This Wall Street Journal ($) article is the most thorough report yet on the sad case of Jamie Olis, the 38 year old former Dynegy mid-level tax manager who was convicted and recently sentenced to over 24 years in federal prison for his role in the Project Alpha financial scheme that essentially masked loan proceeds as cash flow from operations. Here are the previous posts on Mr. Olis’ case.
The entire WSJ article is interesting reading, and provides the best background piece to date on how Mr. Olis finds himself in this position. As I suspected based upon previous rulings by U.S. District Judge Sim Lake in Mr. Olis’ case, his defense team made a serious tactical error (at least in my view) by electing not to rebut the government’s evidence at trial of the damage that the Project Alpha deal caused to Dynegy shareholders:
After eight days of prosecution testimony, Mr. Olis’s lawyers believed they had poked enough holes in the government’s case to win. They rested without putting Mr. Olis on the stand — or any other witness.
That decision meant that, in considering the length of Mr. Olis’ sentence, the only evidence that Judge Lake had on damages resulting from the deal was that which the government offered:
The new federal sentencing guidelines work on a kind of point system, with more points and more prison time given if the case involves more victims, larger losses or using special training to execute a fraud. The key issue was the size of the loss suffered by Dynegy investors from the scheme: Anything more that $100 million would garner the maximum number of points, lengthening the sentence.
After considering several options, U.S. District Judge Sim Lake settled on a loss estimate of $105 million — the amount the University of California retirement fund lost on Dynegy stock, a hit the fund attributed to Project Alpha. With that loss and other factors, the guidelines recommended a sentence of 292 to 365 months.
As the article relates, Mr. Olis remains convinced of his innocence and, thus, remains unwilling to assist the government in its investigation and possible prosecution of other Dynegy executives and outside lawyers who were implicated in the scheme during Mr. Olis’ trial:
But such cooperation seems unlikely. Though “facing years away from his wife and daughter, Jamie remains strong in his convictions,” close friend Joan E. Quinn wrote to Judge Lake before the sentencing.
Mike Shelby, the U.S. attorney for the southern district of Texas, who supervised the case, isn’t sympathetic. “We have been rebuffed at every turn” by Mr. Olis, said Mr. Shelby. “I would ask the question, ‘Why don’t you help us?’ “
My speculation: “Despite the tactical errors of his defense, maybe because Mr. Olis did not deserve 24 years in prison.”
I continue to maintain that the criminalization of questionable business practices — combined with the government’s sledgehammer approach of forcing executives to defend themselves only at the risk of what amounts to a life prison sentence if they lose — is an extremely unfair and unwise governmental policy. And this from an administration that touts itself as “business friendly?”
If you are interested in reviewing more on this topic, Professor Ribstein over at Ideablog has provided some of the best analysis of the Olis case and this troubling trend of the government criminalizing such things as bad accounting.
Jamie Olis goes to jail
I have written about this sorry case. It has reached at least a temporary denouement as Mr. Olis begins to serve his 24 year sentence. This WSJ article makes it seem unusually clear that he is serving as much for
Amazing and unbelievable that anyone thinks this makes sense and is deserved. Has anyone considered that the CFO, outside attorneys, accountants, internal lawyers, other field experts and Mr. Olis’ boss were all named as part of the “conspiracy to commit crimes” by the one guy who took a deal yet no one has shown that anyone gained any money? How stupid would they all have to be to intentionally commit a crime for no gain and overwhelming risk to themselves and their families?? Why did they only go after a few lower level people when they had a built in witness, Mr. Olis’ boss, who was willing to say it was all directed by the CFO in order to get his deal? Has anyone considered how much it costs to appropriately defend a complex case like this under the threat of what happens if you fail? Jeff Skilling had $23 million for his defense, how much do you think a mid level employee who didn’t personally profit can afford to pay? Mid level tax guys don’t review or make decisions about financial statements or communications to auditors and shareholders. If they did, who would need CFOs, accounting departments, finance departments, legal departments or pay for experts? Does sending someone to prison for over 24 years for working under the direction of their boss, their CFO and experts seem justifiable? Would you want to be held solely responsible for the change in your company stock price considering the steep rises and falls that are simply chalked up to arbitrary “investor confidence”- What if you worked at a Fortune 5 company and a few cents loss per share could put you away for life? The idea that the US Atty is claiming they can’t understand why Olis won’t just “help” them is stupifying. Come on! What happened to common sense?
Sounds like an incredibly long sentence.
But you err, I think in one respect: That decision [not to put on a defense case] meant that, in considering the length of Mr. Olis’ sentence, the only evidence that Judge Lake had on damages resulting from the deal was that which the government offered. The decision not to put on a defense case in no way precluded the defense from contesting at sentencing the loss caused by Mr. Olis’s actions. If they had evidence of a lower loss amount, why, pray tell, didn’t they present it at sentencing? Or did they?
Something’s missing here.
Although I did not attend the Olis sentencing hearing (which occurred pre-Booker and pre-Dura), it’s my understanding that the government took the position — and that Judge Lake bought it — that the Court could not consider evidence and testimony of the market effect of the underlying transaction that had not been propounded by the defense during the trial. Although seemingly a fundamentally wrong decision, that explains how Judge Lake came to adopt the government’s measure of market effect and thus, the draconian sentence.
Many did attend that hearing. It was packed with family and supporters for Mr. Olis. They witnessed when the judge — pre Blakely and pre Dura — refused to hear a defense expert on the amount of loss and refused to consider the experts written statement or consider the defense attorneys argument that when measured shortly after 9/11 and shortly after the Enron collapse and in conjunction with a number of unrelated financial statement discrepancies that his company revealed at the same time, that the shareholder loss had other substantial factors that affected it. Why did he refuse? Because he didn’t have to consider those factors and he said as much. Proof beyond a reasonable doubt is not required for assessing a sentencing factor even one so great to give someone over 24 years vs 6 months. In fact, no “proof” is required- just anything that the judge chooses to rely on whether or not it makes any sense in the real world. At most Fortune 100 companies, any days fluctuation is substantial enough to “justify” an equal sentence according to the Federal Sentencing Guidelines for even the most minor offender among those accused. And the Supreme Court refuses to say anything different.
I do think that Dura represents a strong basis for the Fifth Circuit to order a reconsideration of Mr. Olis’ sentence. The position that the DOJ took in the Olis sentencing hearing contradicted the position that the DOJ took before the Supreme Court (and the position that SCOTUS ultimately upheld), a fact that I do not believe Mr. Olis’ attorneys knew at the time of Mr. Olis’ sentencing hearing.