In yet another stunning blow in a series of setbacks to the Enron Task Force, the jury in the Enron Broadband trial returned late this afternoon and advised U.S. District Judge Vanessa Gilmore that they had acquitted three of the five defendants on certain of the 164 counts and were hopelessly hung on the remainder of the counts against all five defendants. Here is Mary Flood’s Chronicle article on the outcome.
Scott Yeager, the former Enron Broadband strategic planning executive, was acquitted on the wire fraud and conspiracy charges, former Enron Broadband co-CEO Joe Hirko was acquitted on insider trading and money laundering charges, and former engineering executive Rex Shelby was also acquitted on the insider trading charges.
The jury could not reach an agreement on any of the counts against former Enron Broadband finance executives Kevin Howard and Michael Krautz. Judge Gilmore declared a mistrial on all of the counts — some of which related to each defendant — on which the jury could not reach a decision.
On one hand, it’s not surprising that the jury would be in disarray over their deliberations on the charges. To reach a decision, the jury had to leaf though 60 pages of jury instructions and answer more than 190 special issues about the guilt or innocence of five former Enron Broadband executives. Consequently, no wonder the poor jurors bailed out after three days of deliberations and three months of an often mind-numbing trial.
On the other hand, it’s hard to recall a white collar trial that turned out as badly as this one did for a prosecution team that thought getting convictions in this case would be a tap-in.
How did this trial veer so far out of control for the prosecution?
Well, to begin, the Task Force’s decision to throw 164 charges of mud at the five defendants to see what would stick turned out to be an unmitigated disaster. The jurors could not reconcile the voluminous allegations of wrongdoing with what they heard over three months of often idiosyncratic testimony.
Then, when the trial actually began, the over-confident Task Force prosecutors were placed on the defensive almost from the outset.
The first blunder of the Task Force during the trial occurred when prosecutors elicited false testimony from the government’s key witness, former Enron Broadband co-CEO Ken Rice.
Then, after Rice’s testimony was impeached dramatically during cross-examination, the prosecution compounded its error by calling a witness (Beth Stier) who testified that, based on discussions with the Task Force prosecutors before her testimony, she felt threatened by the Task Force prosecutors.
Later in the trial, another witness — Lawrence Ciscon — testified that he was threatened shortly before his testimony by prosecutors with a possible indictment if he proceeded to testify on behalf of the Broadband defendants. T
o make matters worse, toward the close of the trial, U.S. District Judge Vanessa Gilmore sharply rebuked an Enron Task Force prosecutor for asking a question on cross-examination of Broadband defendant Kevin Howard that at least violated the judge’s prior instructions to the Task Force prosecutors.
Finally, earlier this week, Task Force director Andrew Weissman took the unusual step of resigning as head of the Task Force while the Broadband jury was still deliberating amidst rumblings of prosecutorial misconduct within the Task Force.
Accordingly, at the end of the day, the case that the Enron Task Force thought was their strongest against former Enron executives turned into an absolute debacle. Although the Task Force’s mishanding of the trial certainly had something to do with that result, there are two more important dynamics that are actually more revealing of why the prosecution’s case went awry.
First, the Enron Task Force is facing what is often called among lawyers involved in high profile cases the “curse of the correct result.” The Task Force has always been better at demonizing Enron in the media and bludgeoning former Enron executives into highly-publicized plea bargains than actually proving its charges in court.
The scorecard after the Enron Broadband trial is that the Enron Task Force — in over three and a half years on the job — has prosecuted to trial seven former Enron executives and obtained precisely one conviction of a mid-level Enron manager.
Despite that rather unimpressive batting average, the Task Force’s far better public relations machine has effectively pounded into the public’s mind that the “correct” verdict should be a conviction in any Enron-related criminal case even before the case is tried. That was certainly the case in the Enron Broadband trial.
However, the public’s fixed opinions were not based on the testimony as it was presented in court. The general public did not see the witnesses testify, and the public had no way to assess the credibility of those witnesses. The public’s fixed opinions were based largely on propaganda about Enron, much of which the Task Force willingly facilitates.
We now know the story of the trial. The Task Force’s case was far less clear cut than the prosecutors suggested to the jury during opening arguments. The Task Force had to deal with the effect of its blunders described above, and the lawyers for the Broadband defendants put up a well-organized and effective defense. As is often the case, the prosecution was forced to rely on the testimony of witnesses who admitted committing crimes and benefiting from those crimes, and some had personal issues that reasonably called their credibility into question.
Thus, the jurors who actually heard the evidence in this case concluded that the Broadband defendants were not guilty or that the government had failed to carry its burden of persuading all the jurors that the crimes alleged had occurred.
This result is contrary to the “correct” verdict that the general public has about anything having to do with Enron, but blame that on the “curse of the correct result,” not the jurors. In my view, this jury that actually reviewed the evidence and heard the witnesses testify came back with a result that — although not perfect — is the correct one based on the evidence that was actually presented in court.
Finally, as has been noted many times on this blog, the result in the Enron Broadband trial stands for the dubious nature of the government’s policy of criminalizing merely questionable business practices.
As much as the government protests that true business crimes are deterred by vigorous prosecution of such transactions, the fact of the matter is that any reasonable interpretation of justice is strained in attempting to square the result in the Enron Broadband trial with the results in the Richard Scrushy case, the case of Arthur Andersen, the case of Martha Stewart, the sad case of Jamie Olis, the case of Dan Bayly, the case of William Fuhs, the DOJ’s handling of the Global Crossing case, the Tyco case, the Bernie Ebbers case and many others.
These highly disparate results are not the product of a rational deployment of our criminal justice system, and the carnage to the families of the businesspeople who are caught in this troubling cauldron simply cannot be reasonably dismissed as a “trade-off” of an imperfect system.
Meanwhile, respect for justice and the rule of law upon which the success of American society is largely based is continually eroded by the roulette nature of such prosecutions.
If we lose the public’s respect for justice and the rule of law, then, as Sir Thomas More asked Will Roper in A Man for All Seasons, “do you really think you could stand upright in the winds [of abusive state power] that would blow then?”
Words to ponder as the Task Force now turns to using admitted felon Andy Fastow as its key witness in the upcoming trial of Messrs. Lay, Skilling and Causey. That trial could well make the hard-fought Broadband trial look like a picnic.
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This earlier post that compares American International Group, Inc.’s business model to that of Enron Corp. makes an important point about the true reason that Enron collapsed.