Well, the Department of Justice finally did the right thing and dismissed the remaining criminal charges against former Merrill Lynch banker, Dan Bayly, in connection with the shameful Enron-related Nigerian Barge prosecution.

Even in the heavily-littered landscape of failed Enron-related prosecutions, the Nigerian Barge prosecution stood out for its sheer brazen nature. As noted in this post from over five years ago (!), the Nigerian Barge prosecution was baseless from the start and, as later developments revealed, trumped-up to boot.

After prosecuting Arthur Andersen out of business in the intensely anti-business post-Enron climate of Houston in 2004, the Enron Task Force threatened to do the same to Merrill Lynch unless the firm served up some sacrificial lambs, which it did by offering Mr. Bayly, Robert Furst, James Brown and William Fuhs.

Through a deferred prosecution agreement with Merrill, the Task Force then proceeded to hamstring the Merrill defendants’ defense by limiting access to other Merrill Lynch executives who were involved in the barge transaction. To make matters worse, the Task Force then intimidated other potentially exculpatory witnesses by threatening to indict them if they cooperated with the Merrill defendants’ defense.

Thus, after bludgeoning a couple of plea deals from former key witnesses Ben Glisan and Michael Kopper, the Task Force proceeded to put on a paper-thin case against the defendants, which was good enough to obtain convictions.

Of course, most of the convictions were vacated on appeal (and in Fuhs’ case, thrown out completely), but not before each of the Merrill defendants had served over a year in prison and their families had incurred the incalculable human cost of these misguided prosecutions.

Incredibly, over the past couple of years, the Department of Justice (the Enron Task Force has, mercifully, been disbanded) actually has been threatening to pursue a re-trial of the Merrill defendants. Accordingly, the dismissal of the remaining charges against Mr. Bayly was good news. A similar dismissal of charges against his remaining co-defendants — Messrs. Furst and Brown — would certainly follow, right?

Apparently not, at least for the time being. Inexplicably, the DOJ announced yesterday that it is continuing to pursue charges against Mr. Furst.

So, Mr. Furst unloaded on the DOJ yesterday with the filing of this motion to dismiss on the grounds of pervasive and egregious prosecutorial misconduct. You can review the motion here, but if you go ahead and download it, then you can review a version of the motion that is bookmarked in Adobe Acrobat to facilitate ease of review. Inasmuch as the 45 page motion includes about 350 pages of exhibits, bookmarks are helpful.

The summary of the motion gets right to the shocking point:

The American criminal justice system is built upon the principle that the government’s interest is not that it shall win a case, but that justice shall be done. Berger v. United States, 295 U.S. 78, 88 (1935).

The Enron Task Force (the “ETF”) team of prosecutors and investigators formed in 2002 to address the public demand for individual accountability in the aftermath of Enron’s collapse investigated, indicted, and prosecuted Defendant Robert Furst and his co-defendants with the goal to win at all costs.

And the ETF “won.” Mr. Furst spent almost a year in prison before his conviction was overturned on appeal.But to secure victory, the ETF engaged in a campaign of misconduct which violated Mr. Furst”s constitutional rights to due process and a fair trial.

This misconduct was necessary because the case the ETF indicted and hoped to prosecute, which would involve a sordid tale of a well-organized conspiracy to defraud Enron and its shareholders, was not supported by the facts.

The ETF could not prove that Enron or its shareholders lost any money in the barge transaction, because they did not. The form and mechanics of the transaction were thoroughly vetted through hundreds of hours of negotiation by dozens of highly-competent attorneys. Witnesses interviewed by the ETF undercut its theory of the case.

In short, the barge transaction had all the markings of a legitimate business transaction, because it was.

But legitimate business transactions do not generate convictions, and the ETF needed convictions. So, in order to ensure victory, the ETF withheld volumes of exculpatory, case-dispositive evidence which nullified its theory of criminal liability; manipulated and misstated exculpatory testimony in pretrial disclosures to make it appear inculpatory; silenced witnesses by indiscriminately designating nearly all material witnesses as unindicted co-conspirators; and sponsored inculpatory testimony that it knew was false.

