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April 21, 2005

A masterful performance

werlein.jpgInasmuch as I had to appear at an hearing in federal court early this morning, I stuck around after my hearing to attend the sentencing hearing of former Merrill Lynch executive Daniel Bayly in connection with the Enron Nigerian Barge case, which has been a regular subject on this blog over the past year.

To say the least, I'm glad I stuck around.

In one of the most impressive judicial performances that I have witnessed in my 26 year legal career, U.S. District Judge Ewing Werlein, Jr. (picture above) -- in the face of widespread public and political expectation that anyone who had anything to do with Enron should be punished severely -- rejected the Enron Task Force prosecutors' pleas to punish Mr. Bayly with up to 15 years of prison and sentenced the former Merrill Lynch executive to 30 months in prison, six months of probation, a $295,000 restitution award, and a $250,000 fine. Later in the afternoon, Judge Werlein sentenced former Merrill executive James Brown -- who, unlike Mr. Bayly, also faced conviction on perjury and obstruction of justice charges over the barge deal -- to 46 months of prison and similar financial penalties as the ones assessed to Mr. Bayly.

Inasmuch as Mr. Bayly is the first defendant to be sentenced after being convicted at trial of an Enron-related crime, the far shorter sentence than the punishment that the prosecutors recommended was a bitter blow to the Task Force prosecutors, who did not attempt to hide their displeasure with Judge Werlein's ruling after the hearing.

Clearly in full command of the legal issues and evidence before him, Judge Werlein carefully stated his findings and conclusions, which included the following:

He categorically rejected the prosecution's controversial $44 million "market loss" theory as being contrary to the U.S. Supreme Court's recent decision in Dura Pharmaceuticals v. Broudo, in which the Court rejected the price inflation theory of causation that the Task Force prosecutors used in calculating the $44 million in market loss.

He declined to adopt the jury's $13.7 market loss theory, essentially on the same grounds as he rejected the government's theory.

He ended up calculating market loss at $1.4 million, which was the total profit that Merrill and the Enron-related partnership ultimately made on the Nigerian Barge deal.

He rejected the prosecutors' pleas for an upward adjustment of the sentence under the advisory sentencing guidelines "to make an example out of Mr. Bayly for Wall Street."

He granted a downward adjustment of the sentence under the sentencing guidelines because of Mr. Bayly's exemplary professional and personal record. "I may have never had a defendant before me who had a more glowing and extraordinary record of being a good citizen," noted Judge Werlein.

Although he noted the jury conviction of fraud, Judge Werlein observed that -- in the constellation of of Enron fraudulent conduct that former Enron CFO Andrew Fastow orchestrated -- Mr. Bayly's involvement in the barge transaction was relatively benign and not central to Enron's fraudulent transactions.

He noted that the Enron Task Force had obtained plea bargain sentences for two Enron executives who were central to Enron's more wide-ranging fraudulent conduct -- 10 years for Mr. Fastow and five years for former Enron treasurer Ben Glisan -- and that those sentences were less than the one that the prosecution was recommending for Mr. Bayly, who was a bit player in Enron's fraudulent conduct.

Then, as if to punctuate his rulings, Judge Werlein firmly rejected the prosecution's over-the-top call at the end of the hearing for Mr. Bayly to be taken into custody immediately, and allowed Mr. Bayly to report to prison voluntarily in accordance with a date to be scheduled in the near future by the Bureau of Prisons.

Judge Werlein delivered his rulings in his customary conscientious and professional manner that exuded the careful consideration that this man of extraordinary depth gave to the issues before him. After the hearing, I happened to get on the same elevator as Mr. Bayly and several members of his family. After having lived through a nightmarish prosecution and clearly expecting the worst when they came to court today, Mr. Bayly and each of his family members -- several of whom had tears in their eyes -- were clearly touched by Judge Werlein's courage, grace and fairness in sentencing Mr. Bayly.

Later, as I drove back to my office after the hearing, I reflected on Ewing Werlein, Jr. and the remarkable judicial performance that I had just witnessed.

When I moved to Houston as a young college student over 30 years ago, one of the first Houston families that my family and I met was that of Mr. and Mrs. Ewing Werlein, Jr., who hired a couple of my younger sisters to babysit their daughter and son. I recall my late father observing to me at the time: "Tom, if you want to become a gentleman, Mr. Werlein would be a fine model for you to follow."

Several years later, after finishing law school and becoming a young attorney in Houston, I learned quickly that Ewing Werlein, Jr. -- then a partner at Vinson & Elkins -- was one of the most respected lawyers in the Houston bar and a model for young lawyers.

Over a decade later, Judge Werlein's son, Ken, became an associate pastor at my family's church here in The Woodlands before going on to start his own church in northwest Houston. One of Ken's finest sermons during his time at my family's church was one that he gave on Father's Day in which he lovingly described his father's tender mentoring of his son and daughter.

Finally today, in the face of virtually unprecedented public animus toward anyone or anything having to do with Enron, Judge Werlein has shown judges everywhere the model of what a judge should aspire to be.

That's quite a fine legacy in my book.

Posted by Tom at April 21, 2005 1:22 PM |

Comments

Tom:

Well said. There are few men of greater character or dignity than Judge Werlein. It is nice to see an acknowledgement of the positive attributes of some of the finer members of our judiciary. Hopefully Judge Werlein's decision in this matter will signal the beginning of the end of the attempts by the government to prosecute bad business decisions as criminal actions.

Posted by: Matt Henneman at April 22, 2005 10:13 AM

While it is good to hear that the Judge was balanced under the circumstances, Dan Bayly should not be in jail. He was railroaded by our justice system which is out of balance and failed him. Important evidence for the defense was excluded from the trial.

I have heard from more than one source in the legal community that this verdict is vulnerable and likely to be overturned on appeal. That would be a just outcome.

Dan is universally believed to be one of the finest executives on Wall Street and our Justice Department seems to revel in taking decent people down, along with the guilty.

Posted by: Anon Y. Mous at May 19, 2006 10:39 PM

I commend you for disclosing your close personal connection with the Judge, such that the source of enthusiasm behind your sycophantic rose-petal parade is transparent. Nonetheless, after 26 years at the bar, you should know that judges don't put on "performances;" they simply weigh the evidence and address the relevant legal principals impartially.

The Judge's record is a fine one, and I have no doubt that he is a good man. But to hear you tell it, he is something akin to Gandhi, Dr. King, and the Messiah rolled into one -- all for simply applying the law correctly, as his job requires.

Posted by: CKS Author Profile Page at August 15, 2006 12:51 PM

CKS, although I have great admiration for Judge Werlein, that does not mean that I do not disagree with him on occasion. For example, as I have noted many times in other posts on this blog, I believe that the Judge granted the Enron Task Force too much latitude in the prosecution of the four Merrill Lynch executives. The Fifth Circuit has agreed with me on that issue.

Nevertheless, Judge Werlein showed great character and courage in rejecting the Task Force's proposed sentencings of the Merrill Four. Although he had a sound legal basis in doing so, another competent judge handed down this far different sentence in a similar case in the same environment as Judge Werlein was operating under. That Judge Werlein did not give in to the mob in sentencing the Merrill Four reflects the integrity of this fine man.

Thanks for reading Clear Thinkers.

Posted by: Tom K. Author Profile Page at August 15, 2006 1:21 PM

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