An unusually high number of the prospective jury pool for the upcoming trial of former key Enron executives Ken Lay and Jeff Skilling already have concluded that the two men are guilty of various business crimes merely because of their connection with the social pariah, Enron. Although such widespread bias against the two defendants would seem to be great source of comfort for Enron Task Force prosecutors, there are increasing signs that the Task Force is not sanguine about its case against Messrs. Lay and Skilling. As Larry Ribstein points out, that’s part of the conunbrum of the lottery-style system of criminalizing agency costs in the first place.
The Wall Street Journal’s John Emshwiller, who has as good an information pipeline into the Task Force as any reporter covering the Enron case, has a couple of W$J articles today (here and here) in which he reports that the Task Force — less than a month before trial — has made a new allegation of wrongdoing against Skilling relating to the former Enron CEO’s December 6, 2001 SEC deposition testimony. The gist of the new allegations are that the Task Force contends that Skilling lied when he testified that he sold over $15 million of Enron stock on September 17, 2001 because of concerns over the impact of the 9/11 attacks on the stock market (Skilling resigned from Enron in August, 2001). The Task Force contends that Skilling lied about the reason for that September 17 stock sale and that evidence of the lie is that he failed to inform the SEC during the deposition that he had inquired with a broker on September 6th about selling less than half as much Enron stock as he sold on September 17th.
H’mm, cranking up a new allegation of wrongdoing less than a month before trial based on those dubious facts? Sure looks like a bunny trail to me.
Meanwhile, as I speculated in this earlier post, this Emshwiller article confirms that, even though Richard Causey’s plea bargain last week simplifies the Task Force’s case against Lay and Skilling, the Task Force’s post-plea bargain debriefing of Causey has apparently left prosecutors undecided on whether even to use the former Enron chief accountant as a witness against Lay and Skilling.
Last minute preparations for a big trial are usually somewhat chaotic and often involve minor alterations in strategy. However, adding new allegations of misconduct and wondering whether even to use a key witness involved in the allegations are not the type of strategy decisions that one normally wants to be making less than a month before trial. As with the Task Force’s schizophrenic approach to Arthur Andersen, the latest revelations about the Task Force’s preparations for the Lay-Skilling trial do not reflect that the Task Force is particularly confident about its case. Although the Task Force has already won the public relations battle regarding the Enron scandal, winning its legacy case in the courtroom may prove to be far more difficult.

As expected, former Enron chief accountant Richard Causey pled guilty Wednesday afternoon to a single count of securities fraud while agreeing to a prison sentence of seven years and a fine of $1.250 million.

Here are the Houston Chronicle, NY Times (Eichenwald’s here), W$J, and Washington Post articles on the plea deal.

As a result of the timing of Causey’s plea deal, U.S. District Judge Sim Lake postponed the commencement of the Lay-Skilling trial for two weeks to January 30, 2006.

In agreeing to the seven-year plea deal, the 45 year-old Causey took on the second-longest prison sentence of the 16 former Enron executives who have pled guilty to date under plea bargains, less only than former Enron CFO Andrew Fastow’s minimum ten year sentence. It’s a surprisingly long sentence given that Causey, unlike Fastow, did not peel tens of millions of dollars off of Enron and various special purpose entities for his own benefit.

Causey has two years’ worth of incentive to be a compelling Task Force witness against his co-defendants Ken Lay and Jeff Skilling because the only way that he can obtain a reduced sentence (to five years from seven) is if the Task Force, in its sole discretion, determines that Causey has been a good helper.

However, unlike most other former Enron executives who have copped pleas, Causey did not sign a cooperation agreement with the Task Force and thus, is not obligated to cooperate with the government. Even though he has two years’ worth of motivation to ingratiate himself to Task Force prosecutors, Causey cannot lose his plea deal if the Task Force finds that his assistance is not particularly helpful.

During its almost four year existence, the Task Force has been much more successful in bludgeoning plea bargains out of former Enron executives than in obtaining convictions of such executives at trial — only one former Enron executive (Dan Boyle in the Nigerian Barge case) has been convicted out of the seven former Enron executives who have defended themselves at trial against a Task Force prosecution.

Causey had been facing trial on an absurd 36 counts of conspiracy, fraud, insider trading, lying to auditors and money laundering, and also faced a potential, effective life sentence if convicted on all or most of the counts. The securities fraud charge that Causey pled to has a maximum prison sentence of 10 years.

