Longtime Houston attorney Tom Kirkendall's observations on developments in law, business, medicine, culture, sports, and other matters of general interest to the Houston business, professional, and academic communities.
Or the FBI using its resources to investigate this?
The FBI shouldn’t be involved in such matters at all. But if the G-Men insist on investigating, they should be investigating why some institutions of higher education are getting away with making great wealth from their football programs while colluding to restrict the compensation paid to the predominantly black professional athletes who take enormous risk to life and limb to generate that wealth.
If Cam Newton received money to play for Auburn, I’m glad he got it and that he didn’t take the discounted payment from Mississippi State. He deserves every dime that he was paid.
R. Allen Stanford is not a popular person to defend.
But one does not have to defend what Stanford allegedly did in building his financial empire to decry the treatment that he has received from the federal government since his indictment in early 2009.
Earlier posts on this blog pointed out the federal government’s unusually brutal treatment of Stanford pending his trial on business fraud charges that will probably take place sometime next year. The U.S. Department of “Justice” routinely responded to Stanford’s mistreatment by contending that nothing unusual had occurred with regard to Stanford and that he was being treated the same as any other defendant who was being held in prison pending trial.
Well, that contention appears to be bullshit, to put it mildly.
The Daily Mail Online finally obtained photos of Stanford after he had been attacked in prison (H/T Henry Blodget) and they depict injuries that are even worse than those described in Stanford’s court pleadings.
Now, before our eyes, the presumption of innocence has been eviscerated in the Stanford case with nary a peep of protest other than from Stanford’s attorneys and a few bloggers.
“When the last law was down, and the Devil turned ’round on you, where would you hide, the laws all being flat?”
“[D]o you really thing you could stand upright in the winds that would blow then?”
Oral argument before a Fifth Circuit Court of Appeals panel in Houston occurs today on the U.S. Supreme Court’sreversal and remand of former Enron CEO Jeff Skilling’s appeal of his criminal conviction.
Although the Supreme Court did not overturn all counts of Skilling’s conviction, it remanded the remaining counts to the Fifth Circuit to determine whether any of them should stand given the Supreme Court’s reversal of the other counts based on the invalid “honest services” wire fraud charges.
In essence, Skilling is arguing on remand that the government relied on the amorphous nature of that invalid theory of criminality in obtaining a conviction against him on numerous different charges. Having relied on that invalid theory of criminality, Skilling contends that the government cannot now prove that the jury didn’t rely on it in convicting Skilling on the other charges, too. Although results rarely occur as they should in misdirected criminal prosecutions, Skilling really should win his release and a re-trial.
Meanwhile, rather than address the merits of Skilling’s important case, the Wall Street Journal – which already has a dubious record of coverage in Enron-related criminal prosecutions – serves up the following characterization of the Enron-related prosecutions in this recent article on another miscarriage of justice related to the demise of Enron:
The U.S. government’s Enron Task Force criminally charged about 30 individuals, including Mr. Brown, but said there were more than 100 other unindicted co-conspirators. The task force got guilty pleas from more than a dozen people and won a 2006 fraud conviction against former Enron President Jeffrey Skilling.
Some of the group’s courtroom victories have been upended on appeal. Mr. Skilling’s conviction and 24-year sentence are under appeals-court review following a Supreme Court decision invalidating part of his case.
“Some of the [Enron Task Force’s] courtroom victories have been upended on appeal“? In reality, not any of the criminal convictions that the Enron Task Force obtained after a trial have been upheld on appeal. Not one.
Seems like something that the nation’s leading business newspaper would get right, don’t you think?
Legal education pervasively sends law students the message that corporate lawyering is a less moral and socially desirable career path than so-called “public interest” lawyering. The corporate world is viewed as essentially corrupting and alienating, while true self-actualization is possible only in a Legal Aid office.
Our students get these messages not only in law school, of course, but also in the media. Films like “A Civil Action” or “Erin Brockovich” illustrate the general ill repute in which corporations-and corporate lawyers-are held, at least here in Hollywood.
In my teaching, I have chosen to unabashedly embrace a competing view. I tell my students about Nicholas Murray Butler, president of Columbia University and winner of the Nobel Peace Prize, who wrote that: “The limited liability corporation is the greatest single discovery of modern times. Even steam and electricity are less important than the limited liability company.”
