial resulted in the conviction of four Merrill Lynch employees, and the two remaining Merrill defendants are scheduled to be sentenced tomorrow by U.S. District Judge Ewing Werlein. A Wall Street Journal article (here) states that the firm (still affectionately known as "Mother Merrill" to some) will continue to pay the attorney's fees of the employees through their appeals. To this point, Merrill has paid over $17 million to the lawyers, and the government apparently is now complaining in a letter to the district court about the continued payment of the fees and the firm's failure to seek repayment. The duty to pay attorney's fees on behalf of an employee for conduct in the course of employment is governed by whatever contract they might have, and corporate law authorizes such agreements. Merrill is a Delaware corporation, and Delaware General Corporation Law Section 145 (here) permits such payments in a criminal prosecution so long as the officer or director "had no reasonable cause to believe the person's conduct was unlawful." Whether the officer's can have their attorney's fees paid (Delaware law authorizes advancement of expenses) is up to the board of directors, which must decide whether the employees were acting in good faith. Although the Department of Justice views the payment of attorney's fees as somehow suspicious (see the Criminal Division's Principles of Federal Prosecution of Business Organizations (here) on this issue), I don't think the government has any basis to question a business judgment made by a corporation about its obligation to pay the attorney's fees of its officers and directors. Shareholders can certainly object to how their company uses its funds, but that is a matter of internal corporate governance and not an issue in a criminal prosecution.
Sentencing Dates for Cooperating Former Enron Execs Postponed: Not surprisingly, the sentencing dates of four former Enron executives who reached plea agreements with the government have been pushed back. Among the four are former CFO Andrew Fastow and his top aide Michael Kopper, who will be key witnesses in the 2006 conspiracy trial of former CEOs Ken Lay and Jeff Skilling (along with former chief accounting officer Richard Causey). Their sentencing has been set for June 2006, which will probably be after the trial if finished -- at least I hope it's done within five months. A Houston Chronicle article (here) discusses the sentencing postponements. (ph)