The ETF’s conduct did not end with the return of the verdict.

After trial, but before sentencing, the ETF received additional case-dispositive, exculpatory evidence from one of the key witnesses in the case. This evidence further nullified the ETF’s theory of criminal liability, and exculpated Mr. Furst.

Rather than disclosing this evidence to the Court, the ETF instead withheld the evidence and brazenly asked this Court to enhance Mr. Furst’s sentence for conduct which was negated by this and other evidence in the ETF’s possession.

This misconduct eliminates all faith in the integrity of the jury’s verdict and warrants dismissal of the Indictment.  .   .   .

The mess that is the Nigerian Barge prosecution is a quintessential example of what happens when government is given the leeway to bastardize charges to criminalize a merely questionable business transaction and then appeal to juror resentment against wealthy businesspeople to procure politically popular convictions.

The damage to the defendants, their careers and their families that this abuse of power has caused is bad enough.

But the carnage to justice and respect for the rule of law is even more ominous. Does anyone really think that they could stand upright in the winds of such abusive governmental power if that gale turned toward them?

The remaining charges against Messrs. Furst and Brown should be dismissed. Not only for their protection, but for ours, too.

Larry Ribstein and the WSJ’s Holman Jenkins — both of whom exposed the vacuity of the federal government’s backdating witch hunt from the very beginning — provided their usual insightful perspective on U.S. District Judge Cormac Carney’s decision earlier this week to dismiss the government’s remaining criminal charges against former Broadcom CFO William J. Ruehle and Broadcom’s co-founder, Henry Nicholas, III. A copy of the transcript of Judge Carney’s inspiring ruling is below.

Given the excellence of Professor Ribstein and Mr. Jenkins’ analysis of the corrupt nature of the backdating prosecutions, there is really nothing to add in that regard. The bottom line is that the unchecked prosecutorial power of the state does enormous damage to lives, families, and careers, as well as job and wealth creation.

But as I read the transcript below and the motion to dismiss that prompted it, imagine my surprise to discover that one of the prosecutors involved in the Broadcom misconduct was a member of the Enron Task Force that engaged in similar conduct in connection with the prosecution of former Enron CEO Jeff Skilling and chairman Ken Lay. Frankly, as bad as the prosecutorial misconduct was in the criminal case against Mr. Ruehle and the other Broadcom executives, it pales in comparison to what prosecutors made Skilling and Lay endure.

Judge Carney provided in the Broadcom prosecutions a perspective of fairness and wisdom that was sadly lacking in the Enron cases. He reminds us that the line between freedom and oppression in civil society is often razor-thin.

His final declaration in the transcript below is one that we should all embrace:

"I don’t think anything needs to be said further other than, Mr. Ruehle, you are a free man."

Download Transcript of Judge Carney’s Ruling

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Overcriminalization of daily life, particularly as it relates to punishing taking risks necessary to create jobs and wealth, are common topics on this blog.

Longtime Boston attorney Harvey A. Silverglate is an expert on this troubling trend in American jurisprudence. His recent book — Three Felonies a Day: How the Feds Target the Innocent (Encounter Books, 2009) — examines how pliable politicians have expanded the criminal laws to the point where the freedom of virtually anyone who attempts to take risks to create jobs and wealth is subject to the whims of often avaricious prosecutors.

Silverglate is currently guest-posting over at The Volokh Conspiracy where, in this post, he examines how the crime of honest services wire fraud involved in the Skilling case has allowed prosecutors pretty much to choose whether to indict and prosecute business people at their discretion:

Because of the vague terminology increasingly used in the ever-expanding federal criminal code, combined with the erosion of intent as a requirement for conduct to be considered prosecutable, the average citizen can easily commit several felonies in any given day.  .  .  .

“Honest services” fraud is an instructive example of this trend, but the federal law books are cluttered with countless others. Creative interpretations of the Computer Fraud and Abuse Act, obstruction of justice statutes, and controversial Patriot Act provisions—to name a few—have turned honest citizens into federal defendants and even convicted felons. [.  .  .]

