Longtime Houston attorney Tom Kirkendall's observations on developments in law, business, medicine, culture, sports, and other matters of general interest to the Houston business, professional, and academic communities.
It is a reflection of the Texans (7-7) endearing mediocrity that they can out-gain the Rams (1-13) by almost 200 yards and struggle to win by a field goal.
Now the Rams have been playing reasonably well over the past month and a half (only one blow-out loss during that span), but come on. They are still the Rams.
Although most sports talk hosts and fans think the Texans are underachieving, my sense is that their record is an accurate measure of their ability at this point in time.
For a variety of reasons, the Texans do not run the ball well. They do spray the ball reasonably well in the passing game, but they lost their second-most explosive receiver (Owen Daniels) to injury several games ago.
The defense has improved steadily during the season, but the lack of a consistent pass rush still puts too much pressure on the secondary, which is the weak link in the unit. The fact that 2007 first-round draft choice DT Amobi Okoye is doing a good imitation of former first-round DT bust Travis Johnson isn’t helping matters on the defensive line.
Finally, kicker Kris Brown has been so inconsistent that he looks as if he has all the confidence of a professional golfer undergoing a swing change in an effort to save his career.
Thus, with two games to go (the Dolphins at Miami and home against the Patriots), the Texans still have a chance to register the best record of their tortured eight-season existence. As a team, the Texans don’t seem to play with much confidence, which is probably attributable in good part to the overall youth of the team.
But the reality is that the Texans continue to improve. Just not as fast as their followers prefer.
The issue that Texans owner Bob McNair has to resolve is whether it is more likely that such improvement will continue under Gary Kubiak? Or is it more likely to continue under another head coach?
Owning shares of stock in Houston-based Landry’s Restaurants, Inc. has never been for the faint-hearted.
First, Landry’s board of directors failed to obtain a standstill agreement from Landry’s chairman and CEO, Tilman Fertitta, as his failed take-private offers over the past couple of years that would have prevented Fertitta from acquiring majority stock ownership in the company while its stock tanked.
Then, the Pershing Square Capital hedge fund entered the picture, bought up a bunch of Landry’s shares and announced that it opposed Fertitta’s most recent buyout offer.
Now, as Steve Davidoff explains, it appears that Fertitta has not been complying with his board’s instructions in making public disclosures about his buyout offers.
At least partly as a result, counsel for a special committee of Landry’s board that was created to negotiate Fertitta’s buyout offers resigned, apparently in protest.
As a result of this disclosure and other developments, don’t be surprised if the Securities and Exchange Commission comes knocking on Landry’s door to look into these developments.
And Tilman Fertitta’s firm grip on Landry’s from its inception may be slowly slipping away.
This time its the harsh sentences that U.S. District Judge Melinda Harmon handed down on Thursday to three former El Paso Natural Gas Company natural gas traders — 14 years to one defendant and 11 years and 3 months to the other two. They were convicted of multiple counts fraud and false reporting in connection with what has become known in Houston as "the trader cases."
The severity of the sentences is mind-boggling when compared with the nature of the alleged "crime."
The government alleged that the three traders provided false information to natural gas industry publications such as the Inside FERC Gas Market Report, which use data from traders to calculate an index price of natural gas.
Inasmuch as movement in index prices can theoretically affect the level of profits that traders can generate, the government’s theory was that the defendants provided false information so that they and El Paso could reap higher profits on their trades.
However, the government never proved that the magazines actually used the false information that the defendants provided to them or that the information actually affected the natural gas markets at all. Indeed, a myriad of market factors affect natural gas prices, as with the price of any commodity.
That was no problem for prosecutors, though. The government contended that the market effect of providing the false information was irrelevant and that the prosecution needed only to prove that false information was reported to the magazines in order to make a gain a conviction of the defendants. And they got away with it.
So, key point to all businesspeople — don’t ever provide any information to a publication about your business that could be construed to be false. It really doesn’t make any difference whether the false information affects your company. The government contends that the mere transmittal of the false information is the crime.
