Monday, November 21, 2005
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).