More on the sad case of Jamie Olis

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This LA Times article is the best analysis that I have seen to date regarding what occurred in the sad case of former mid-level Dynegy accountant Jamie Olis that resulted in the absurd 24 year sentence for Mr. Olis.
In November, 2003, a Houston jury found Mr. Olis guilty of helping cook the books at Dynegy, a Houston-based pipeline company that tracked Enron’s course into online power trading before that entire industry went bust as a result of Enron’s collapse. Mr. Olis was convicted of a battery of charges — conspiracy, securities fraud, mail fraud and wire fraud — related to an accounting scheme called Project Alpha, which attempted to mask $300 million of debt as revenue.
U.S. District Judge Sim Lake — who is presently handling the criminal case against former Enron chief honchos Kenneth Lay, Jeffrey Skilling and Richard Causey — handled Mr. Olis’ sentencing. Under the sentencing guidelines, several factors — including the skills required to perpetrate an accounting sleight-of-hand, the number of victims and a defendant’s criminal history — contribute to the length of a prison term for a white-collar criminal. However, the most significant factor in determining a sentence in a corporate fraud case is the monetary loss and — as all business litigators know — proving financial loss is far from an exact science.
Indeed, even the government expert on financial loss upon whom Judge Lake primarily relied acknowledges that he did not testify that Project Alpha caused the amount of monetary loss that Judge Lake used in sentencing Mr. Olis:

At Olis’ sentencing, Lake put the loss at a minimum of $105 million. He based that finding on his view of losses suffered by the University of California, a major Dynegy shareholder and lead plaintiff in a class-action lawsuit against the company.
During the trial, Jeffrey Heil, a former university investment official, testified that the UC system had lost a little more than $100 million on its Dynegy investment.
But in a recent interview, Heil made clear that he was not sure the punishment meted out to Olis was fair, considering the much lighter sentences given to senior corporate officers who have cut plea agreements in other cases.
“This doesn’t make a lot of sense,” said Heil, who served as UC’s co-head of investments until January 2003.
Yet Heil, who now works for the Doris Duke Charitable Foundation in New York, acknowledged in the interview that he couldn’t place a dollar value on the UC losses tied specifically to Project Alpha.
It was not a number he was asked to single out at trial.
“To be truthful,” he said, “I wouldn’t have known the figure.”
Notably, Heil never testified that Project Alpha cost the university system more than $100 million. Rather, he told the court that UC lost that amount during its overall period of owning Dynegy stock in 2001 and 2002, a time when the shares dropped for any number of reasons: the market-rocking Sept. 11, 2001, terrorist attacks; Enron’s spectacular collapse, which dragged down the whole energy sector; Dynegy’s ill-fated attempt to acquire Enron; and the California energy crisis, which raised fears of a broad regulatory clampdown.

Consistent with the Justice Department’s current penchant for criminalizing business, the Olis prosecutors actually attempted to prove that public disclosure of Project Alpha caused a much greater loss:

The government urged Lake to figure investors’ losses at more than $500 million — and perhaps twice that amount — based on the hit taken by all shareholders, not just the university. Prosecutors submitted a consultant study that considered the entire decline in Dynegy’s market value and attempted to screen out factors unrelated to Project Alpha.

The defense countered that it was impossible to accurately separate the losses tied to the fraud, given the array of pressures bearing down on Dynegy.
In the end, Lake sought to simplify the matter by focusing on UC’s investment alone.

Meanwhile, in the wake of the Supreme Court’s recent Blakely decision, Houston-based criminal defense lawyer David Gerger has filed a motion asking for his client to be released pending appeal because, lacking the jury’s endorsement of the $100-million-plus loss that the Blakely decision appears to require, Olis’ sentence should be no longer than six months.