I tell them about journalists John Micklethwait and Adrian Wooldridge, whose magnificent history, The Company, contends that the corporation is “the basis of the prosperity of the West and the best hope for the future of the rest of the world.” [. . .]
The corporation also has proven to be a powerful engine for focusing the efforts of individuals to maintain economic liberty. Because tyranny is far more likely to come from the public sector than the private, those who for selfish reasons strive to maintain both a democratic capitalist society and, of particular relevance to the present argument, a substantial sphere of economic liberty therein serve the public interest. Put another way, private property and freedom of contract were “indispensable if private business corporations were to come into existence.” In turn, by providing centers of power separate from government, corporations give “liberty economic substance over and against the state.” [. . .]
And so I ask my students: What explains the relatively rapid development in the mid-19th century of a recognizably modern corporation and, in turn, that entity’s emergence as the dominant form of economic organization?
The answer has to do with new technologies – especially the railroad – requiring vast amounts of capital, the advantages such large firms derived from economies of scale, the emergence of limited liability that made it practicable to raise large sums from numerous passive investors, and the rise of professional management.
For the most part, these advantages remain true today. The corporation remains the engine of economic growth, both at the level of giants like Microsoft and garage-based start-ups.
The rise of the corporate form thus has “improved the living standards of millions of ordinary people, putting the luxuries of the rich within the reach of the man in the street.” The rising prosperity made possible by the tremendous new wealth created by industrial corporations was a major factor in destroying arbitrary class distinctions, enhancing personal and social mobility. Many of the wealthiest businessman of the latter half of the 19th Century and the 20th Century began their careers as laborers rather than as scions of coupon-clipping plutocrats.
And so I put it to my students this way: You want to help make society a better place? You want to eliminate poverty? Become a corporate lawyer. Help businesses grow, so that they can create jobs and provide goods and services that make people’s lives better.
So, why are we doing this to those who are attempting to facilitate the benefits of this marvelous creation?
A couple of months ago, this post reviewed the living hell that former Merrill Lynch banker James Brown had been living for the past seven years as he he attempted to salvage his reputation and career after being targeted in the now-thoroughly discredited Nigerian Barge prosecution that arose from the demise of Enron.
As that earlier post noted, after the Fifth Circuit reversed Brown’s conviction on honest services wire fraud, the DOJ had inexplicably teed up yet another trial of Brown, which was scheduled to begin next week.
Meanwhile, Brown was seeking a dismissal of the case and of his conviction on additional charges of perjury and obstruction of justice. Those latter charges arose from Brown protesting his innocence to the grand jury that indicted Brown and the other Nigerian Barge defendants on the fallacious honest services wire fraud charges.
Sort of wrong to be convicted of perjury and obstruction for saying that you’re innocent of something that is not a crime, don’t you think?
At any rate, earlier in the week, the prosecution in Brown’s case out of the blue requested a continuance of the September 20 trial setting. The government’s dubious grounds for the continuance were that Brown might win an appeal on his perjury and obstruction charges, so the District Court should wait on the outcome of that appeal so that all of the charges could be tried at one time.
After seven years, that’s a flimsy reason for a continuance, but at least it’s colorable.
However, as Brown’s opposition to the government’s motion reveals, the reason was also false. The real reason that the government was seeking a continuance was that the prosecution had no intention of prosecuting the case against Brown. In short, the government was only seeking to extend Brown’s ordeal:
In sum, the government’s motion for an indefinite continuance reveals that the government has put the Court and Brown through months of stress, anxiety and litigation over three counts it has not even intended to bring to trial. Despite being only a few days from the third trial setting, our trial preparation has disclosed that the government has not contacted any of the persons who have knowledge of the transaction and who it presented in its case-in-chief in 2004. Indeed, it has not even contacted its “star witness,” Ben Glisan, from Brown I “in years.” Nor has it contacted its lone Merrill Lynch witness, Tina Trinkle, about Brown’s trial. Trinkle was the only individual whose testimony even alleged that Brown might have participated in one internal Merrill call regarding the government’s purported criminal conspiracy.