Exhibit A to Causey’s plea agreement contains his specific admissions, which reflect that the Task Force is now focusing more on non-disclosure of material facts relating to Enron’s financial performance than the allegations of fraudulent accounting that permeate the indictment against Causey.

Nevertheless, it remains unclear to what extent, if any, Causey’s testimony will be used against Lay and Skilling in their upcoming trial.

Causey’s admissions on exhibit A are limited in nature and are based on the generic statement that he participated with “others in Enron senior management” to defraud the investing public by misleading them about the company’s true financial performance.

However, the affidavit only cites two examples, and they do not involve some of the broader accounting allegations related to Fastow’s SPE’s that have been the focus of the Task Force’s case against Causey and his co-defendants to date.

Similarly, the affidavit makes no reference to secret handshake deals involving alleged oral promises (undisclosed to Enron’s auditor) to pay back money provided by third parties such as the Task Force parlayed into convictions of Boyle and four former Merrill Lynch executives in the Nigerian Barge trial.

Surprisingly, Causey’s admissions involve one-time deals that do not, in and of themselves, reflect a management team that was — as the Task Force contends — engaged in a conspiracy to hide a house of cards from investors for several years before Enron’s bankruptcy.

In one instance, Causey admitted that he and other unnamed Enron executives removed a hedge from a partnership that Enron partly owned and which held Enron stock. Inasmuch as the Enron executives knew that positive news about Enron was about to push the value of the stock upward, the value of a related investment would go down if the hedge was still in place. Once the hedge was removed, Enron reported the stock price increase as recurring profits in the first quarter of 2000, which Causey now contends was improper.

The second Causey admission involves Enron’s retail electricity business, Enron Energy Services.

Causey admitted that EES — which he contends was an important promotional tool for Enron to investors — had hundreds of millions of dollars of unexpected first quarter of 2001 trading losses, which far exceeded the unit’s projected income for the year. In order to maintain the unit’s attractiveness as a promotional tool, Causey contends that Enron shifted the unit’s trading losses into a more profitable unit and thus, avoided direct reporting of the losses that might have chilled investor fervor for Enron.

Finally, inasmuch as Causey and his counsel have participated under a joint defense agreement with the Lay and Skilling defense teams for over two years now, virtually any of Causey’s testimony would be subject to challenge as being derived from that joint defense effort. Moreover, Causey had problems in defending himself against the charges that Lay and Skilling do not, and his credibility may be subject to impeachment at trial through portrayal of the eve-of-trial plea deal as an effort to save his skin at the expense of his co-defendants.

Thus, even though Causey’s plea is disconcerting for Lay and Skilling, it remains to be seen whether it really changes the dynamics of the government’s case against the two key former Enron executives.

As the Task Force debriefs Causey, the nature of his potential testimony will likely become better known over the next couple of weeks.

Meanwhile, in the lottery that has become the criminalization of business in this country, former Qwest Communications International Inc. executive Marc Weisberg agreed yesterday to plead guilty to a single count of wire fraud and will cooperate with prosecutors in Denver who have charged Qwest’s former chief executive, Joseph Nacchio, with insider trading.

Weisberg had been scheduled to begin trial next week on eleven counts of wire fraud and money laundering for allegedly abusing his position at Qwest for personal gain by using his access to shares of Qwest vendors’ initial public offerings to benefit himself, his friends and his family to the tune of approximately $3 million. As did Causey, Weisberg faced decades in prison if convicted on all those counts.

Weisberg’s deal?

Sixty days of home detention, two years probation, a fine of $250,000 and a two-year ban on him serving as an officer or director of a public company.

The Chronicle, the Wall Street Journal ($), the NY Times and the Washington Post began reporting last night that former Enron chief accountant Richard Causey will enter into a plea bargain with the Enron Task Force this afternoon in Houston federal court.

The plea deal hedges Causey’s risk of an effective life sentence if he were to stand trial and be found guilty on 36 criminal counts in the Task Force’s legacy case against Causey and his co-defendants, former Enron chairman Ken Lay and former CEO Jeff Skilling.

Although the initial news reports speculate that a key part of Causey’s plea deal will be his agreement to testify against Messrs. Lay and Skilling at trial, I’ll reserve judgment on the probable impact of such testimony until I’ve reviewed the terms of Causey’s cooperation agreement.

