More ripples from the Fifth Circuit’s Nigerian Barge decision

Amidst the publicity on the Andy Fastow sentence and the upcoming sentencing hearing of Jeff Skilling, the legal wrangling related to the conviction of former Enron Broadband executive Kevin Howard has been flying somewhat under the radar screen. Howard is currently scheduled to be sentenced by U.S. District Judge Vanessa Gilmore on October 30.

You will recall that Judge Gilmore inexplicably decided to try Howard and his fellow former Enron Broadband executive Michael Krautz on wire fraud, falsifying books and records and conspiracy charges just down the hall from the intensive media glare of the final weeks of the Lay-Skilling criminal trial.

The jury in the Howard case deliberated at the same time as the Lay-Skilling jury was deliberating in an adjacent conference room! Not only that, the Howard jurors saw first hand the media firestorm at the federal courthouse on the Thursday before the Memorial Day weekend when the Lay-Skilling verdict was announced and, not surprisingly, the Howard jury returned a split verdict the following Tuesday convicting the “boss” Howard and acquitting the subordinate Krautz.

Now, however, it appears that the Fifth Circuit’s recent decision in the Enron-related Nigerian Barge appeal may be Howard’s ticket to reversing the outrage represented by his conviction. Based a motion filed late last week, Howard’s attorneys persuasively argue that the Fifth Circuit’s decision in the Nigerian Barge appeal requires that Howard’s conviction be vacated because — just as with the convictions of the four Merrill Lynch executives in the Barge case — the Task Force improperly placed the round peg of Howard’s actions on behalf of Enron Broadband into the square hole of depriving an employer of “honest services” under 18 U.S.C. ß 1346:

The [Fifth Circuit’s Nigerian Barge decision] holds that an employee deprives his employer of “honest services” under 18 U.S.C. ß 1346 only when the employee seeks to promote his own interests instead of the interests of the employer. Conversely, conduct — even otherwise illegal conduct — does not violate Seciton 1346 where it is “associated with and concomitant to the employer’s own immediate interest.” . . . The Government’s allegations against Mr. Howard describe this exact scenario. . . . Whatever elese one may say about the Braveheart transation, it was designed, in whole or in part, to promote the interests of Enron Broadband Services and not purely the interests of Kevin Howard. Under [the Fifth Circuit’s Nigerian Barge decision], such conduct does not fun afoul of Section 1346.

Howard’s lawyers go on to explain that the Enron Task Force’s case against Howard was precisely the same as the Task Force’s odious case against the four Merrill Lynch executives — taking a risky but legitimate transaction and criminalizing it through assertion of a “deprivation of honest services” violation that is meant to apply in cases involving bribes, kickbacks or related self-dealing between a corporate employee and a third party. This is precisely the point that U.S. District Judge Lynn Hughes made during the hearing over a year ago to accept the plea bargain of former Enron executive Christopher Calger, a plea bargain that Calger is now attempting to disavow.

In short, Howard’s motion reiterates the reality that the true criminal activity in regard to the Enron — such as the embezzlement of funds by Fastow and a few of his close associates, such as Ben Glisan and Michael Kopper — was actually limited to a few individuals. The Task Force has obtained the convictions of many others largely through bludgeoning of plea bargains or appealing to jurors’ resentment of wealthy businesspersons while asserting dubious applications of criminal law, such as the “honest services” violations alleged against Howard.

A mainstream media and general public largely satisfied with demonizing Enron executives are not concerned that the awesome force of the government’s prosecutorial power is being wielded irresponsibly against Howard, the four Merrill Lynch executives, Calger, Jeff Skilling and many other former Enron executives who have copped pleas out of fear of long prison sentences.

Here’s hoping that the judiciary — the most important check on the Executive Branch’s prosecutorial power — is not as comfortable with the Task Force’s abuse of that power.

