The ever-alert Doug Berman notes that, in an expected decision, the Fifth Circuit Court of Appeals has denied Jamie Olis’ appeal of U.S. District Judge Sim Lake’s denial of Olis’ motion for release pending the Judge’s re-sentencing of Olis after the Fifth Circuit late last year reversed Olis’ original 24-year sentence and ordered re-sentencing. Although yet another unfortunate decision for Olis and his family, the Fifth Circuit traditionally defers to the trial judge in regard to such matters, particularly when the judge is as well-regarded as Judge Lake.
Judge Lake has scheduled a status conference in regard to Olis’ resentencing for June 9th as the Justice Department continues to drag its feet in regard to the re-sentencing hearing. With the Lay-Skilling case finally coming to a close, my sense is that Judge Lake will use that conference to put the Olis resentencing on a fast track.

Amidst an overwhelmingly negative media drumbeat, former Enron executives Ken Lay and Jeff Skilling await a jury verdict that could send them to prison for most of the rest of their lives. Meanwhile, in Amsterdam, such matters are handled a bit differently:

The executives in charge of the Dutch retailer Royal Ahold when it plunged into a financial scandal were convicted of fraud on Monday but were sentenced to a fine and no prison time, as judges found they bore little criminal guilt.
The former chief executive, Cees van der Hoeven, and the former chief financial officer, Michiel Meurs, were fined 225,000 euros ($288,000) each and they were given nine-month suspended sentences.
The verdict comes more than three years after Ahold ó which operates grocery stores around the world, including the Stop & Shop and Giant chains ó went to the brink of bankruptcy in February 2003.

An earlier post on the Royal Ahold case is here.
Meanwhile, if the prospect of fairness for Lay and Skilling is simply too difficult to fathom, then how do you square the resolution of the Ahold case with that of this case, this case, or this one?
So it goes as an unattractive cauldron of resentment towards business and wealth continues to produce the lottery-style results of prosecuting corporate crime in America.

Inasmuch as I had a couple of hearings yesterday in federal court, I was able to slip in and watch most of the closing arguments of the Enron Task Force’s case against former EBS CFO Kevin Howard (picture on the far left) and former EBS accounting director Michael Krautz. Based solely on the closing arguments — which are not always a good indicator of how the evidentiary phase of the trial went for either party — my sense is that acquittals of both men are likely.
Call the Howard-Krautz part of the Enron Broadband re-trials the “Nigerian Barge II case.” As with its basic theory in that case, the Enron Task Force in this one contends that Howard and Krautz engineered a series of secret side deals that undermined the validity of Enron’s accounting treatment for an otherwise valid joint venture deal with a small computer outfit named nCube. The purpose of the joint venture was to monetize Enron’s video on demand (“VOD”) contract with Blockbuster, which Enron used to buttress its earnings in a couple of quarters to the tune of around $100 million during 2000-2001. Although there is nothing wrong such a deal in theory, says the Task Force, the deal was a sham because nCube’s equity in the joint venture was never at risk because Enron orally promised to take nCube out at a stated rate of return, Enron controlled the joint venture and the parties operated no real business in the joint venture. The Task Force contends that Howard and Krautz were at the center of the sham deal.

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The indefatigable Walter Olson, senior fellow at the Manhattan Institute for Policy Research and editor of the popular blawgs Overlawyered.com and PointOfLaw.com, chimes in today with this Wall Street Journal ($) op-ed that provides a fine overview of the key issues raised by the Milberg Weiss indictment. Olson’s op-ed runs along side this WSJ ($) editorial that also comments on the Milberg Weiss indictment.
In reviewing the issues raised by the indictment, Olson notes the irony of Milberg Weiss being indicted for allegedly paying illegal kickbacks when Milberg Weiss has profited from making similar accusations in a large number of its class action securities fraud cases over the years:

Milberg Weiss lawyers have been in the forefront of efforts to define kickbacks broadly and punish them with rigor. The firm’s Web site boasts that it “has sued major providers of private mortgage insurance for kickback violations, resulting in substantial settlements.” Melvyn Weiss and others at the firm have expressed indignation at, and filed lawsuits over, alleged kickbacks in the contexts of Wall Street initial public offerings, mutual fund sales, insurance brokerage commissions and doctors’ prescribing of pharmaceuticals.

Meanwhile, although no great fan of many of the class action securities fraud lawsuits that Milberg Weiss has pursued, Larry Ribstein remains troubled by the indictment:

We (and I) may not like Milbergís business. But the class action part of it was one enabled by legal rules. The right way to deal with the problems of this business is to change the rules, as Iíve argued for securities class actions in my Fraud on a Noisy Market. When we criminally condemn firms like Milberg because we don’t like their business, we set a precedent for other firms in controversial lines of work — e.g., Drexel Burnham.
More seriously, the power to criminalize a firm puts a potent tool in the governmentís hands to get the firm to cooperate in sacrificing the rights of criminal defendants. Here the cure seems patently worse the disease. The questions are no less in Milberg than in KPMG just because Milberg was in an unpopular line of work.

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Almost ignored amidst the media’s unprecedented focus on the Lay-Skilling trial, the first re-trial in the Enron Broadband case will go to the jury today after the prosecution and defense attorneys complete their closing arguments, which are expected to last most of the day. The trial is taking place in the courtroom of U.S. District Judge Vanessa Gilmore in Houston’s federal courthouse just down the hall from where the Lay-Skilling jurors resume deliberations this morning.
As noted earlier, the defendants in this first re-trial are Kevin Howard, the former Enron Broadband (“EBS”) CFO, and Michael Krautz, the former EBS senior accounting director, who are being tried together on four counts alleging that they conspired to commit wire fraud and falsify books and records in connection with a sale of video-on-demand profits. The charges relate to a April 2000 structured finance transaction known as Project Braveheart that was designed to allow EBS to monetize a 20-year agreement with Blockbuster Inc. EBS’ agreement with Blockbuster provided that Blockbuster would obtain digital rights to films that EBS would encode and stream over its network to customers’ homes.
The government contends that Howard and Krautz understood the accounting rules relating to the structured finance transaction, but that they intentionally violated those rules and withheld key information from Enron’s auditors so that the Braveheart transaction could be booked and allow Enron to post about $110 million in revenue in 2000-01. Howard and Krautz assert that the sale was an entirely legal and creative structured finance transaction that allowed EBS to generate earnings in an industry that was undergoing a deep shakeout amidst intense competition and fast-changing technology.
As noted earlier here, the Enron Broadband case is a part of a troubling trend in the post-Enron era in which individuals involved in legitimate structured finance transactions are targeted for indictment and prosecution, resulting in yet another disincentive for those individuals and their companies to engage in innovative risk-taking that generates wealth and jobs.