This dangerous trend is exacerbated by the “win at all costs” mentality of the Justice Department. Colleagues are turned into stool pigeons as prosecutors offer deals for testimony that often bears little resemblance to the truth. (As my colleague Alan Dershowitz colorfully but all-too-accurately puts it, “prosecutors can pressure witnesses not only to sing, but also to compose.”)

Faced with the prospect of a long prison sentence, enormous costs of defense counsel, and frequent threats to indict family members who are thus held hostage, defendants often choose, to parody an old cigarette commercial, to switch rather than fight.

At some point, shouldn’t we be asking the question — why are we doing this to ourselves?

On the heels of the U.S. Supreme Court’s hearing earlier this week in Conrad Black’s appeal of his criminal conviction on honest services wire-fraud charges under 18 U.S.C. § 1346 (“Section 1346), former Enron CEO Jeff Skilling filed his brief on the merits of his similar appeal with the Supreme Court yesterday.  Oral argument on Skilling’s appeal will take place on March1st of next year at 1 p.m.

A copy of the Skilling’s merits brief is below. The sections of that copy are bookmarked in Adobe Acrobat to facilitate ease of review, so download a copy to take advantage of those features.

This earlier post and Lyle Denniston’s ScotusBlog post on the Skilling merits brief provide thorough analysis of the issues involved in Skilling’s appeal, which differ a bit from Lord Black’s appeal. So, I won’t reiterate those points here.

However, the following are some highlights of the brief, which is well-written and forceful. Citations to the appellate record that are contained in the brief are deleted in the following excerpts.

The following excerpts get to the heart of the appeal:

Skilling not only was tried by jurors drawn from a community passionately committed to convicting him, but he was prosecuted under a vague statute that virtually ensured jurors would vindicate that objective. Section 1346 is an unconstitutionally vague statute. A federal criminal statute must define the conduct it proscribes so that ordinary persons have notice of what is prohibited, and prosecutors are constrained in what they can prosecute.

But everyone agrees that § 1346 on its face says nothing about the conduct it proscribes. To identify its meaning, one must consult almost two decades worth of Federal Reports, searching for cases describing or enforcing the judicially-created crime of honest-services fraud, before this Court rejected them all as exceeding the judicial function in McNally v. U.S., 483 U.S. 350 (1987). But those cases reflect only the same morass of conflict and confusion that, in part, led this Court to require that Congress define the crime clearly in the first place. Congress did not do so. And it is beyond the judicial function to identify, through common-law exegesis of pre-McNally precedents, the crime that Congress failed to define. [.  .  .]

The Government’s theory is not that Skilling received bribes or kickbacks, or that he directed money or property to an entity in which he had a personal interest, or indeed that he acted for any private gain that was distinct from his ordinary compensation incentives. The Government openly conceded at trial that Skilling stole no money from Enron, that the case against Skilling was not about “greed,” that Skilling sought to pursue Enron’s “best interests,” and that every act for which he was prosecuted was undertaken for the purpose of protecting Enron and promoting its share value.

The Government proceeded on the theory that Skilling nonetheless committed honest-services fraud simply because he took on too much risk for the long-term good of Enron, and improperly touted the company. It did not seek an instruction requiring jurors to find that Skilling acted pursuant to undisclosed personal financial interests in conflict with Enron’s. Instead the Government urged the jury to send Skilling to prison simply because he breached his “duty to do [his] job and do it appropriately.”

That theory of honest-services fraud has no grounding in pre-McNally caselaw, and is totally at odds with the Government’s current conception of the statute.The implications of that theory, moreover, extend far beyond what Congress reasonably could have intended when it enacted § 1346 to overrule McNally, a public-official kickback case. In the private sector, corporate officers are expected to take business risks and cheerlead for their enterprises. A rule that criminalizes every business decision that seems imprudent to prosecutors or lay jurors in hindsight — but does not involve the corrupt pursuit of private gain— would force officers to proceed at their peril in making everyday business judgments. Fortunately, the theory of honest-services fraud the Government advanced below is not the law, as the Government now recognizes.