It is always troublesome for the other co-defendants to have one of their brethen cop a plea on the eve of trial, particularly when the plea bargaining co-defendant has been part of a joint defense agreement with the two other defendants and has participated in discussions both about his defense and the defenses of his co-defendants.

But Causey has always been the most likely of the three to cop a plea, both for financial and tactical reasons.

In fact, the latest Task Force initiative to pressure Causey into plea bargain negotiations began months ago in regard to Causey-approved accounting over a transaction called Coyote Springs that does not appear to involve either Lay nor Skilling. That pressure was reinforced earlier this month when the Task Force threatened more indictments over the Coyote Springs transaction. Ellen Podgor has additional thoughts on the possible reasons for the late timing of Causey’s plea deals.

On the tactical side, Causey was far more involved than either Lay or Skilling in the details of questionable accounting in regard to certain transactions between Enron and special purpose entities effectively run by former Enron CFO, Andrew Fastow.

An apparent “side” agreement between Causey and Fastow relating to those SPE’s that allegedly was not disclosed to Enron’s auditors has long been considered a key element in the Task Force’s case against Causey.

Lay and Skilling have both denied any knowledge of that Causey-Fastow side deal at the time they were running Enron.

Similarly, over the past couple of months, the Task Force has signaled a change of trial strategy that did not bode well for Causey, in particular.

The Task Force had previously demonized former Enron auditor Arthur Andersen, alleged in previous Enron-related prosecutions that a number of the firm’s former partners were co-conspirators with the defendants and prosecuted the firm out of business.

However, the Task Force recently embraced several former Andersen partners as prosecution witnesses in the upcoming trial against Lay, Skiling and Causey on the theory that Enron duped Andersen just like everyone else.

Inasmuch as Causey had primary responsibility for Enron’s accounting, that change in prosecution strategy impacted Causey more than either Lay or Skilling.

Finally, because the government froze his assets upon his indictment, Causey was not able to pay compensation to his criminal defense attorney (Reid Weingarten) that would normally be expected in a case of this size and complexity.

As a result, Causey’s defense team has been forced to ride the coattails of both Skilling and Lay’s defense teams in preparing for trial, which meant that, from a practical standpoint, the particular problems involved in defending Causey were not likely to be at the forefront of the defense effort.

Thus, it is not entirely clear that Causey will be a particularly effective witness on the core charges that the Task Force is pursuing against Lay and Skilling. We have already seen that the prior testimony of a key Enron executive under a plea bargain did not turn out well for the Enron Task Force in the Enron Broadband trial.

In fact, the plea could actually work to simplify the defense of the remaining two defendants by shifting the focus of the trial away from technical accounting issues over which neither Lay nor Skilling had primary responsibility.

Moreover, even if Causey ends up testifying as a prosecution witness against Lay and Skilling, the defense will be able to use the eve-of-trial timing of the plea deal and Causey’s previous protestations of innocence to impeach the credibility of any such testimony and to present Causey as a witness who — much like former Andersen partner David Duncan — copped a plea to hedge the risk of a long prison sentence even though he really does not think he is guilty of a crime.

Along those lines, the WaPo article on Causey’s plea deal includes the following from a neighbor of Causey:

For friends of Causey, including his next-door neighbor Steve Huey, word of the advanced plea negotiations is bittersweet. They say Causey is devoted to his three children, the youngest of whom is in eighth grade, and is a devout Catholic who helped raise funds for a new church in the Woodlands, an upscale suburb of Houston.

“I don’t think Rick has ever believed he did anything wrong,” said Huey, who shared a Christmas Eve dinner with Causey and his wife, Elizabeth. “I think that Rick’s concern is over the family and what the eventual outcome will be for the family. As you get closer to trial, you start to weigh the options and weigh the odds and the resources the federal government has.”

The most probable immediate impact of the plea deal is that the Lay and Skilling defense teams will request a delay of the beginning of the now-scheduled January 17, 2006 trial and renew their request that the trial be moved out of Houston.

Although the Lay and Skilling teams have already made a persuasive case that the trial should be moved out of Houston because of extraordinary pre-trial publicity and a Houston jury pool that is clearly biased against Lay and Skilling in regard to Enron-related matters, U.S. District Judge Sim Lake‘s previous rulings in the case indicate that he will decline to grant either a delay in the trial or a change of its venue.

