This post from last week reported on how a recent civil lawsuit against Dynegy, Inc. involved issues relating to the Justice Department’s 2003 threat to indict the company that contributed dramatically to the barbaric prosecution and prison sentence of former mid-level Dynegy executive, Jamie Olis. The evidence from that trial is now slowly filtering out and reveals a systematic effort by federal prosecutors to interfere with Olis’ defense of the government’s charges. The following is from a Platt’s.com‘s ($) Gas Daily:

The CEO of Dynegy, who four years ago cooperated with a fraud investigation that resulted in a former colleague getting a six-year prison sentence, feared at the time that prosecutors might deal Dynegy a fatal blow by seeking a criminal indictment against the firm.
According to transcripts from a late-April trial, [Dynegy CEO] Bruce Williamson testified that after a January 2003 meeting with the US attorney, ìI walked out of there a few pounds lighter. An indictment clearly would have put the company out of business.î [. . .]
Williamson testified for three days in late April about his thought process in 2003 as the US Attorneyís office in Houston was preparing an investigation into Project Alpha ó a probe that led to the conviction of Olis and two other former employees.
At the time of the Project Alpha inquiry, Williamson had been on the job just a few months, having been named CEO in October 2002 when Dynegy was facing severe liquidity and credit problems and its future as a viable company was in doubt.
Lloyd Kelley, Yatesí attorney, told Platts last week that prosecutors, under the direction of then-US Attorney Michael Shelby, pressured Williamson and other Dynegy officials to cut off support to Olis and other ex-employees under investigation or face the prospect of a criminal indictment against the company itself.
ìShelby basically threatened Dynegy, and Williamson agreed to do whatever the government wanted, which meant they would order people to give testimony,î Kelley maintained. ìThey had to waive their Fifth Amendment privilege, waive attorney-client privilege.î
According to the transcripts of last monthís trial, Williamson testified that in early January 2003, he arranged a meeting at Shelbyís office after receiving a letter from Shelby indicating his displeasure with Dynegyís lack of cooperation into the Project Alpha investigation.
ìI wouldnít say it frightened me, but it was another issue along with all the debt that we needed to pay off, along with a FERC investigation, a Commodity Futures Trading Commission investigation, all the other things going on,î he testified.
Williamson said he feared that a criminal indictment against Dynegy on the heels of mass layoffs would have ìshut the company downî by forcing the departure of the firmís remaining 1,400 employees. An indictment never came. Williamson told the court that he took a hard line against any current or former Dynegy employee being investigated by the government.
ìIím not going to give people the presumption of innocence,î he said. ìAnybody on that list needs to be investigated fully and we needed to determine whether they were guilty or not. If they are, they need to leave the company. If they are going to be indicted, they need to leave the company. If there is a doubt, they need to leave the company,î Williamson testified. . .
Don DeGabrielle, the current US Attorney for the Southern District of Texas, told Platts that his predecessor, who died last July, did nothing wrong in his prosecution of the Project Alpha case. . . .

It’s a sad sign of our times that federal authorities deem “nothing wrong” with threatening to put a company out of business for merely defending its employees. Despite the recent jury verdict against Dynegy, Williamson and the Dynegy board did the correct thing for the company’s shareholders by tossing Olis to the wolves — having to pay several million in damages for failing to subsidize Olis’ defense costs is peanuts compared to the billions in damages that would have resulted from a Dynegy bankruptcy. But Dynegy’s board should never have been forced to make that Draconian choice in the first place. In the face of such interference with Olis’ defense, the prosecution of Olis should have never been allowed to proceed. Peter Henning reports that the latest development in the KPMG case is prompting Judge Kaplan to confront the same issue in that case (Larry Ribstein also comments here). Here’s hoping that the injustice heaped upon Jamie Olis helps lead Judge Kaplan to the correct decision.