Stros sink to new low

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The Stros officially hit oblivion on Sunday afternoon as they they hacked away with futility at Jose Lima’s change up and lost the third of their four game series with the Dodgers, 7-4.
Roy O started on three days rest and battled gamely, giving up 3 runs on 8 hits and 3 walks over 6 innings. But then Weathers gave up a grand salami to Lo Duca in the eighth and the Dodgers cruised to the win. The Stros got their usual six hits, with Beltran and Everett cranking two run yaks to account for the Stros four runs.
The Stros are 44-44 at the All-Star break, 11 games behind the Cards in the NL Central, and 4 1/2 games behind the Giants for the NL Wild Card spot. Since winning 10 of 12 games for a 21-11 record as of May 11, the Stros are an atrocious 23-33. That’s a lousy two months, and the Stros’ hitting statistics reflect it.
Here are the Stros’ hitters’ runs created against average (“RCAA,” explained here) through Friday’s games, courtesy of Lee Sinins:
Lance Berkman 33
Craig Biggio 10
Jeff Bagwell 6
Mike Lamb 5
Carlos Beltran 4
Eric Bruntlett 1
Jeff Kent 1
Chris Burke -1
Jose Vizcaino -1
Jason Lane -3
Orlando Palmeiro -3
Raul Chavez -8
Richard Hidalgo -9
Morgan Ensberg -11
Adam Everett -17
Brad Ausmus -20
The Stros’ team RCAA has now plummeted to -13. During their feeble West Coast swing, the Stros have fallen from 7th to 12th out of the 16 National League teams (only the Brewers, Rockies, DBacks, and Expos are worse).
Berkman continues to have a solid overall season, but he has fallen to ninth and eighth in RCAA and OPS (on base average + slugging percentage) respectively after challenging Bonds for first place earlier in the season. Berkman’s RCAA now is the same as it was on May 30, so Berkman has been precisely an average player in the National League over the past month and a half.
But things get even worse. The Stros now have two players (Everett and Ausmus) among the worst ten hitters in the National League, and Ausmus is bearing down on Neifi Perez for the lead in that dubious category. Moreover, Ensberg — who followed up last weekend’s promising performance against the Rangers with a horrid West Coast trip — is not far from breaking into the ten worst hitters in the NL. That means that four out of the Stros’ nine hitters in most games (Everett, Ausmus, Ensberg, and the pitcher) are are producing far fewer runs than an average National League hitter would be generating.
And they aren’t the only ones not performing. Bags has had a -4 RCAA and is 43rd in OPS among regular players in the National League, the lowest position for Bagwell in those categories in his career. Similarly, Kent a -3 RCAA since May 30 and beyond Bidg, Lamb, and Viz, no other Stro player has had a positive RCAA since May 30. Indeed, Beltran leads the Stros in RCAA since joining the club in June.
Remarkably, the Stros’ pitchers’ runs saved against average (“RSAA,” explained here) is actually improving:
Roger Clemens 23
Brad Lidge 12
Wade Miller 11
Roy Oswalt 11
Octavio Dotel 5
Dan Miceli 4
Andy Pettitte 2
David Weathers 2
Kirk Bullinger 1
Mike Gallo 1
Pete Munro 0
Brandon Backe -2
Jeremy Griffiths -3
Ricky Stone -3
Jared Fernandez -6
Chad Harville -7
Brandon Duckworth -10
Tim Redding -14
The Stros team RSAA is fourth in the National League behind only the Cards, Mets, and Cubs. Clemens remains one of the best pitchers in the league, and Lidge and Roy O’s RSAA are improving steadily. Miller remains a big loss for the club, and Harville, Duckworth and Redding are disasters, but perhaps Carlos Hernandez will be called up from AAA New Orleans and provide some spark to the bullpen during the second half of the season.
The Cards have emerged as the clear power in the NL Central over the past two weeks and should win the division easily if current trends hold. The Cubs remain a solid wild card contender and the Stros should eventually overtake the Reds and the Brewers for third in the division, although the Brew Crew is gaining on the Stros statistically and could maintain their position over a discouraged Stros ballclub. The Reds’ lack of pitching should continue to grease their skid during the second half of the season.
The bottom line: The Stros pitching is good enough to contend for a wild card spot. However, unless Bags, Kent, and Ensberg heat up considerably, the Stros’ lack of hitting will prevent them from contending for a playoff spot. Inasmuch as Bags and Kent are in age-related declines, and Ensberg still is not a proven big league hitter, my bet is that the Stros’ hitting will not improve enough in the second half of the season to contend for the wild card spot.