The government’s failure even to notify its key witnesses of the long-scheduled September 20 trial suggests that the government has been using the court to run an outrageous “bluff”-demonstrating the Department’s continuing disingenuous gamesmanship with Brown’s life and liberty. No continuance shall be granted for “lack of diligent preparation or failure to obtain available witnesses on the part of the attorney for the Government.” . . . This Court must now enforce Brown’s right to a trial as scheduled and deny the government’s motion.
Not surprisingly, U.S. District Judge denied the government’s request for a continuance on Wednesday. The government then filed its motion to dismiss the case entirely shortly thereafter, which Judge Werlein immediately granted.
So, what was the government’s purpose in putting James Brown and his family through the wringer over the past seven years?
Ayn Rand’s observation about socialists who use state power to further their supposedly altruistic goals seems particularly apt:
“[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.”
Update: Larry Ribstein, who also has been appalled at the government’s conduct of this and related criminal cases for years, provides his customary keen insight to these latest developments.
On the heels of his brief on the meritsin support of his motion to be released from prison pending further disposition of his case by the Fifth Circuit Court of Appeals and the U.S. District Court, Jeff Skilling filed his reply brief below (download it to review the bookmarked version) to the government’s merits brief opposing his proposed release.
Skilling’s brief hammers home why he should be released:
As the standard is articulated in [Neder v. U.S., 527 U.S. 1 (1999)], the case on which the government relies, a court cannot find the presence of a factually supported invalid theory to be harmless beyond a reasonable doubt where the defendant contested the [valid theory] and raised sufficient evidence to support a contrary finding. 527 U.S. at 19. In that situation, it cannot be presumed that rational jurors necessarily would have accepted the valid theory, and so it remains impossible to tell which theory the jury selected.
As shown below, the government cannot prove that the honest services error was harmless because, for every count of conviction, the record, the instructions, evidence, and argument allowed a rational juror to reject the valid theory asserted, while relying on the invalid honest-services theory to return a conviction. Because it is thus impossible to tell whether the jurors selected the valid or invalid path to conviction for any count, every count must be reversed.
Stated simply, the government relied on the amorphous nature of an invalid theory of criminality in obtaining a conviction against Skilling on numerous different charges. Having relied on that blather, the government cannot now prove that the jury didn’t rely on it in convicting Skilling on all charges.
Although results rarely occur as they should in misdirected criminal prosecutions, Skilling really should win his release and a re-trial. Stay tuned. Jeff Skilling’s Reply Brief on his Motion for Bail
After beginning with the example of the absurdly over-the-top local federal criminal case against local orchid importer George Norris, the article hammers home the stark statistics:
Justice is harsher in America than in any other rich country. Between 2.3m and 2.4m Americans are behind bars, roughly one in every 100 adults. If those on parole or probation are included, one adult in 31 is under correctional supervision. As a proportion of its total population, America incarcerates five times more people than Britain, nine times more than Germany and 12 times more than Japan. Overcrowding is the norm. Federal prisons house 60% more inmates than they were designed for. State lock-ups are only slightly less stuffed.
The system has three big flaws, say criminologists. First, it puts too many people away for too long. Second, it criminalises acts that need not be criminalised. Third, it is unpredictable. Many laws, especially federal ones, are so vaguely written that people cannot easily tell whether they have broken them.
In 1970 the proportion of Americans behind bars was below one in 400, compared with today’s one in 100. Since then, the voters, alarmed at a surge in violent crime, have demanded fiercer sentences. Politicians have obliged. New laws have removed from judges much of their discretion to set a sentence that takes full account of the circumstances of the offence. Since no politician wants to be tarred as soft on crime, such laws, mandating minimum sentences, are seldom softened. On the contrary, they tend to get harder.
Of course, America’s dubious drug prohibition policy fuels a substantial part of the prison industrial complex. Check out how supposedly enlightened Massachusetts handles certain drugs:
Massachusetts is a liberal state, but its drug laws are anything but. It treats opium-derived painkillers such as Percocet like hard drugs, if illicitly sold. Possession of a tiny amount (14-28 grams, or ¬Ω-1 ounce) yields a minimum sentence of three years. For 200 grams, it is 15 years, more than the minimum for armed rape. And the weight of the other substances with which a dealer mixes his drugs is included in the total, so 10 grams of opiates mixed with 190 grams of flour gets you 15 years.
