Yes, it’s Tuesday, but the Monday morning quarterbacking on the failed defense of Ken Lay is in full swing.
Donald Watkins, an Alabama-based lawyer who headed up the defense team that handled the successful defense of former HealthSouth CEO, Richard Scrushy, says the following about the Lay defense:
In an interview following the Enron trial, Watkins called Lay’s strategy wrong from the start because the former Enron CEO began his defense by hiring a team of big-name trial lawyers. What Lay needed first, Watkins says, was a strategist with a broader view of what was needed to keep such a high-profile defendant out of prison.
“Lawyers are technicians,” Watkins says. “They’re like painters, plumbers and sheet-rockers.”
Frankly, although somewhat interesting, Watkins’ views should be taken with a rather large grain of salt. First, Lay did not hire a “team of big-name trial lawyers.” Mike Ramsey — Lay’s lead attorney — has a good local reputation as a criminal defense attorney, but is hardly close to a “big-name” trial lawyer in Houston or anywhere else. No one else on the Lay team comes close to having that reputation, either.
Moreover, although similarities exist, all big business criminal cases have significant differences. HealthSouth did not experience anywhere near the societal and media demonization of Enron, which made Lay’s public relations problem much more difficult than Scrushy’s. Moreover, under the circumstances of Lay’s case, Lay’s defense had to be far different from Scrushy’s, who relied on the “honest idiot” defense and did not testify during his trial. In contrast, the jurors to a person in the Lay trial stated post-trial that they expected Lay to respond to the testimony of prosecution witnesses against him, signaling that they would have crucified him if he had not testified. Thus, the fact that Lay was not particularly effective in defending himself while testifying does not mean that it was a mistake to put him on the stand.
In short, different circumstances call for different strategies. The fact that Watkins’ strategy worked in the Scrushy case does not mean that the same strategy would have worked in the defense of Lay. However, his success in the Scrushy case does provide a nice perch from which to Monday morning quarterback.
I love it. Now they’re Monday-morning-quarterbacking these guys’ defense against Monday-morning-quarterbacking of their business decisions.
Tom this probably isn’t the right post for this concept, but I want to get your take on something so I’ll ask anyway. I wonder if we are seeing the emergence of a “public goods” situation in the stock market similar to the one that took hold in the electricity markets and the comparable ascendent trend in the oil/gas markets. Have you considered this as a possibility? The prosecutions so far have been (for the most part) limited to bankruptcies, but it seems that the line could be drawn anywhere or nowhere, depending on how “unjust” it is at the time for shareholders who elect board members and hire senior managers to lose their equity due to the performance of their employees. And God help us if John Q Stockholder ever becomes John Q Bondholder.
Kevin, I don’t think that there is any question that the criminalization of corporate agency costs is in full bloom right now. I don’t think a bankruptcy is even necessary to trigger such prosecutions any longer — note the prosecutions that have emanated from the AIG situation last year.
There are not many disincentives for the prosecution to pursue such cases, particularly if they can simplify them into cases in which cooperating witnesses testify about the alleged lies of the executive/defendants and the prosecution effectively ices exculpatory testimony from other witnesses. Just another reason for business executives to avoid the public company model altogether.