Meanwhile, three relatively young men (the oldest is 49) with families and promising careers are now facing over a decade of imprisonment for the "crime" of reporting false price information to a magazine.
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 whatprosecutors 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."
But lest we think that the problem is limited to such things as business and victimless crimes, think again says Bob Wachter:
Along comes another case involving jail time for a medical mistake, this one featuring an Ohio pharmacist named Eric Cropp.
Eric was the lead pharmacist at Cleveland’s Rainbow Babies and Children’s Hospital on February 26, 2006. The pharmacy, understaffed that day, received a rush order for chemotherapy for a 2-year-old girl, Emily Jerry, who was undergoing treatment for a spinal malignancy.
An unlicensed and distracted (by press accounts, she was planning her wedding on the day of the event) pharmacy technician mistakenly mixed the chemo with 23% saline rather than the intended 0.9%. Eric, working in cramped quarters and rushed for time, gave final approval to the mixture, partly because, after seeing a spent bag of 0.9% saline next to the mixed solution, he assumed that it had gone into the solution.
In other words, the case was a classic illustration of James Reason’s Swiss cheese model, in which numerous safety checks failed due to a confluence of systems and human errors. Tragically, little Emily died from the hypertonic saline infusion.
On hearing of the error, a Cuyahoga County DA decided that the case merited criminal prosecution, even though Eric had no history of errors in his pharmacy career and root cause analysis of the case confirmed that its cause was simple human error compounded by systems problems. At trial, fearing even harsher penalties, Eric pleaded guilty to involuntary manslaughter, and was sentenced to 6 months in the state prison, 6 months of home confinement, 3 years of probation, 400 hours of community service, and a $5,000 fine. Moreover, the Ohio pharmacy board permanently stripped him of his license, depriving him of his livelihood – forever. . . .
During last week’s webcast, Mike Cohen described visiting Eric in prison. “Like a scene out of a movie,” he recalled, with Eric in his orange jumpsuit, speaking to visitors through a glass wall, other felons – including violent offenders – milling about. As he related the visit, Mike choked up with emotion, clearly seeing this tale as both powerfully tragic and cautionary.
How has it come to the point where the criminal justice system exacerbates the tragedy of a young girl’s accidental death by ruining a career and inflicting enormous damage on an innocent family? At least the young girl’s family recovered substantial financial damages resulting from the pharmacist’s negligence. Where does the young pharmacist’s family turn for help?
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?
Key tip of the day to Seahawk Defensive Coordinator Casey Bradley — your cornerbacks need safety help in covering Texans WR Andre Johnson.
After a 64 yd TD reception on the first play of the game, Johnson proceeded to run through, around and over the beleaguered Seahawk (5-8) secondary for 193 total receiving yards as the Texans (6-7) broke a four game losing streak in this laugher.
The game was so one-sided that Texans QB Matt Schaub had only 29 yds passing in the 2nd half and still had 365 yds for the game. Before the Seahawks final drive of the first half, the Texans had outgained them 311-25.
Moreover, the Texans defense continued to show signs of improvement as they held the Seahawks to under 300 yds of total offense while forcing three fumbles, sacking Seahawks QB Matt Hasselback three times and injuring his right shoulder on another hard hit. The Texans held the Seahawks to about 20 yards on 14 plays during their first four drives of the game, resulting in four punts.
The Texans to on the road for the next couple of weeks against the Rams (1-12) and Dolphins (7-6) before returning to Reliant Stadium to close the season against the Patriots (8-5). All those games are winnable, but one concern is that PK Kris Brown remains in a funk, missing a 48 yard FG attempt and having another short one blocked when he appeared to kick it thin and low. Many a close NFL game has been lost because of a kicker who suddenly has gone into a funk. Brown certainly appears to be in a serious funk.
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.
(AP Photo/Jeff Roberson photo; previous weekly reviews for this season are here).
Overcriminalization of daily life, particularly as it relates to 