The Chronicle’s Loren Steffy thinks I’m stretching a bit in noting the conflict of interest that the Wall Street Journal has apparently decided to overlook in allowing John Emshwiller to report on the upcoming trial of the Enron Task Force’s legacy case against key former Enron executives Ken Lay, Jeff Skilling and Richard Causey.

Candidly, I don’t think the point is a stretch at all. The following explains why.

Along with many others, Emshwiller has promoted the now common theme that Enron was merely a house of cards and that the company’s intrinsic instability was hidden from the investing public by a deceitful management team.

That view has been readily embraced by a wide-range of societal forces, such as publicity-seeking politicians who don’t allow facts to get in the way of demonizing unpopular entrepreneurs for political gain, government prosecutors who improperly expand the reach of criminal laws to further their careers, competing businesspeople and lawyers seeking to profit from Enron’s demise, and a general public that finds it easy to resent wealthy businesspeople, particularly after the bursting of a stock market bubble.

These societal forces believe that they understand the Enron morality play so thoroughly that otherwise thoughtful and intelligent people lose the capacity for independent thought regarding Enron and reject any notion of ambiguity or fair-minded analysis in ferreting out the truth of what really happened at Enron.

Unfortunately, this common view of Enron ignores the more nuanced view of a growing number of business experts who have studied Enron’s core businesses and have a far better understanding of Enron’s business practices than most of those who have promoted the Enron morality play.

In many ways, Enron was an innovative firm, both in its primary business activities and in the ways in which it raised money. Experts in structured finance and derivatives recognize this and have already written extensively about Enron’s remarkable innovation (see, for example, Christopher Culp and William Niskanen‘s Corporate Aftershock: The Policy Lessons from Enron and Other Major Corporate Corporations and Culp’s subsequent book, Risk Transfer: Derivatives in Theory and Practice).

Even Enron’s original purpose in using special purpose entities (“SPE’s”) — at least before former Enron CFO Andrew Fastow and henchman Michael Kopper hijacked them — was sound and creative.

With equity owned primarily by investment banks and other financial institutions, the SPE’s were initially intended to be private equity funds with completely separate management from Enron. The main attraction of the SPE’s for investors was the funds’ preferred right to invest in Enron assets, which benefited Enron by allowing the company to preserve liquidity and hedge risk.

A side effect of this drive toward innovation was that Enron pushed the edge of the envelope between beneficial innovation, on one hand, and excessively complicated transactions that appear to have been designed to confuse more than to accomplish a legitimate business purpose, on the other. Fastow and Kopper’s shenanigans with certain of Enron’s SPE’s are a good example of the latter type of activity.

Nevertheless, Enron was engaged in mostly legitimate and beneficial financial activities, including energy trading, structured finance and other financing transactions that had literally never been attempted before, and certainly never on the scale that Enron generated them.

The societal demonization of Enron contributed substantially to an enormous amount of unnecessary wealth loss as many of the markets for such beneficial and innovative financial transactions shriveled in the wake of Enron’s liquidation.

Consequently, it is critically important in determining the truth of what happened at Enron — particularly when the futures of three men and their families are at risk — to distinguish between Enron’s role as a legitimate, innovative company and the fraud that took place.

Emshwiller’s already published views toward Enron reflect that he is a poor choice to make that key distinction.

In fact, the situation with Emshwillier, the WSJ and Enron is eerily reminiscent of a situation that arose at the Journal almost 20 years ago in connection with Rudolf Giuliani’s career-boosting prosecution of Michael Milken.

Back then, it was WSJ reporter James Stewart who became the mouthpiece for Giuliani’s propaganda campaign that demonized Milken’s revolutionary financing techniques that literally unlocked billions in shareholder wealth during the 1980’s.

Stewart followed up his highly misleading WSJ reporting on Milken with a book that perpetuated the same prosecutorial myths about Milken and utterly ignored Milken’s role in the tremendous wealth creation and innovation in financial markets that occurred during the 1980’s.

Daniel Fischel brilliantly exposed both Stewart and Giuliani’s duplicity with regard to Milken in his 1995 book, Payback: The Conspiracy to Destroy Michael Milken and his Financial Revolution. Despite the wise perspective that Fischel provides regarding the grave danger to justice, the rule of law and wealth creation that results from unleashing the power of government against the unpopular businessperson of the moment, precious few of the hundreds of people with whom I have spoken or corresponded regarding the Enron case even know about Fischel’s book, much less have read it.