Have we got a bomb shelter for you

bunkerpic.jpgThis Wall Street Journal article reports on the decision of Continental Airlines and several other local companies to lease as an emergency control center one of the most bizarre sites in the Houston area — a 38,000 square foot, 70-foot deep bomb shelter designed to house 1,500 people for 90 days in the case of a nuclear attack.
The shelter — which has been a topic of conversation for years in these parts — is located adjacent to a four-story office building just up the road on Highway 105 in Montgomery near Conroe on Houston’s far north side. The office building and bomb shelter were built during the early 1980s by a Ling-Chieh “Louis” Kung, the nephew of Madame Chiang Kai-Shek, the former first lady of Taiwan and the wife of Mao Tse Tung’s foremost domestic enemy during the Communist revolution in China. Kung died in Houston in 1996 also claimed to be a direct descendant of Confucius, so he seemed to be pretty well-connected.

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2006 Weekly local football review

texastech2.jpgTexans 17 Dolphins 15

Well now, that’s a relief!
In an entertaining but not particularly well-played game, the Texans (1-3) won for only the third time in the past 21 games as the Dolphins (1-3) could not convert a questionable play call on a two-point conversion attempt late in the 4th quarter. The Texans defense finally showed a long-awaited pass rush, sacking the immobile Dolphin QB Dante Culpepper five times and hurrying him at least another dozen times or so. The Texans offense was mediocre, but QB David Carr and WR Andre Johnson were able to put the Texans in a position to score a couple of TD’s, which was enough to get the job done against a Dolphins team that is dragged down by a rather pedestrian offense. The Texans have a bye in Week Five and then go to Dallas to be smoked by the Cowboys (2-1) in Week Six before returning home to face the Jaguars (3-1) in Week Seven. Although the win against the Dolphins was refreshing, this team has no NFL-average running back, is soft in the defensive secondary, tackles poorly overall and continues to have problems protecting the QB. Thus, my sense is that the Texans will be 1-5 when they have their next realistic chance for a victory in Week Eight against the Titans in Nashville.

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Ripples from the Grimsley Affair reach the Stros

clemens5a.jpgpettitte.jpgNow that it looks as if the Stros late-season push for the playoffs is all for naught, it appears that the Stros may well be dealing with more than just the disappointment of missing the playoffs for the first time in three seasons.
Remember the Jason Grimsley Affair that broke this past June?
Then, remember that Cardinals’ slugger, Albert Pujols, was was one of the first Major League Baseball players implicated in the affair?
Well now, the ripples of the affair have reached the Stros, as the names of both Roger Clemens and Andy Pettitte have been implicated in the affair (LA Times story here). Clemens and Pettitte deny any involvement with Grimsley or in using performance-enhancing drugs. Lawyers are being consulted.
As predicted earlier, this is going to get rather ugly. Unfortunately, the level of discussion will probably descend into scapegoating rather than a productive debate regarding the use of performence-enhancing drugs in professional sports.

Baylor Med decides to go it alone

photo_tmc_aerial2002.jpgThe Houston professional community and the Medical Center was abuzz yesterday with Baylor College of Medicine’s announcement late this week that the school will construct a new teaching hospital in the Texas Medical Center and end its recent affiliation with St. Luke’s Episcopal Hospital as its primary teaching hospital. This move comes only a couple of years after Baylor (which has no affiliation with Baylor University in Waco) terminated its longstanding with the Methodist Hospital as its primary teaching facility (previous posts here), a relationship that was as storied as the Medical Center itself. As usual, the Chronicle’s Todd Ackerman — who has done a superlative job in covering the Baylor-Methodist split and the changing nature of Baylor within the Medical Center — has this excellent report on the development.
Baylor’s new hospital will resolve Baylor’s increasing concern over being the nation’s only top-20 medical school that does not own a hospital or whose department chairs do not head the key medical departments at an affiliated teaching hospital. The announcement is really not a surprise as there have been rumors for the past six months or so that Baylor-St. Luke’s partnership was on the rocks. Although the two institutions entered into merger negotiations shortly after they entered into the teaching hospital affiliation, those negotiations didn’t go anywhere as St. Luke’s staked a vision of providing medical services in new hospitals throughout the far-flung Houston metropolitan area. The straw that broke the camel’s back was St. Luke’s dragging its feet in making Baylor department chairs the head of the hospital’s parallel medical departments.
The demise of Baylor’s relationships with both Methodist and St. Luke’s is a reflection of the difficulties involved in sustaining long-term business and professional relationships in the face of the fast-changing world of American health care finance. When those pressures overwhelm a productive relationship such as the one that Baylor and Methodist long-enjoyed, the risk increases that a decline in the quality of medical care will be the ultimate result, which is a risk that should concern all of us. On the other hand, Baylor is presenting an ambitious plan for maintaining its position as one of the top medical schools in the country, and more competition between outstanding hospital facilities in one of the nation’s top medical centers could well generate even better medical care and research. How it turns out will reflect much in regard to the direction of the American health-care finance system and the challenges of training physicians within that changing system.