Innocent until proven guilty, except in the Enron case

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This Houston Chronicle article reports on a survey that defense attorneys commissioned in connection with one of the upcoming Enron-related criminal trials. The survey concludes that over 80% of potential jurors in Houston believe that believe that the indicted Enron executives are guilty.
The survey claims 81.4% of potential jurors said they thought the former Enron executives accused of misleading the public and profiting off the sale of their own Enron stock were guilty, 7.8% said they were not guilty, and 8.7% said they did not know. The survey also polled potential jurors in Austin, Corpus Christi and Albuquerque, N.M., and the percentages of those who said the Enron executives were guilty in those cities were 71.9%, 67.9% and 71.1%, respectively.
In discussing the change of venue issue with one of the defense attorneys for a prominent former Enron executive, I asked him where he would prefer to try the case. His reply:
“How about Rio?”

Civilization v. Trivia

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Victor Davis Hanson’s latest NRO piece addresses that portion of American society that belittles President Bush and the administration’s policy toward Iraq and the Middle East without providing any meaningful alternative other than the continuation of the disastrous policies that culminated in the 9/11 attacks. The entire article is well worth reading, and the following will give you a taste for it:

Do the trivialists want Saddam and the Taliban back in power? Does a Mr. Allawi repulse them? Do they wish 10,000 American troops back in Saudi Arabia? Perhaps they want Libya to resume its work on nukes? Do they care whether Dr. Khan returns to his lab? Or do they think it is child’s play to hike back through the Dark Ages into the Pakistani borderlands looking for bin Laden? And is it all that easy to have prevented another 9/11 attack for almost three years now of constant vigilance? Perhaps they would like to deal with the corrupt, duplicitous, and tottering Saudi Royal family, which just happens to sit on 25 percent of the world’s oil reserves ? without whose daily production the economies of Japan, Korea, and China would almost immediately grind to a halt.
Only belatedly has John Kerry grasped that his shrill supporters are often not just trivial but stark-raving mad. If he doesn’t quickly jump into some Levis, shoot off a shotgun, and start hanging out in Ohio, he will lose this election and do so badly.
The war that Mr. Kerry and Mr. Edwards once caricatured as a fiasco and amoral is now, for all its tragedies, emerging in some sort of historical perspective as a long-overdue liberation.

. . . For over a year now, we have witnessed a level of invective not seen since the summer of 1964 ? much of it the result of a dying 60’s generation’s last gasps of lost self-importance. Instead of the “innocent” Rosenbergs and “framed” Alger Hiss we now get the whisk-the-bin-Laden-family-out-of-the-country conspiracy. Michael Moore is a poor substitute for the upfront buffoonery of Abbie Hoffman.

. . . It was politically unwise and idealistic ? not smart and cynical ? for Mr. Bush to gamble his presidency on getting rid of fascists in Iraq. There really was a tie between al Qaeda and Saddam Hussein ? just as Mr. Gore and Mr. Clinton once believed and Mr. Putin and Mr. Allawi now remind us. The United States really did plan to put Iraqi oil under Iraqi democratic supervision for the first time in the country’s history. And it did.
This war ? like all wars ? is a terrible thing; but far, far worse are the mass murder of 3,000 innocents and the explosion of a city block in Manhattan, a ghoulish Islamic fascism and unfettered global terrorism, and 30 years of unchecked Baathist mass murder. So for myself, I prefer to be on the side of people like the Kurds, Elie Wiesel, Hamid Karzai, and Iyad Allawi rather than the idiotocrats like Jacques Chirac, Ralph (the Israelis are “puppeteers”) Nader, Michael Moore, and Billy Crystal.
Sometimes life’s choices really are that simple.

Read the whole piece.

Stros quickly return to losing

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The Stros wasted another strong pitching performance from the Rocket as the Dodgers used a three run yak from Paul Lo Duca to fuel a 3-1 victory before another crowd of over 45,000 at Dodger Stadium Saturday afternoon.
Clemens was magnificent, as he gave up only 4 hits and 3 runs over seven innings while fanning 8 and walking 2. However, the Stros other than Berkman had one hit (a Jeff Kent single) as they made journeyman Dodger starter Wilson Alvarez look like Fernando Valenzuela in his prime. Typical of the Stros’ hitting this season, they loaded the bases with one out in the seventh, but were only able to score the one run (on Mike Lamb‘s sac fly). “That was the ol’ ball game.”
In an interesting matchup tomorrow afternoon, ex-Stro fan favorite Jose Lima pitches for the Dodgers against the Stros’ Roy O, who will be pitching on only three days’ rest with the All-Star Game break coming up. Inasmuch as the playoff propects for the Stros now appear to be remote at best, these types of matchups are the only games that we will be able to look forward to for the remainder of this season.

