Daily Archives: March 13, 2006

The Bush Administration’s pro-business ruse

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anti-business.jpgEarlier posts here, here, and here — among others — question the conventional wisdom that the Bush Administration is particularly pro-business in its orientation.
Consistent with that theme, Larry Ribstein notes that the Bush Administration’s stance on Sarbanes-Oxley has reflected an appalling lack of leadership in regard to business issues:

The Democrats’ position on [modification of] SOX doesn’t go far enough, but at least it goes somewhere. It’s not that I’m ready to conclude that the Democrats can be trusted as the party of business. But somebody has to defend business’s interest, and on the critical issues concerning SOX, it hasn’t so far been the Republicans.

Professor Ribstein follows up that post with this one that summarizes his presentation to the American Enterprise Institute on Sarbanes-Oxley.
Meanwhile, Professor Ribstein’s skepticism of the Bush Administration’s true orientation toward business is mirrored in Bruce Bartlett’s new book on Bush Administration fiscal policy, Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy (Doubleday 2006), which Publisher’s Weekly describes as follows:

Bartlett’s attack boils down to one key premise: Bush is a shallow opportunist who has cast aside the principles of the “Reagan Revolution” for short-term political gains that may wind up hurting the American economy as badly as, if not worse than, Nixon’s did. As part of a simple, point-by-point critique of Bush’s “finger-in-the-wind” approach to economic leadership, Bartlett singles out the Medicare prescription drug bill of 2003ó “the worst piece of legislation ever enacted”óas a particularly egregious example of the increases in government spending that will, he says, make tax hikes inevitable. Bush has further weakened the Republican Party by failing to establish a successor who can run in the next election, Bartlett says. If the Reaganites want to restore the party’s tradition of fiscal conservatism and small government, he worries, let alone keep the Democrats out of the White House, they will have their work cut out for them.

Interestingly, the Bush Administration does not appear particularly enthusiastic to challenge Bartlett on this thesis.

A different kind of favorites list

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prison golf.jpgThe ever-observant Ellen Podgor points us to this interesting Paul Wenske/Kansas City Star article that reports on the increasing role of advisors to indicted business executives providing advice on the preferred location for the executives to serve their prison sentence. According to the article, the following are the top five-preferred locations for serving a white collar prison sentence in the federal system:

Yankton, S.D. A stand-alone federal prison camp that is a converted college campus.
Englewood, Colo. Just outside Denver, it is a satellite camp to the federal correctional institution there.
Texarkana, Texas. Has drug and alcohol treatment and offers adult continuing education and correspondence courses.
Sheridan, Ore. In the heart of the south Yamhill River Valley near Portland. Offers college programs.
Pensacola, Fla. Inmates can work during the day at a nearby naval base.

The Enron Task Force’s unraveling Nigerian Barge case

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Bayly10.jpgfuhs4c.jpgEarly last week, oral arguments were heard in the Fifth Circuit Court of Appeals on the appeal of the four Merrill Lynch executives who were convicted of wire fraud and conspiracy charges in November 2004 in the trial of the Enron-related case known as the Nigerian Barge case.
Reports from those who attended the oral argument indicate that it went well for the appellants, but it may have gone even better had counsel for the Merrill Four known about former Enron CFO Andy Fastow’s testimony from this past Thursday afternoon in the ongoing criminal trial of former key Enron executives Ken Lay and Jeff Skilling.
The Enron Task Force contended in the Nigerian Barge case that the Merrill Four were guilty of conspiring with Enron executives to mislead Enron investors in connection with Merrill’s purchase of a dividend stream attributable to an ownership interest in some power-generating barges moored off the coast of Nigeria. On a threshold basis, the Task Force’s case against the Merrill Four was bizarre because it was Enron, not Merrill, that may have improperly accounted for the transaction, although even that issue was never proven at trial. For its part, Merrill was simply buying a relatively small asset that Enron wanted to sell in Merrill’s ongoing effort to ingratiate itself to a potentially good customer of Merrill’s investment banking services.
Fastow14.jpgkopper2A.jpgThe prosecution’s case against the Merrill Four rested almost entirely on the testimony of former Fastow henchmen, Michael Kopper and Ben Glisan, both of whom were deeply involved with Fastow in effectively embezzling money from Enron in connection with Fastow’s management of certain special purpose entities. Kopper and Glisan both testified on the key issue in the trial — i.e., that Fastow made during a December 1999 telephone call a legally unenforceable oral inducement to Bayly that Enron would either buy Merrill’s interest in the barges back or broker the interest to a third party, such as LJM2, an Enron SPE — despite the fact that neither Kopper nor Glisan participated in the telephone call. Inasmuch as Fastow’s oral inducement allegedly constituted a “hidden side deal” for Enron to “buy-back the barges,” the Task Force argued that Enron’s accounting of the transaction as a “true sale” was fraudulent and that the Merrill Four should have known that, so they were guilty of conspiracy.
glisan.jpgRemarkably, the prosecution did not call either Fastow or anyone else who actually participated in the key December 1999 telephone call to testify during the trial of the Nigerian Barge case. Nevertheless, the Task Force represented to defense counsel for the Merrill Four that Fastow’s testimony in regard to the transaction was consistent with that of Kopper and Glisan. Based on that representation and the weakness of the prosecution’s case at trial generally, the defense team of the Merrill Four elected not to call Fastow as a witness during the trial. The jury convicted the Merrill Four, anyway.
With that backdrop, imagine the surprise of counsel for the Merrill Four when they heard about Fastow’s following testimony on cross-examination this past Thursday afternoon in the Lay-Skilling trial. After reading a portion of Kopper and Glisan’s testimony from the barge trial, Fastow testified as follows:

Q. Now, after having read through those pages [of Glisan and Kopper’s testimony], does that refresh your recollection at all about the events that transpired in December of ’99 concerning LJM[2] having been approached and what it did in response to that approach about these barges?
A. No, sir. They’re largely contradictory to my recollection of events.

Fastow went on to testify at some length on the barge transaction and contradicted key portions of both Kopper and Glisan’s testimony from the barge trial, such as the reason why LJM2 elected not to buy the interest in the barges at the time that Merrill bought the interest.
As noted earlier here (see also the thread here), this is not the first example of key testimony from prosecution witnesses in the Nigerian Barge trial being contradicted by testimony of prosecution witnesses in the Lay-Skilling trial. Meanwhile, four former Merrill Lynch executives sit in prison with their lives turned upside down based largely on testimony of prosecution witnesses that the Enron Task Force knew contradicted that of another key prosecution witness who the Task Force elected not to call.
The Department of Coercion, indeed.