One of the risks of the modern church

church.state.jpgIt’s trendy these days for megachurches to provide all sorts of special services for their members. One of the most popular of such services is marriage counseling, which this NY Times article reports placed a Texas church squarely in the crosshairs of a defamation lawsuit when the minister providing the service went and blabbed confidential information about one of the church members to the church elders.
The leaders of the churches providing these services better recognize that such lawsuits are part of the risk of providing such a service and that it is not at all clear that the traditional separation between church and state is going to insulate the church from liability. Pastors who are leading their churches down this course need to ask themselves how their flocks will react when the church must raise money to pay a damages award from such a lawsuit or even just to pay the considerable cost of defending one. That’s not the type of sacrificial atonement that Christ had in mind.
Speaking of risks for megachurches, Victoria Osteen — wife of Lakewood Church’s Joel Osteenhas resolved her little Christmas season snit with the FAA, but that apparently is not the end of the story:

The Federal Aviation Administration has fined Victoria Osteen, wife of Lakewood pastor Joel Osteen, $3,000 after determining she had interfered with a Continental Airlines crew member aboard a flight late last year.
And this week, a flight attendant filed suit claiming she was assaulted by Victoria Osteen during that flight to Vail, Colo., for the Christmas holidays.
Osteen has paid the penalty, which is not an admission of guilt

Mrs. Osteen is well-represented by none other than the ubiquitous Rusty Hardin.

The most uncomfortable place right now in the United States?

Roy Oswalt31.jpgAnswer: The St. Louis Cardinals clubhouse.
Let’s put this in perspective. 10 days ago, the Cardinals won their game that day and the Stros lost theirs. At that time, the Cards were 79-69 and the Stros were 72-77. The Stros were trailing the Redbirds by a seemingly insurmountable 8.5 games.
After completing a sweep of the Pirates yesterday afternoon, the Stros are now 81-78 and a mere half game behind the 81- 77 Cards, who got creamed by the Brewers last night. So, in a week and a half, the Stros have gone from less than a five percent chance of making the playoffs to being a legitimate contender. You gotta love baseball.
Although there is a element of luck in what has happened, it’s really not that surprising when you look at the statistics. The Stros stellar pitching has continued to improve — as it usually does over the 2nd half of the season — and the hitting, although still well below Naitional League average, has improved enough so as not to undermine the excellent pitching. On the other hand, the Cardinals’ pitching — which has been deteriorating for over a season now — has gone into the tank while their hitting has been pretty much relegated to an occasional Pujols tater.
The Stros have three games against the Braves in Atlanta and the Cards have three more games at home against the Brewers and a make-up game, if necessary, against the Giants on Monday in St. Louis. If the Stros and Cards tie, the one-game playoff is on Tuesday at Minute Maid Park in Houston.