In that regard, Skilling reminds the Court of the chillingly scant basis of the “crime” the Enron Task Force prosecutors told the jury that Skilling had committed:

In closing argument, the Government declared that Skilling and Lay committed honest-services fraud because they violated a duty to Enron’s “employees” — one prosecutors described as “a duty of good faith and honest services, a duty to be truthful, and a duty to do their job … and do it appropriately.” [.  .  .][ The Enron Task Force’s] consistent position in this case has been that the evidence needed only to show—and did only show—“a material violation of a fiduciary duty that defendants owed to Enron and its shareholders.”

In other words, making a bad decision or doing a poor job in running a business is a crime. Almost nothing else need be said in explaining why the Skilling appeal is of paramount importance to the protection of taking risk and creating wealth in the American business community.

On the issue of why Skilling should have never been tried in Houston, check out part of the brief’s summary of the community prejudice against Skilling that the leader of the mob promoted:

What follows is a sampling of the searing media attacks.

One column in the Houston Chronicle, entitled “Your Tar and Feathers Ready? Mine Are,” demanded a “witch hunt.” Houstonians maintained that Skilling and Lay had “stole[n] money from investors,” “ripped off their stockholders for billions,” and “destroyed a great corporation.”

Skilling and Lay were compared to Al Qaeda, Hitler, Satan, child molesters, rapists, embezzlers, and terrorists and encouraged to “go to jail” and “to hell.” Some suggested they should face “the old time Code of the West.” A local rap song (entitled “Drop the S Off Skilling”) threatened Skilling’s murder. Polling showed that Houstonians routinely labeled Skilling a “pig,” “snake,” “crook,” “thief,” “fraud,” “asshole,” “criminal,” “bastard,” “scoundrel,” “liar,” “weasel,” “economic terrorist,” “evil,” “deceitful,” “dishonest,” “greedy,” “devious,” “lecherous,” “despicable,” “equivalent [to] an axe murderer,” and a man who had “no conscience,” “stole from employees,” and “swindled a lot of people.”

Skilling’s picture was “used as a dartboard” and placed on “Wanted” posters next to Osama bin Laden. When Skilling was indicted, the Chronicle proclaimed: “Most Agree: Indictment Overdue.” The paper’s negative coverage extended to articles on sports, education, music, and more.

After detailing how potential jurors’ pre-trial questionnaire answers about the case mirrored the foregoing community prejudice, Skilling describes U.S. District Judge Sim Lake’s nominal questioning of the jurors that was hopelessly inadequate to overcome the presumption of community prejudice:

Skilling sought extensive, non-public, individualized voir dire to try to screen out all the potentially biased jurors—especially in light of the questionnaire responses exposing specific prejudices. But the court took the opposite tack, holding voir dire before throngs of reporters in a ceremonial courtroom, limiting it to just five hours, and twice chastising defense counsel for asking too many questions about potential prejudice because the court had prohibited “individual voir dire.” Just 46 people were questioned—eight more than the minimum necessary—and only for a few minutes each. Only seven were struck for cause, with one excused for hardship.

Skilling then explains what should have happened in the face of such clear bias:

[I]f the [District Court] had presumed prejudice among all potential jurors, it could not have refused to permit probing inquiry into each individual juror’s biases. To the contrary, the Government would have been forced to make detailed inquiries of each juror in order to prove each juror’s impartiality beyond a reasonable doubt, and of course the defense would have been entitled to pursue similar lines to smoke out concealed or latent prejudices.

None of that happened here. Instead the district court satisfied itself that Skilling failed to prove actual prejudice for little reason other than the court looked jurors “in the eye” and decided to credit their promises of fairness. If the presumption of prejudice can be rebutted on that kind of showing, the presumption has no meaning at all.

