The sad case of Jamie Olis has been a frequent topic on this blog as an egregious example of the injustice that has resulted from the government’s increasing criminalization of business in American society.
Last night, after many months of waiting, Mr. Olis finally received some relief from his ordeal.
Although the Fifth Circuit declined to overturn his conviction, the Court did in this long-awaited opinion vacated Mr. Olis’ 24 year sentence and ordered U.S. District Judge Sim Lake to resentence Mr. Olis in accordance with Booker’s overall standard of reasonableness, including a recalculation of the amount of loss for which Mr. Olis should truly be held responsible.
Sentencing expert Doug Berman has more analysis of the Fifth Circuit’s opinion here and business law expert Larry Ribstein comments here.
Writing for the Fifth Circuit panel, Judge Edith H. Jones — who is one of the top appellate judges in the country on business issues — zeroed in on the main flaw in Judge Lake’s acceptance of the prosecution’s dubious theory relating to Mr. Olis’ sentencing.
As noted in this previous post relating to the Enron-related Nigerian Barge trial, the prosecution in Mr. Olis’ case misled Judge Lake regarding the proper method for calculating the market loss for purposes of Mr. Olis’ sentencing.
Indeed, at the time of Mr. Olis’ sentencing, the Justice Department had already taken the position before the Supreme Court in Dura Pharmaceuticals v. Broudo that the market loss calculation method that it was using in Mr. Olis’ case was not the proper method for calculating market loss.
Without noting that egregious contradiction, Judge Jones in the Olis opinion nonetheless criticizes Judge Lake’s acceptance of the government’s method of market loss calculation:
In this case, the district court, faced with a “cook the books” fraud, overemphasized his discretion as factfinder at the expense of economic analysis. Thus, the court elected to rely solely on the Heil testimony concerning the purchase and sale of UCRS stock as a measure of the loss caused by Olis’s offense. When Heil’s testimony was offered at trial to prove guilt, Olis’s counsel was not placed on notice that the same evidence might later pertain to the guidelines loss calculation. For that reason, other significant extrinsic causes of the UCRS loss were not explored, much less quantified, at trial. UCRS bought most of its Dynegy holdings at the top of the market. As Olis pointed out at sentencing, however, two-thirds of the drop in Dynegy’s price occurred either before the revelation of Project Alpha’s problems or more than a week after the announcement of the restatement of earnings caused by Project Alpha. Taken on the court’s own terms, a substantial portion of the entire loss on the UCRS investment in Dynegy, over $100 million, could not have been caused by Olis’s work on Project Alpha.
During sentencing, moreover, Olis offered the expert report of a Rice University expert, Professor Bala Dharan, which explored numerous forces at work on the Dynegy stock price during the relevant periods. The court refused to consider the report, criticizing the expert’s analysis of whether Olis could have “reasonably foreseen” the impact of his conduct on the stock market. As the court observed, the economist was arguably stretching his expertise into an improper legal conclusion, but his statements on this matter are separate from his economic analysis of price and market movements. Professor Dharan’s report demonstrates that Dynegy stock declined during the period covering Project Alpha in tandem with the stocks of other publicly traded companies in the energy marketing and trading business.
Further, Dynegy’s stock was negatively affected, even before the restatement of Project Alpha’s cash flow impact, by the company’s failed bid to acquire the faltering Enron. These factors and others cited in the report suggested that attributing to Olis the entire stock market decline suffered by one large or multiple small shareholders of Dynegy would greatly overstate his personal criminal culpability.
Because the district court’s approach to the loss calculation did not take into account the impact of extrinsic factors on Dynegy’s stock price decline, Olis is entitled to resentencing on this factor, subject to the principles just discussed.
If there has ever been a case in which the sentence should be reduced to time already served, this is the one.
Stay tuned for further developments.