Ryder Cup post-mortem

Rydercup06logo9.jpgJohn Huggan is the European correspondent for both Golf Digest and Golf World magazines, and his thoughts on the just-concluded Ryder Cup matches addresses the rather embarrassing question of whether the U.S. team has fallen so far behind the European squad that the U.S. should consider making their team “the Americas” team:

[O]ne has to wonder what Jack Nicklaus was thinking as he surveyed from afar the carnage that was America’s Team. Was he musing the possibility of the hapless US side being bolstered by the likes of Canada’s Mike Weir, Angel Cabrera of Argentina and Columbian Camilio Villegas in a newly constituted ‘Americas’ team? To even suggest such a thing can no longer be dismissed as frivolous or mere mischief making. After two successive nine-point shellackings that hardly bode well for the new world’s prospects at Valhalla two years hence, it is a question that brings with it a growing legitimacy.

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The Surprising Fastow Sentence

This Kristin Hays-Tom Fowler/Chronicle article picks up on an aspect of the six-year sentence assessed to former Enron CFO Andrew Fastow earlier this week that has largely been ignored in the media but noted earlier here.

The Enron Task Force elicited testimony from Fastow during the Lay-Skilling trial that represented to the jury that Fastow was a more credible witness because he had agreed to a minimum ten-year prison sentence and, thus, had no incentive to lie.

As we know now, Fastow had not really agreed to anything of the sort and, in fact, successfully petitioned U.S. District Judge Ken Hoyt for a lighter sentence. The article quotes several experts — including former Enron Task Force director Andrew Weissmann — who express surprise that the Task Force did not attempt to require Fastow to serve a minimum of ten years.

Although interesting, the article fails to address the most troubling aspect of the Fastow sentencing hearing — that is, the apparent failure of any of the attorneys involved to inform Judge Hoyt about how the Lay-Skilling jury was misled by Fastow’s testimony.

When Judge Hoyt finds out about that he was not informed about that, my sense is that he is not going to be pleased.

The public reaction to the Fastow sentence has been fascinating and reflects the dubious nature of the Justice Department’s regulation of business-through-criminalization policy.

Viewed in a vacuum, the Fastow sentence is reasonably fair. Fastow effectively embezzled millions from Enron and ruined the careers of several other Enron executives who he induced to participate in the embezzlement. Six years is a harsh sentence, so Fastow is certainly not getting off lightly.

However, the Fastow sentence was not handed down in a vacuum.

Not only did Fastow and the Task Force prosecutors mislead the jury in order to convict Lay and Skilling, they trampled justice by needlessly ruining the careers of the four Merrill Lynch executives in the Nigerian Barge case and they are currently doing the same thing to the three U.K. bankers in the NatWest Three case.

There is simply no way to reconcile Fastow’s sentence with the six-year sentence handed down to Jamie Olis — who did not steal anything and refused to tell lies about others — or the seven-year sentence of former Enron chief accountant Richard Causey, who also did not steal anything and who has not testified against anybody.

The death of Ken Lay from defending himself against a weak and unjust case, as well as the effective life sentence likely faced by Jeff Skilling, further underscore the confusing message conveyed by the Fastow sentence.

As Larry Ribstein has repeatedly observed, criminal cases involving business executives have become a sort of lottery, incrementally undermining the principles of justice and respect for the rule of law upon which the success of American society is largely based.

If we lose respect for those principles, then “do you really think you could stand upright in the winds [of abusive state power] that would blow then?

Stros’ streak continues; Cards’ streak ends

Berkman6C.jpgAs noted earlier here and here, the past week and a half has been fun for the Stros as an improbable series of events has catapulted the club back into playoff contention. The Stros won again in Pittsburgh last night, using nine pitchers for the second time in three games and overcoming a 6-1 deficit. The Stros (80-78) have now won eight straight games.
Unfortunately, the Cardinals (81-76) finally broke their seven game losing streak, which is what really got the Stros back in the race for a playoff spot. Accordingly, the Cards’ magic number to win the NL Central title is now four — that is, any combination of further Cardinal wins (they have five games left) and Stros losses (they have four games left) equaling four means that the Cardinals win the title.
Roy O and the Stros go for the sweep this afternoon against the Pirates while the Cardinals open up a four game series at home tonight against the Brewers.