February 5, 2010
Rex Shelby Heads Back To 5th Circuit
Well, damn, damn, damn! I have discovered that Judge Vanessa Gilmore denied Rex Shelby’s motion to dismiss the few remaining charges against him. The order simply says “DENIED”, without explanation. In essence, this is a non-decision by Gilmore — it means she has decided to simply punt the issue to the 5th Circuit Court of Appeals to let them decide. More wasted time and taxpayer money, and more hardship for Rex Shelby as he appeals, yet again, to the 5th Circuit — I don’t see how he can bear this.
For those who have not followed this blog, let me recap Rex Shelby’s situation a bit. Rex ended up at Enron Broadband because his software company was acquired by Enron. He was not at Enron very long. The first public stock he ever owned in his life, and the first trades he ever made, are the ones the federal prosecutors of the Enron Task Force used to heap scores of criminal counts on him. He went to trial back in 2005. Most of the counts against him have been acquitted by jury or court! The jury hung on the few remaining counts (meaning, zero convictions). A rational DOJ would have dropped the remaining counts back in 2005, but because this is ENRON, the DOJ continued to press.
The recent decision by the Supreme Court on co-defendant Scott Yeager’s case clearly shows that Rex’s remaining counts should be dismissed on double jeopardy grounds, as the DOJ was forced by the Supreme Court to do for Yeager. Rex Shelby joined with the Texas Association of Criminal Defense Lawyers (TACDL) in writing an amicus brief, under his own name, in support of Yeager’s appeal. The chief justices actually adopted Rex’s position in their decision supporting the dismissal of Yeager’s remaining counts. So Rex Shelby helped Yeager win his appeal, but Rex himself still remains in jeopardy!
Now, somebody please explain this insanity to me. Could anything be more clear in the world than that it is time to dismiss Rex Shelby’s remaining counts. He is a decade removed from the events in the shameful government indictment, he has been to trial, he has had most of the charges against him acquitted, and his position on double jeopardy has been written into the language of a Supreme Court decision which has been applied successfully to a co-defendant in the Enron Broadband case!
What more must this man do to receive justice!
February 4, 2010
DOJ Seeking Mentally Retarded Lawyers
I wish I was joking. And this really would explain so much. But no. Here is the job posting.
The Civil Rights Division encourages qualified applicants with targeted disabilities to apply. Targeted disabilities are deafness, blindness, missing extremities, partial or complete paralysis, convulsive disorder, mental retardation, mental illness, severe distortion of limbs and/or spine.
The other maladies sound just awful. “Severe distortion of limbs or spine”? Whoa.
Anyway, I was unsure whether or not to post this on the Enron blog as a way to explain, perhaps, how John Kroger ended up at the DOJ, but that would be gratuitous. Oh hell, I’ll go for it:
This post completely explains the Enron Task Force.
The mentally retarded, the mentally ill… basically if you are in no way fit to be a lawyer, the DOJ wants you.
[Crossposted, from the Ellison Blog]
February 2, 2010
What I Know About Enron
This was a graph I made in response to some moron last year. I thought it was funny enough to repost.
February 1, 2010
Sherron Watkins To Speak At Lynchburg College
Former Enron executive and insider trader, Sherron Watkins, is speaking at Lynchburg College in Lynchburg, Virginia at 7:30 p.m. Feb. 9 in the Memorial Ballroom, Hall Campus Center.
Watkins will discuss “The Lessons of Enron: The Importance of Ethical Leadership.”
It is not known whether she will discuss her admitted federal crimes.
January 30, 2010
Transcript of October 14, 2001 Enron Analyst Conference Call
This is a transcript of the October 14, 2001 Enron analyst conference call. There was a cute story about this call. Jeff Skilling had resigned as CEO of Enron Corporation, and was in Fredricksburg, Texas with his brother on vacation. He and his brother were in the car listening to the call and Jeff was very pleased with the results of the call. Of course, only two weeks later, Andy Fastow would be fired and the mudslide would begin.
January 30, 2010
EnronOnline Management Report
What we have here is an Enron Online Management Report from July 17-27, 2001. Bliss yourself out.
January 29, 2010
Sherron Watkins Presentation On Enron
In 2007, Sherron Watkins was still making a go of her company which presumed to tell other companies how to be ethical. This, coming from an admitted insider trader. Anyway, I got my hands on one of her presentations, and am now sharing it with the world.
Enjoy!