Seventh Circuit decision on Blakely

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Highly-regarded Circuit Judges Richard Posner and Frank Easterbrook of the Seventh Circuit Court of Appeals wrote the majority and dissenting opinions in this recent decision (U.S. v. Booker) interpreting the U.S. Supreme Court’s recent decision in U.S. v. Blakely.
In Blakely, the Supreme Court held that judges cannot increase a defendant’s sentence under the state of Washington’s sentencing guidelines based on facts and behavior that were not presented to a jury. Some sentencing guideline specialists believe that Blakely could affect the guidelines under the federal system.
In the Seventh Circuit decision, Judge Posner leans toward the position that the entire federal sentencing scheme is history because Blakely eviscerates the sentencing enhancements under the scheme. Judge Easterbrook is more cautious in interpreting the effect of Blakely. Hat tip to Southern Appeal for the link to this decision on a legal issue that is affecting many white collar criminal prosecutions, such as the sad case of Jamie Olis.
By the way, a relatively new blawg — Sentencing Law and Policy by Professor Douglas A. Berman of the Ohio State University Law School — is providing excellent commentary and insight on Blakely, Booker and other decisions that are affecting this important area of the law, particularly given the sledgehammer approach that the Justice Department is increasingly taking in white collar criminal prosecutions.

Oklahoma! at the Hobby Center

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I have been remiss to mention that the latest play in Houston’s Broadway Series — Oklahoma! is currently playing through July 18 at the fabulous Hobby Center.
My wife, one of my daughters and I went to Friday night’s show, and it was outstanding. The tour that opened this past Tuesday at the Hobby Center is a generally faithful re-creation of the Royal National Theatre‘s acclaimed 1998 London revival, seen on Broadway in 2002. This excellent revival is a great afternoon or evening of entertainment, and if you want to combine a fine meal with the play, make a reservation at the Hobby Center’s Artista, which is one Houston’s finest new restaurants.
Oklahoma! is at 8 p.m. on Tuesdays-Fridays; 2 and 8 p.m. on Saturdays; and 2 and 7:30 p.m. on Sundays through July 18. Tickets range from $23-$64 and can be obtained either online or through the Hobby Center ticket office at 713-629-3700.

Ken Lay PR campaign continues

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On the heels of his indictment and earlier extraordinary NY Times interview, the Houston Chronicle reporter Mary Flood interviewed former Enron Chairman and CEO Ken Lay on Friday on a wide range of topics relating to the indictment, his initial court appearance, and his post-Enron life.
On the indictment, Lay made the following observations:

He said he didn’t lie to Arthur Andersen accountants in an October 2001 meeting about how big a financial writedown hit the company might have to take for overpaying for a water company. He said the accountants gave him the numbers and told him what was going on.
Lay said he can’t be accused of misrepresenting the health of Enron’s retail business because he thought it was fine. He said there were legitimate business reasons for taking a wildly unprofitable section of the retail business and merging it into the profitable wholesale section, and it wasn’t meant to hide losses.
And he said he did not feel he deceived employees when he told them to buy Enron stock in September 2001 and said he’d recently purchased some himself, while never saying he’d sold six times as much stock as he’d bought.
“I don’t suppose I even thought about it,” Lay said of mentioning the $24 million in cash he’d taken out of the company in trade for Enron stock, but telling employees about the $4 million in stock he bought. “I don’t think it’s deceptive … but the (government) tries to spin sinister thoughts and motives around things,” he said.