As I’ve noted many times previously, a humane and civil society would find a better way than what was done to Jeff Skilling. It is simply un-American to throw people in prison for their errors in business judgment while they are attempting to create jobs for communities and wealth for investors.

I remain hopeful that the U.S. Supreme Court will agree.

Jeff Skilling’s Merits Brief at SCOTUS

You know, it’s not every day that a federal appellate court concludes that a newspaper’s coverage of a particular event was a major factor in the creation of a presumption of community prejudice.

But that’s precisely what the Fifth Circuit Court of Appeals did with regard to the Houston Chronicle’s coverage of the demise of Enron generally and the prosecution of Jeff Skilling specifically  (see pp. 41-45 of the Fifth Circuit decision in Skilling’s appeal).

And now the Supreme Court has decided to review the Fifth Circuit’s refusal to grant a Skilling a new trial in another venue because of that presumption of community prejudice. That almost never happens.

So, what does Loren Steffy — the Chronicle’s main business columnist and one of the main leaders of the mob against Skilling (see here) — have to say about the Supreme Court’s decision to review his handiwork?:

More surprising was the court’s decision to review the venue issues. The district court never gave much credence to the argument that pretrial publicity and Enron’s stature in Houston tainted potential jurors, and Skilling’s attorney, Dan Petrocelli, never mentioned it his is argument before the appeals court. As I’ve said before, the media coverage issue is especially interesting, given that someone from Skilling’s legal team apparently was actively engaging in the media coverage by making anonymous posts on Chronicle blogs, including this one.

So, let’s review. Houston’s only daily newspaper reports on the demise of one the city’s largest employers in such a biased fashion that an appellate court uses it as a basis for finding a presumption of community prejudice in the criminal trial of one of the company’s leading executives. Then, the Supreme Court of the United States finds the issue so troubling that it decides to review it, which rarely happens in regard to this particular issue.

And the leader of the mob’s reaction to all this?:

(i) That “the district court never gave much credence” to the issue?Well, the Fifth Circuit has already decided that the district court was wrong about that.

(ii) That Skilling’s lawyer “never mentioned it” during oral argument?Oral argument is driven by the appellate judges’ questions to the lawyers, which in this case were directed to the honest services wire-fraud issue. A substantial part of Skilling’s appellate briefs addressed the community prejudice issue.

(iii) That the Chronicle’s biased coverage was no big deal because someone from Skilling’s team attempted to provide at least a small dose of balance to the Chronicle’s biased coverage of the Skilling trial by commenting on Chronicle blog sites?

So much for fair and balanced reporting, eh?

Meanwhile, over the past couple of years, precisely what happened to Enron has also taken down numerous trust-based Wall Street firms and substantial evidence has arisen that the Enron Task Force engaged in widespread prosecutorial misconduct in prosecuting Skilling.

The Chronicle has not even acknowledged the former, while it has soft-pedaled coverage of the serious scandal represented by the latter.

Wouldn’t it be ironic if that, in its haste to lead the mob against Skilling and Enron, the Chronicle misses what Larry Ribstein has characterized as the real crime in regard to Enron — the prosecution of Skilling?

On the heels of the U.S. Supreme Court’s decision earlier this year to hear Conrad Black’s appeal of his criminal conviction on honest services wire-fraud charges under 18 U.S.C. § 1346 (“Section 1346”), the Court yesterday granted former Enron CEO Jeff Skilling’s appeal on similar grounds.

My sense is that Skilling has a good chance of having the Supreme Court overturn his conviction. Here’s why.

The Fifth Circuit Court of Appeal’s decision in Skilling’s appeal — which is looking by the minute similar to the Fifth Circuit’s decision in the Arthur Andersen case that was overturned by a unanimous Supreme Court — made a mess of two key issues:

(i) application of the honest services wire-fraud statute to Skilling’s actions, and

(ii) application of the standard for deciding the proper venue for Skilling’s trial in the face of a presumption of community prejudice against Skilling.

The Fifth Circuit panel’s decision in Skilling’s appeal failed to reconcile the reasoning in upholding Skilling’s conviction for honest services wire-fraud with earlier Fifth Circuit panel decisions on the same issue in the Nigerian Barge and Kevin Howard cases.

