Peter Elkind of The Smartest Guys in the Room fame has now turned his sights toward class-action plaintiff’s law firm, Milberg Weiss Bershad & Schulman (prior posts here). In this lengthy article (hat tip to Peter Lattman) entitled The law firm of Hubris Hypocrisy & Greed, Elkind uses his same irreverent Smartest Guys-style in telling the tale of how Milberg Weiss became a criminal defendant. For example, take Elkind’s description of L.A. lawyer-entreprenuer, Seymour Lazar, who the government alleges took illegal kickbacks from Milberg Weiss:

When Lazar appeared in federal court in L.A. earlier this year after being charged with fraud, conspiracy, and obstruction of justice in the Milberg Weiss case, it seemed a miracle he was still alive. A small, wild-haired man, Lazar, now 79, sat in a wheelchair and listened to the proceedings with a hearing aid. Later court filings detailing his medical history – and asking for the charges to be dismissed because the stress of a trial was likely to kill him – reported that Lazar was suffering from congestive heart failure, diabetes, renal failure, high blood pressure, anemia, gout, strokes, a suppressed immune system, and cancer (in remission).
Yet Lazar, who had pleaded not guilty, remained combative and defiant. He’d recently protested his innocence on the front page of the Wall Street Journal, declaring, “I swear, they treat me like an absolute thug. . . Who did I cheat? Did anybody get screwed?” While Milberg Weiss was insisting that it had no idea its “referral fees” were ending up with plaintiffs, Lazar admitted that Milberg had paid him. He simply argued that no one got harmed because the money came out of the law firm’s pockets.

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This news just in — the Fifth Circuit Court of Appeals has denied the Enron Task Force’s petition for en banc review of a Fifth Circuit panel’s decision that struck down the wire fraud and conspiracy convictions of four Merrill Lynch executives involved in the controversial Enron-related Nigerian Barge case.

The Fifth Circuit’s now final decision in the Nigerian Barge case calls into question a number of convictions obtained by the Task Force during its reign of terror over the past five years, not the least of which is the conviction of former Enron CEO Jeff Skilling, who is scheduled to be sentenced on Monday.

Regardless of the impact of the Fifth Circuit’s decision in the Nigerian Barge appeal on the other Enron-related cases, here’s hoping that the Fifth Circuit’s decision of today puts a nail in the coffin of the Task Force’s case against the four Merrill Lynch executives, three of whom are subject to a retrial as a result of the Fifth Circuit panel’s decision (one Merrill defendant, William Fuhs, had his conviction reversed and is not subject to retrial).

The damage to justice and the rule of law that has resulted from the Task Force’s pursuit of this abomination of a case is bad enough. But the damage that has been done to the careers and families of these men alone calls for this sordid chapter in the criminalization of business in the post-Enron era to be closed.

So, now it’s Debra Wong Yang, U.S. Attorney for California’s central district, is resigning to take a job with Gibson, Dunn & Crutcher LLP where she will serve as co-chair of the firm’s crisis management practice group. Sounds sort of like a legal SWAT unit, don’t you think?
At any rate, Yang — like Arthur Andersen-slayer Andrew Weissman before her — is moving on to greener pastures after spearheading the indictment of the Milberg Weiss law firm. Larry Ribstein — who just used Yang’s pursuit of Milberg Weiss in his recent talk on arranging key witness testimony — is wondrous about this development:

The WSJ reports that Debra Wong Yang, the U.S. Attorney in Los Angeles, has parlayed her prosecution of Milberg into a plum partnership at Gibson, Dunn & Crutcher. Bruce Kobayashi and I recently discussed Ms Yang’s handiwork: the irony of an indictment alleging that Milberg bought witness cooperation supported by a government plea deal with a leading witness. Now Ms Yang will earn big bucks to defend clients against similar government tactics. Is this a great country or what?

In this New York Sunday Times article, Mike McIntire explores the above question regarding the true nature of future New York Governor, Eliot Spitzer.
I could have saved McIntire a lot of time. Seriously. A lot of time.
Spitzer and his ilk — whom we have seen on display in numerous business-related prosecutions in the post-Enron era — remind me of what Ayn Rand observed about socialists:

“[T]he truth about their souls is worse than the obscene excuse you have allowed them, the excuse that the end justifies the means and that the horrors they practice are means to nobler ends. The truth is that those horrors are their ends.”

As noted earlier here, here and here, the federal govenment’s crackdown on Internet gambling is a a wasteful exercise in nanny-state futility, but also damaging to important American markets. Following up on that theme, University of Texas finance professor Paul Tetlock and Robert Hahn, director of the American Enterprise Institute-Brookings Joint Center, pen this NY Times op-ed appropriately entitled “Short Odds for Ignorance” in which they make the point that the Internet gambling ban will likely shut down important and productive information markets such as TradeSports:

The bigger economic story is how this act, by effectively prohibiting Internet betting, could unintentionally slow the emergence of new tools that have the potential to improve the productivity of the private sector and the government. Sadly, this is an aspect of the measure that both its supporters and its opponents seem to have overlooked. [. . .]
For instance, we now have markets for predicting political and economic events, where you can wager on the monthly unemployment rate or the outcome of the presidential race. (If you visit TradeSports.com, you can bet on Hillary Clintonís chances of becoming the next president: a contract purchased for $1.91 would yield $10 if she wins ó implying that the senator has about a 1 in 5 chance of winning.)
Why should we care? Because information markets, which essentially reflect the collective wisdom of savvy bettors, can help us make more accurate forecasts. Information markets have outperformed experts in a number of areas, whether itís predicting point spreads in football games or elections or printer sales. There are more than 20 Web sites that offer information-market securities, including those run by Goldman Sachs and the University of Iowa.