And how did Mr. Lay pass the time in the holding cell between arriving at the federal courthouse on Thursday and his initial court appearance?:

. . .Lay started chatting with a couple of other men in his holding cell.
The two, in green prison garb and leg irons, were charged in the smuggling ring deaths of 19 undocumented workers in Victoria.
“One young man said: `I think I saw you on TV last night,’ ” recalled Lay, who had surrendered that day and was awaiting a court hearing so he could be freed on bond.
So for the next three hours, the former CEO and two alleged human smugglers talked. Defendants from other holding cells soon chimed in.
“A couple even asked me for investment advice,” Lay said with a laugh.
His response: “Well, I’ve not really thought much about that recently,” said Lay, who lost hundreds of millions of dollars after Enron’s collapse.

As noted before, Mr. Lay’s campaign to defend himself publicly is highly unusual in a criminal case of this nature. However, the public perception of anybody associated with Enron is so negative that Mr. Lay and his attorneys have apparently concluded that Mr. Lay has little to lose by attempting to persuade at least one potential juror that his management failures at Enron were not criminal in nature. All attorneys representing Enron-related defendants will be watching the upcoming trial in the Nigerian Barge criminal case closely to evaluate whether it is possible for a defendant tainted with the Enron association to receive a fair trial in this highly anti-Enron environment.
Meanwhile, The Economist — which has been providing some of the most insightful coverage of the Enron affair — notes that Mr. Lay’s defense theory of being an avuncular grandfather who was betrayed by underlings may be hard to prove:

In truth, though, Mr Lay was never the simpleton he now makes himself out to have been. Four years ago, in an interview with The Economist, he revealed an aggressive and somewhat dark management streak. In reply to a question about Enron?s perceived arrogance and disdain for the law, he pointed to what he considered another great firm unfairly maligned by ignorant critics as arrogant: Drexel Burnham Lambert, an investment bank that?like Enron?rose quickly from obscurity to market dominance during the junk-bond boom of the 1980s, only to implode amid charges of wrongdoing. Mr Lay gushed about the brilliance of Michael Milken, Drexel?s star trader, who ended up in jail. Mr Milken (a ?dear friend?) was accused of being arrogant, he said, but was just being ?very innovative and very aggressive?. Prosecutors will no doubt argue that the fraud at Enron was a direct result of Mr Lay?s push to make the company just as ?innovative? and ?aggressive? as the defunct Drexel.

In the meantime, the Lay Endowed Chair in Economics at the University of Missouri remains unfilled.

Stros edge Dodgers

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Brad Lidge induced Shawn Green to hit into a nifty game-ending 3-6-1 double play with the bases loaded in the bottom of the ninth to spur the Stros to a 3-2 over the Dodgers on Friday night before almost 53,000 at Dodger Stadium in L.A.
Andy Pettitte rebounded from last Sunday’s awful outing against the Rangers and allowed just two runs on four hits, striking out four with no walks over seven innings. Lidge pitched the last two innings, and really had an adventure in the ninth as he almost walked in the tying run.
The long dormant Stros’ bats generated only seven hits, including Carlos Beltran‘s solo yak. Light hitting Viz drove in the winning run in the eighth after Palmeiro blooped a pinch double and Bidg sacrificed him to third. Both Beltran and Viz left the game with bruise injuries, but neither appeared to be serious.
By the way, inasmuch as Viz has had a good week of hitting, his slugging percentage is now approaching that of Bags, a clear sign that Bags’ decline this season is not a temporary slump. We are seeing the inevitable decline of a Hall of Fame quality player. I am now just hopeful that Bags and the Stros can work out an arrangement that will allow Bags to retire with dignity and not sully his Hall of Fame quality career.
The Rocket takes the hill for the Stros on Saturday afternoon against the Dodgers’ Wilson Alvarez (2-3, 3.77) as the Stros struggle to stay in the playoff hunt. The Stros enter Saturday’s game 9.5 games behind the Cards in the NL Central race, but only 2.5 games behind the second place Cubbies.

The NY Times Travel section covers my hometown

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I have lived in Texas for 32 years, but I was born and raised through high school in the wonderful midwestern university community of Iowa City, Iowa. This NY Times Travel section article reports on Iowa City, and even includes a mention of the Kirkendall Family’s old house, 430 Brown Street (now a bed & breakfast). For a student’s tour of Iowa City, be sure to check out my nephew Richard’s picture tour here.