Inasmuch as there is now a split between Fifth Circuit decisions and several other circuit appellate courts on the scope of honest services wire-fraud, the issue is ripe for Supreme Court consideration. Indeed, Justice Antonin Scalia earlier this year urged the Supreme Court to take up the issue in his dissent from denial of certiorari in Sorich, et al v. U.S., 129 S.Ct. 1308, 1310 (2009):

“Without some coherent limiting principle to define what ‘the intangible right of honest services’ is, whence it derives, and how it is violated, this expansive phrase invites abuse by headline grabbing prosecutors in pursuit of local officials, state legislators, and corporate CEOs who engage in any manner of unappealing or ethically questionable conduct.  .   .   . Indeed, it seems to me quite irresponsible to let the current chaos prevail.”

Since Justice Scalia’s dissent in Sorich, at least four other Justices (the number it takes to grant an appeal to the Supreme Court) have repeatedly voted over the objection of the Department of Justice to confront the meaning and constitutionality of Section 1346, first in the Black appeal, again in another case in June (Weyhrauch v. U.S.) and now in the Skilling appeal.

As I’ve noted many times over the years, the Enron Task Force’s use of honest services wire-fraud charges to criminalize Enron executives has been the legal equivalent of trying to stick a square peg in a round hole.

Honest services wire-fraud under Section 1346 was intended by Congress to penalize corporate executives and governmental officials for accepting bribes and kickbacks and for engaging in self-dealing at the expense of the employer– i.e., the private gain requirement of the crime.

The Task Force faced a big problem with prosecuting Skilling at all because he never stole a dime from Enron (that is, no private gain). In fact, the Task Force conceded at trial that, not only did Skilling not embezzle any money from Enron, the case against him was not about “greed,” that Skilling always sought to pursue Enron’s “best interests,” and that every act for which he was being prosecuted was undertaken for the purpose of protecting Enron and promoting its share price.

Despite the foregoing, the Task Force persuaded U.S. District Judge Sim Lake to allow the prosecution to proceed against Skilling on a much broader honest services theory — that is, that Skilling simply took on too much risk for the long-term good of Enron and improperly touted the company to the markets.

However, all corporate executives take business risks and promote their companies, so a rule that criminalizes any business decision that seems imprudent to prosecutors or lay jurors operating with hindsight bias — even if if the executive was pursuing the interest of the company — would force corporate executives to proceed at peril of criminal liability in making day-to-day business judgments.

Indeed, in a civil case, Skilling would have had the protection of the “business judgment rule” for his business decisions, but the Enron Task Force’s theory of honest services in Skilling’s case provided for no such defense. Instead, the Task Force lawyers urged the jury to send Skilling to prison effectively for life simply because he breached his duty to do his job and do it appropriately.

Thus, the essence of Skilling’s appeal on the honest services wire-fraud issue is that bribes, kickbacks, and self-dealing is what Congress intended to criminalize under Section 1346, not lapses in business judgment. Where a corporate executive has not sought private gain, his conduct — no matter how questionable, unwise, or wrongful — should not be subject to prosecution under Section 1346, but should be left to assessment for damages that it caused in a civil lawsuit in which responsibility can be assessed to all potentially responsible parties.

The Supreme Court will also consider Skilling’s arguments that (i) if Section 1346 is not limited as described above, it must be struck down entirely as unconstitutionally vague, and (ii) strongly negative publicity about Enron and Skilling in Houston made it impossible for him to be tried by an impartial jury.

On that latter issue, Skilling argues that the Fifth Circuit improperly allowed Judge Lake to rebut a presumption of community prejudice against Skilling through a superficial voir dire of individual jurors even though the Fifth Circuit concluded that Judge Lake had improperly failed to apply the presumption of community prejudice against Skilling.