Given the WSJ’s experience with Stewart in the Milken debacle, it’s at least odd that the Journal appears to be overlooking the high risk that a similar journalistic failure may occur in regard to Emshwiller’s coverage of the Lay-Skilling-Causey trial.

The warning signs are clearly there — Emshwiller completely missed on the government’s overreaching destruction of Arthur Andersen and has largely ignored the prosecutorial misconduct that has marred the Enron Task Force’s handling of all of the Enron-related prosecutions.

Perhaps most notably, Emshwiller has said virtually nothing about the outrageous miscarriage of justice that landed four Merrill Lynch executives in jail for doing nothing other than being involved in a relatively small transaction with the social pariah Enron.

So, count me as skeptical that Emshwiller is capable of providing the type of objective reporting regarding the Lay-Skilling-Causey trial that readers of America’s leading financial newspaper deserve.

The Wall Street Journal can do much better.

The Wall Street Journal’s ($) John Emshwiller reports that former Enron chief accountant Richard Causey is currently negotiating with Task Force prosecutors regarding a possible plea bargain under which he would testify against his former bosses, Ken Lay and Jeff Skilling, in the upcoming Enron legacy criminal trial scheduled to begin in Houston federal court on January 17, 2006. A subsequent WaPo article on Causey’s plea bargain negotiations is here and the Chronicle story is here.

The gist of Emswiller’s piece is that the Task Force is focusing on statements that Causey made to investigators early in the Enron criminal investigation to the effect that Enron had adequate internal controls in place to limit the risk of Andrew Fastow using his position as both Enron’s CFO and as the control person in various special purpose entities doing business with Enron to harm the company.

The prosecution contends that Causey’s statements to investigators — as well as Lay and Skilling’s similar public statements regarding the controls — were false and that the executives knew that the controls on Fastow’s dual positions were inadequate.

The three executives contend that Enron’s internal controls were both extensive and reasonable, but that no control can absolutely prevent someone such as Fastow from using his position to perpetrate a fraud on the company if he is intent on doing so.

Frankly, neither Causey’s plea bargain negotiations nor Emshwiller’s story are particularly surprising. Given that Causey is facing the equivalent of a life sentence if he chooses to defend himself without access to his full net worth in a case in which much of media (including Mr. Emshwiller — see his Enron book, 24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America) has already concluded that he is guilty, it is understandable that Causey would at least explore all options that would hedge that substantial risk of loss.

Likewise, the Enron Task Force has frequently used the media throughout its dubious handling of the criminal investigation of Enron to pressure former Enron executives into questionable plea bargains.

By the way, Emshwiller has already published questionable conclusions about Enron that are clearly adverse to the three former executives. Moreover, through his book, he has a financial interest in seeing that even his most dubious conclusions are confirmed during the upcoming trial.

Why on earth is a media publication of the Wall Street Journal’s caliber having someone with such an obvious conflict of interest covering the Lay-Skilling-Causey trial?

Lunch was interesting in Houston yesterday as former Enron CEO and federal criminal defendant Ken Lay was the featured speaker at the Houston Forum‘s monthly luncheon. An earlier post on the lunch is here and the NY Times article on Mr. Lay’s talk is here.
From Mary Flood’s article on the talk, it sounds as if Mr. Lay has been reading this blog as he bones up for testifying at trial (which decision to testify, as Ellen Podgor notes, may be premature):

Flanked on the podium by Texas and U.S. flags, and a gold- and red-trimmed Christmas tree, Lay read from a prepared text in which he attacked the Justice Department for prosecuting the accounting firm Arthur Andersen, destroying the company and dropping the case. He said the prosecutors have been trying to criminalize normal business practices.

“If asked, I am certain that the Enron Task Force would say they have taken so much time because the crimes at Enron are so complicated,” he said. “However, I would say the Enron Task Force has taken so much time because it is complicated to find crimes where they do not exist.”

He said he doubts most of those who pleaded guilty in this case were criminals ó rather they were bullied into their pleas by prosecutors. . . .
Prosecutors want to narrow the case, and defendants want more witnesses and experts, Lay said.

“Why do we want the truth in the case, and why does the Enron Task Force want the truth out of the case?” Lay asked.