And don’t think for a moment that the ubiquitous law of unexpected consequences isn’t at play with regard to this mess:
Severe drug laws have unintended consequences. Less than half of American cancer patients receive adequate painkillers, according to the American Pain Foundation, another pressure-group. One reason is that doctors are terrified of being accused of drug-trafficking if they over-prescribe. In 2004 William Hurwitz, a doctor specialising in the control of pain, was sentenced to 25 years in prison for prescribing pills that a few patients then resold on the black market. Virginia’s board of medicine ruled that he had acted in good faith, but he still served nearly four years.
There are over 4,000 federal crimes, and many times that number of regulations that carry criminal penalties. When analysts at the Congressional Research Service tried to count the number of separate offences on the books, they were forced to give up, exhausted. Rules concerning corporate governance or the environment are often impossible to understand, yet breaking them can land you in prison. In many criminal cases, the common-law requirement that a defendant must have a mens rea (ie, he must or should know that he is doing wrong) has been weakened or erased. [. . .]
“You’re (probably) a federal criminal,” declares Alex Kozinski, an appeals-court judge, in a provocative essay of that title. Making a false statement to a federal official is an offence. So is lying to someone who then repeats your lie to a federal official. Failing to prevent your employees from breaking regulations you have never heard of can be a crime. A boss got six months in prison because one of his workers accidentally broke a pipe, causing oil to spill into a river. “It didn’t matter that he had no reason to learn about the [Clean Water Act’s] labyrinth of regulations, since he was merely a railroad-construction supervisor,” laments Judge Kozinski.
One of the most encouraging moments in the most recent presidential campaign was then-candidate Obama’s willingness to address the overcriminalization problem by considering reform of America’s abhorrent drug prohibition policy.
One of the most disappointing aspects of Obama’s Presidency is his abandonment of that issue.
Could it be that folks are finally realizing that old-fashioned greediness really should not be a crime?
Of course, the rationalization for the lack of villains now as compared to earlier crises has never been particularly compelling.
Business prosecutions over merely questionable business judgment obscure the true nature of risk and fuel the myth that investment loss results primarily from criminal misconduct. Taking business risk is what leads to valuable innovation and wealth creation. Throwing creative and productive business executives such as Michael Milken and Jeff Skilling in prison does nothing to educate investors about the true nature of risk and the importance of diversification.
Ignorance about business risk has led in part to the criminalization of business lottery. Such a lottery breeds cynicism and disrespect for the rule of law.
Isn’t it about time that dubious policy be put to permanent rest?
During my unexpected absence from the blogosphere last week, the Seventh Circuit Court of Appeals released Conrad Black from prison pending his re-trial on various business fraud charges.
That got me to thinking about what was going on in Jeff Skilling’s case on the same issue, so I checked in at the Fifth Circuit and found that Skilling has also requested his release from prison. That motion — as well as Skilling’s memorandum of law on why all remaining counts against him should be reversed and the entire case remanded for retrial — are below.
These two documents arguably provide the best description yet of the unjust nature of the criminal case against Skilling. In short, the government knew that it had a flimsy case against Skilling on conventional securities fraud (he simply believed in and touted his company like any other CEO) and wire fraud charges (he didn’t steal a dime from Enron).
So, the government relied on the defective honest services wire-fraud theory to convict Skilling of crimes based on amorphous, non-criminal acts such as not acting in the best interests of the company or promoting an unhealthy culture at Enron. Having relied heavily on the now-discredited honest services wire-fraud theory in obtaining convictions against Skilling on the more conventional charges, the government simply cannot prove beyond a reasonable doubt (it’s burden on remand under such circumstances) that the jury did not rely on the acts relating to the honest services wire-fraud charges in convicting Skilling on the other charges.
It looks to me as if this case should be going back to the District Court for re-trial on all charges. Skilling and the government have agreed to an expedited briefing schedule on the issues and Skilling has requested that the Fifth Circuit review the matter on an expedited basis. Thus, look for a decision sometime next month.
R. Allen Stanford is not a popular person to defend.
Could it be that folks are finally realizing that old-fashioned greediness really 