Frankly, given the extensive evidence of both pervasive local media bias and prospective juror bias against Skilling, if the Supreme Court allows the Fifth Circuit’s decision to stand on the venue issue, then a denial of a motion to change the venue of a trial within the Fifth Circuit will effectively no longer be grounds for an appeal.

Accordingly, the Supreme Court’s review of Section 1346 in the Skilling appeal and the two related cases directly confronts how avaricious prosecutors have abused the open-ended nature of the statute. The amicus brief of the National Association of Criminal Defense Attorneys in the Skilling appeal sums it up well:

[T]he time has come to resolve the confusion that engulfs the honest services statute. [.  .  .] [The fundamental issue is] whether courts have the power to engraft limiting principles — none of which has any strong textual basis — on the vague language of Sec. 1346.  If federal judges lack that power, then the Court must decide whether the honest services statute, shorn of judge-created limiting principles, is void for vagueness  .   .   . The effort by courts to infuse meaning into Sec. 1346 collides .  .  . with the principle that there is no federal common law of crimes.   .    . Federal crimes are defined by statute rather than by common law.

Meanwhile, back down in the trial court part of the Skilling case, things are looking even worse for the prosecution.

First, the Fifth Circuit ordered Judge Lake to re-sentence Skilling because of an error that was made in applying a sentencing enhancement in assessing Skilling’s 24-year sentence. The District Court’s  docket of Skilling’s criminal case reveals that Judge Lake originally scheduled Skilling’s re-sentencing for July 30th, but that Skilling and the prosecution filed a joint motion requesting Judge Lake to put off the re-sentencing indefinitely pending the filing of Skilling’s motion for a new trial, the prosecution’s response to that motion, and the Court’s disposition of the motion.

In that regard, the Fifth Circuit decision invited Skilling to file a motion for new trial based on issues of prosecutorial misconduct that Skilling raised in the appeal after discovering the evidence post-trial.

Specifically, the Fifth Circuit was particularly concerned about the failure of the Enron Task Force to comply with federal rules requiring the disclosure of exculpatory evidence to the defense from the Task Force’s pre-trial interviews with main Skilling accuser, former Enron CFO Andrew Fastow.

Fastow testified at trial that he told Skilling about the Global Galactic agreement, which purportedly documented a series of illegal “side deals” between Fastow and former Enron chief accountant Richard Causey that guaranteed Fastow would not lose money on certain special purpose entities that he was managing. Skilling denied any knowledge of the purported agreement.

After Skilling’s conviction, the Skilling defense team discovered Fastow interview notes that the Enron Task Force had failed to disclose to the Skilling team prior to trial. Among other things, those notes revealed that Fastow had told the Task Force lawyers that he didn’t think he had told Skilling about the Global Galactic agreement. The Fifth Circuit characterized the Task Force’s non-disclosure as “troubling” in inviting Skilling to file a motion for new trial with the District Court.

Interestingly, the docket reflects that the parties have requested that the deadline for Skilling’s motion for a new trial be pushed back several times over the past six months. The deadline is now in mid-November and, as a result of the Supreme decision to review of Skilling’s appeal, will probably be pushed back until after the Supreme Court rules.

So, what is going on here?

Could it be that Skilling’s team has discovered even more exculpatory evidence that the Task Force failed to disclose to the Skilling defense prior to the trial?

Could it be that the government’s current lawyers — who were not members of the now-disbanded Task Force —  are now finding themselves dealing with a serious failure of the Task Force members to comply with rules requiring the disclosure of exculpatory evidence to the defense in Skilling’s case and have little incentive to cover for their predecessors?

In short, could the Skilling case in the trial court be turning into something similar to this?

Finally, as if to remind us how little we have learned from the Enron debacle, on the same day that the Supreme Court announced that it would consider Skilling’s appeal, the parties began picking a jury in the criminal case against two Bear Stearns executives who are accused of committing the “crime” of violating the obligation to throw in the towel on their business venture. Larry Ribstein has more.

A humane and civil society would find a better way to hold people responsible for their errors in business judgment while creating jobs for communities and wealth for investors. I am hopeful that the Supreme Court will agree.