Frankly, that’s a darn good question. Despite that, Chronicle business columnist Loren Steffy is not impressed with Mr. Lay’s talk (blog post here).
Mr. Steffy’s skeptical reaction to Mr. Lay’s proclamation of innocence is quite common, but misses the difference between being held responsible in civil context as opposed to a criminal one. Few people — probably not even Mr. Lay — would contend that Mr. Lay should not share at least some responsibilty in a civil lawsuit for Enron’s demise. However, absent the state making a clear presentation of an alleged criminal act, the responsibility for Enron’s descent into insolvency should be sorted out among all responsible parties in a civil lawsuit, not a criminal case against a few of the more prominent responsible parties. In that regard, the Enron Task Force’s indictment (download pdf here) and current statement of its criminal case against Mr. Lay and his co-defendants (download pdf here) reveals that the Task Force’s presentation of criminal charges against Mr. Lay is anything but clear. Indeed, a lack of coherence in the presentation of criminal charges against Enron-related defendants has been a recurring problem for the Enron Task Force.
Taking risk is how entreprenuers create jobs for communities and wealth for business owners. Risk takers sometimes make dubious or plain bad decisions, but that’s an essential part of the price that we pay to enjoy the jobs and wealth that are derived from a bustling market economy. Criminalizing merely bad business decisions dampens that essential entreprenurial spirit and will ultimately lead to job loss and dimunition of shareholder wealth. That is simply not a coherent use of our criminal justice system.

As anticipated in this earlier post, U.S. District Judge Sim Lake concluded in a hearing yesterday that the defense team of former key Enron executives Ken Lay, Jeff Skilling and Richard Causey had not established in his mind that prosecutorial misconduct caused several clients of two Houston criminal defense attorneys not to assist the defense in preparation for the upcoming trial of the Enron Task Force’s legacy case of its four year Enron investigation.
Judge Lake’s ruling on the witness intimidation evidence was not surprising, as the Lay-Skilling-Causey defense team has struggled with the reality that no witness under the threat of retaliation from the Task Force is going to testify — or allow their attorney to testify — about that threat. However, compelling evidence of the Task Force’s intimidation of witnesses in Enron-related prosecuctions still exists (see also here), and the larger issue in the trial — the Task Force’s unprecedented fingering of over 100 unindicted co-conspirators — remains unresolved and clearly troubling to Judge Lake.
In addition to the chilling effect on exculpatory testimony from potential defense witnesses who have been fingered as unindicted co-conspirators, the Task Force intends to rely heavily during the Lay-Skilling-Causy trial on hearsay testimony from prosecution witnesses who have copped pleas about alleged statements made by various of those alleged co-conspirators. The defense is attempting to limit the prosecution’s use of such hearsay testimony, and Judge Lake ordered the parties yesterday to brief him as he wrestles with the issue of whether to allow any such testimony — and, if so, how much — to come into evidence during the trial.
Finally, during the hearing yesterday, comments of the Task Force prosecutors and the other attorneys involved in the hearing indicated that the Task Force is preparing to have the grand jury investigating Enron issue another indictment in the near future against other former Enron executives who have not yet been indicted on any charges. The timing of the new indictments is transparent, given that the Task Force knows that publicity about more Enron executives being arrested will be beneficial for the jury pool to hear immediately before the beginning of the upcoming Lay-Skilling-Causey trial. You might recall that the Task Force pulled a similar stunt by publicly announcing the plea bargain of former Enron North America executive Chris Calger on the day that the jury in the trial of the Enron Broadband case began deliberations. The subject of the upcoming indictments remains unclear, but I suspect that it probably relates to the transaction involved in the Calger plea bargain (related post here).

This earlier post noted the 180 that the Enron Task Force has recently taken in regard to defunct accounting firm Arthur Andersen. After demonizing the firm, gutting it with a misguided prosecution, and alleging that a number of the firm’s former partners were co-conspirators in several Enron-related prosecutions, the Task Force is now embracing several former Andersen partners as prosecution witnesses in its upcoming legacy trial against former key Enron executives Ken Lay, Jeff Skilling, and Richard Causey. In short, after putting Andersen out of business as an accomplice of the evil Enron, the Task Force is now contending that Enron duped Andersen just like everyone else.
On the heels of that development, David Duncan, the former Andersen partner-in-charge of the Enron account at the time of the company’s demise, earlier this week requested — without opposition from the Enron Task Force — that U.S. District Judge Melinda Harmon allow him to withdraw his previous guilty plea under this cooperation agreement for allegedly obstructing the federal investigation of Enron. Duncan had testified — albeit ineffectively — during the Andersen trial in 2002 as a Task Force witness against Andersen, and has been awaiting sentencing ever since.
Meanwhile, the Task Force also requested dismissal of its criminal case against Andersen after publicly stating that it was prepared to retry the case just a couple of weeks ago. As a result, the Task Force will not be providing an “Andersen annuity” for Andersen defense attorney Rusty Hardin after all.