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So, let’s see if I’ve got this straight.
Patricia Dunn, who was probably a bit over her head in her role as chairperson of the Hewlett-Packard board of directors, uses bad judgment in authorizing an investigation into fellow board members over leaks of confidential company information. Although dubious, her judgment to proceed with the investigation is ratified by both in-house and outside counsel of the company, as well as the CEO of the company.
After it is revealed that the investigation went over-the-top in examining phone records of various folks who may have been involved in the leaks, Dunn does the right thing by owning up in public statements and before Congress regarding her role in the matter, apologizes for her lapse in judgment and resigns from the board.
Subsequently, Dunn is indicted on felony charges stemming from the affair by this bird, whose judgment is questionable, to say the least. By the way, Dunn is scheduled to start six months of chemotherapy for recurrent ovarian cancer tomorrow.
Meanwhile, with the exception of a few bloggers, the key corporate issues driving the HP affair — such as preservation of confidential company information in board deliberations and the impact of a dysfunctional board on a company — are largely ignored.
So, a question for you. Based on the foregoing, why should any businessperson in the future, who gets embroiled in a similar lapse in judgment as Dunn here, try to do the right thing or be particularly concerned about the leaking of confidential company information? What policies are the Dunn indictment supposed to encourage? Not having lapses in judgment? Not much chance of that. Perhaps it would be better to encourage people to do the right thing, such as Dunn did. But then, we wouldn’t have a need for an indictment, would we?

Amidst the publicity on the Andy Fastow sentence and the upcoming sentencing hearing of Jeff Skilling, the legal wrangling related to the conviction of former Enron Broadband executive Kevin Howard has been flying somewhat under the radar screen. Howard is currently scheduled to be sentenced by U.S. District Judge Vanessa Gilmore on October 30.

You will recall that Judge Gilmore inexplicably decided to try Howard and his fellow former Enron Broadband executive Michael Krautz on wire fraud, falsifying books and records and conspiracy charges just down the hall from the intensive media glare of the final weeks of the Lay-Skilling criminal trial.

The jury in the Howard case deliberated at the same time as the Lay-Skilling jury was deliberating in an adjacent conference room! Not only that, the Howard jurors saw first hand the media firestorm at the federal courthouse on the Thursday before the Memorial Day weekend when the Lay-Skilling verdict was announced and, not surprisingly, the Howard jury returned a split verdict the following Tuesday convicting the “boss” Howard and acquitting the subordinate Krautz.

Now, however, it appears that the Fifth Circuit’s recent decision in the Enron-related Nigerian Barge appeal may be Howard’s ticket to reversing the outrage represented by his conviction. Based a motion filed late last week, Howard’s attorneys persuasively argue that the Fifth Circuit’s decision in the Nigerian Barge appeal requires that Howard’s conviction be vacated because — just as with the convictions of the four Merrill Lynch executives in the Barge case — the Task Force improperly placed the round peg of Howard’s actions on behalf of Enron Broadband into the square hole of depriving an employer of “honest services” under 18 U.S.C. ß 1346:

The [Fifth Circuit’s Nigerian Barge decision] holds that an employee deprives his employer of “honest services” under 18 U.S.C. ß 1346 only when the employee seeks to promote his own interests instead of the interests of the employer. Conversely, conduct — even otherwise illegal conduct — does not violate Seciton 1346 where it is “associated with and concomitant to the employer’s own immediate interest.” . . . The Government’s allegations against Mr. Howard describe this exact scenario. . . . Whatever elese one may say about the Braveheart transation, it was designed, in whole or in part, to promote the interests of Enron Broadband Services and not purely the interests of Kevin Howard. Under [the Fifth Circuit’s Nigerian Barge decision], such conduct does not fun afoul of Section 1346.

Howard’s lawyers go on to explain that the Enron Task Force’s case against Howard was precisely the same as the Task Force’s odious case against the four Merrill Lynch executives — taking a risky but legitimate transaction and criminalizing it through assertion of a “deprivation of honest services” violation that is meant to apply in cases involving bribes, kickbacks or related self-dealing between a corporate employee and a third party. This is precisely the point that U.S. District Judge Lynn Hughes made during the hearing over a year ago to accept the plea bargain of former Enron executive Christopher Calger, a plea bargain that Calger is now attempting to disavow.

In short, Howard’s motion reiterates the reality that the true criminal activity in regard to the Enron — such as the embezzlement of funds by Fastow and a few of his close associates, such as Ben Glisan and Michael Kopper — was actually limited to a few individuals. The Task Force has obtained the convictions of many others largely through bludgeoning of plea bargains or appealing to jurors’ resentment of wealthy businesspersons while asserting dubious applications of criminal law, such as the “honest services” violations alleged against Howard.

A mainstream media and general public largely satisfied with demonizing Enron executives are not concerned that the awesome force of the government’s prosecutorial power is being wielded irresponsibly against Howard, the four Merrill Lynch executives, Calger, Jeff Skilling and many other former Enron executives who have copped pleas out of fear of long prison sentences.

Here’s hoping that the judiciary — the most important check on the Executive Branch’s prosecutorial power — is not as comfortable with the Task Force’s abuse of that power.