This Wall Street Journal ($) article is the most thorough report yet on the sad case of Jamie Olis, the 38 year old former Dynegy mid-level tax manager who was convicted and recently sentenced to over 24 years in federal prison for his role in the Project Alpha financial scheme that essentially masked loan proceeds as cash flow from operations. Here are the previous posts on Mr. Olis’ case.
The entire WSJ article is interesting reading, and provides the best background piece to date on how Mr. Olis finds himself in this position. As I suspected based upon previous rulings by U.S. District Judge Sim Lake in Mr. Olis’ case, his defense team made a serious tactical error (at least in my view) by electing not to rebut the government’s evidence at trial of the damage that the Project Alpha deal caused to Dynegy shareholders:
After eight days of prosecution testimony, Mr. Olis’s lawyers believed they had poked enough holes in the government’s case to win. They rested without putting Mr. Olis on the stand — or any other witness.
That decision meant that, in considering the length of Mr. Olis’ sentence, the only evidence that Judge Lake had on damages resulting from the deal was that which the government offered:
The new federal sentencing guidelines work on a kind of point system, with more points and more prison time given if the case involves more victims, larger losses or using special training to execute a fraud. The key issue was the size of the loss suffered by Dynegy investors from the scheme: Anything more that $100 million would garner the maximum number of points, lengthening the sentence.
After considering several options, U.S. District Judge Sim Lake settled on a loss estimate of $105 million — the amount the University of California retirement fund lost on Dynegy stock, a hit the fund attributed to Project Alpha. With that loss and other factors, the guidelines recommended a sentence of 292 to 365 months.
As the article relates, Mr. Olis remains convinced of his innocence and, thus, remains unwilling to assist the government in its investigation and possible prosecution of other Dynegy executives and outside lawyers who were implicated in the scheme during Mr. Olis’ trial:
But such cooperation seems unlikely. Though “facing years away from his wife and daughter, Jamie remains strong in his convictions,” close friend Joan E. Quinn wrote to Judge Lake before the sentencing.
Mike Shelby, the U.S. attorney for the southern district of Texas, who supervised the case, isn’t sympathetic. “We have been rebuffed at every turn” by Mr. Olis, said Mr. Shelby. “I would ask the question, ‘Why don’t you help us?’ “
My speculation: “Despite the tactical errors of his defense, maybe because Mr. Olis did not deserve 24 years in prison.”
I continue to maintain that the criminalization of questionable business practices — combined with the government’s sledgehammer approach of forcing executives to defend themselves only at the risk of what amounts to a life prison sentence if they lose — is an extremely unfair and unwise governmental policy. And this from an administration that touts itself as “business friendly?”
If you are interested in reviewing more on this topic, Professor Ribstein over at Ideablog has provided some of the best analysis of the Olis case and this troubling trend of the government criminalizing such things as bad accounting.