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Is it just me or does anyone else find it odd that this USA Today article is doing a better job of covering the prosecutorial abuse that is taking place in the Enron-related criminal cases than supposedly more thorough national newspapers such as The New York Times and The Wall Street Journal?
Following up on this post from over the weekend, the USA Today article notes the utterly absurd and abusive tactic of the Task Force in fingering about 100 unindicted co-conspirators in its legacy case against former key Enron executives Ken Lay, Jeff Skilling and Richard Causey. The transparent purpose of the tactic is twofold:

First, to suppress exculpatory testimony in favor of the defendants from the unindicted co-conspirators, all or whom have declined to testify under their Fifth Amendment privilege out of fear of being indicted; and
Second, to have the testimony of the Task Force’s own witnesses about the alleged hearsay statements of the unindicted co-conspirators introduced into evidence as an exception to the hearsay rule. Not surprisingly, most of the Task Force’s witnesses are “cooperating witnesses” — i.e., former Enron executives who attempting to reduce their prison time by testifying against the defendants pursuant to plea bargains with the Task Force.

Of this tactic, the USA Today article notes the comments of Stanley Twardy, a former U.S. attorney who is now a defense lawyer in Connecticut, that “‘extremely rare’ for a case to have as many unindicted co-conspirators as [the Lay-Skilling-Causey] case does. It’s unusual to have them at all outside of drug and Mafia cases.”
As noted in this other post from over the weekend, the Task Force’s tactic has already resulted in a grave injustice in the Nigerian Barge case, where four Merrill Lynch executives are now serving prison terms because large amounts of exculpatory testimony for the defendants never came into evidence at trial. To avoid the same injustice from occurring in the Lay-Skilling-Causey trial, Judge Sim Lake should give the Task Force a deadline in which to indict any of the unindicted co-conspirators against whom the Task Force has a viable case, and then grant immunity from prosecution for all of the remaining unindicted co-conspirators. Only with such key testimony will the jury be able to sort out the truth of the Task Force’s allegations that the defendants engaged in criminal wrongdoing at Enron. Without such testimony, the jury will be deliberating on nothing more than the Task Force’s fictional screenplay of the defendants’ role in Enron’s demise.

This Mary Flood/Chronicle article reports that U.S. District Judge Sim Lake has scheduled a hearing in the Enron Task Force’s legacy case against former key Enron executives Ken Lay, Jeff Skilling and Richard Causey over the defendants’ allegations that the Task Force has engaged in wide-ranging witness intimidation in an effort to suppress exculpatory testimony in favor of the defendants, whose criminal trial is scheduled to commence in less than two months.
Ms. Flood reports that Judge Lake has ordered two Houston criminal defense attorneys and four of their clients to testify in the hearing. The two attorneys are Bob Sussman and Wendell Odom, and one of the client that will be called is Larry Lawyer, a former mid-level Enron executive who previously pled guilty under a cooperation agreement to a tax-related charge arising from a payment that he received in connection with one of former Enron CFO Andy Fastow’s infamous deals in which Fastow and several of his Enron associates enriched themselves.
The witness intimidation issue has been festering throughout both of the prior Enron-related criminal trials. It first arose in connection with the trial of the Nigerian Barge case in which the Task Force effectively suppressed exculpatory testimony for the defendants in that case by fingering as unindicted co-conspirators dozens of former Enron and Merrill Lynch executives who were involved in the transaction that was the basis of the prosecution. Every one of the unindicted co-conspirators declined to testify in the Nigerian Barge trial on the basis of their Fifth Amendment privilege against self-incrimination. Consequently, four Merrill Lynch executives are serving prison sentences without having had the opportunity to present substantial amounts of exculpatory testimony and related evidence to the jury.

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