Watkins_Presentation
January 29, 2010
Transcript of Rick Causey Sentencing
This is truly a fascinating document. While pleading guilty, Rick Causey’s attorney makes the point that Causey believed he was following GAAP and acting ethically. I support Rick Causey; he is not guilty. Not under any interpretation of the law, not of acting unethically, not of anything. He is a stand-up guy.
Download the transcript of Causey Sentencing and watch your understanding of the Skilling/Lay case explode into a million silvery shards.
January 27, 2010
DOJ Replies To Skilling’s Brief
Check out Kirkendall’s post on the DOJ’s response to Jeff Skilling’s appeal to the Supreme Court. Color me amazed that the DOJ is basically confining it’s case to statements made regarding Enron Broadband Services and Enron Energy Services.
It couldn’t be because the EBS case is the only case with a defendant who refuses to take a plea, could it?
A usual thorough job by Kirkendall, complete with the actual DOJ reply.
January 26, 2010
The Nature of Insider Trading At Enron
Almost every executive accused of crimes was accused of insider trading; it was like a tax for working there. Prosecutors believed it was an easy allegation to make; executives, by virtue of their position, do have insider information, and many did sell. Because the stock did so well for so long, and since, their theory goes, everyone and every project was corrupt from the C-Suite to the mail room, insider trading must have been part of the bundle of malfeasance.
After reading various indictments, however, from Broadband to Corporate, it would appear that the prosecution believes that people sell their stock while it is rising. Some do, I suppose, but if you’re trading on insider information, usually that means you know some material information which will force the stock to decline, thus you save yourself the expected loss. A good example of this is Martha Stewart, who – the theory goes – sold when her friend, the CEO of ImClone, told her that they did not receive FDA approval for an experimental drug and thus, the stock would decline. Stewart sold her stock on the information that nobody else had, and avoided a sharp decline in the value of her stock. That’s what the prosecution says, and I frankly tend to doubt it, but the example is a pretty classic case of insider trading.
Yet if you read what the executives at Enron did, it was generally the exact opposite – they sold when the stock was still rising. Imagine a case in which I told you to sell Cara Ellison Corp. stock because tomorrow we’re announcing a cure for cancer.
Would you sell? If you were wise, no, you’d hold on to those puppies because they’re about to make you a lot of money. In this case, my insider tip to you is worthless. You’re not about to do anything at all but watch your bank account get fat.
Prosecutors can not convict a defendant for declining to sell his stock as stock rises. Yet it appears that in the cases of Jeff Skilling, Ken Rice, Ken Lay, Cliff Baxter, Rex Shelby, Joe Hirko, and Scott Yeager, they all sold when they were still making money. (Sidebar: Ken Rice did make one trade illegally – when Skilling revealed that he was going to leave. But Rice was not convicted of that and it is worth noting that Rice did not dump all his stock – just some.) Most executives wanted to diversify their portfolios. Even Ken Rice said that 80% of his fortune was tied to Enron. It makes sense to diversify (just ask those poor, helpless Enron employees whose retirements accounts vanished because they were too stupid to spread their retirement income over several investments.)
I would like to explore Jeff Skilling’s September 14 stock sale a little more.
On August 14, 2001 Jeff Skilling left Enron.
Almost a month later, on September 6, Jeff called his broker and asked to sell some stock. If he was trading on insider information, as the DOJ alleges, why did he wait a month after he left to sell on insider information? The DOJ alleges that his “insider information” was that Enron was corrupt (ie, the “secret side deals” with LJM.) If indeed that was true, why not start dumping it while he was still CEO? His indictment alleges that the conspiracy was hatched in September 1999. So why did he buy so much stock during the period between September 1999 and August 2001, only to decide to sell it after he’d left. If he knew it was a “house of cards”, why not sell it on August 15? August 14 was a Tuesday, his broker was open, but he didn’t sell anything. He did not sell on Wednesday. Not on Thursday, or that Friday. Instead, he waited three weeks, in which time the stock was in freefall. Why? WHY NOT SELL ON HIS SUPPOSED INSIDER INFORMATION during those weeks? Why wait?
In any case, he was not able to sell because his broker needed confirmation that he was no longer an executive of the company, and thus the sale did not have to be reported.
Skilling said okay and hung up. The next day, Friday, September 7, 2001, his broker received the confirmation he needed. Yet Skilling did not call him back. He did not call him over the weekend with an urgent appeal to sell first thing on Monday. He did not call him back on Monday. On Tuesday, September 11, 2001, the markets closed. On the first day the markets were open again, September 17, he called and sold a much larger block of stock than he had originally planned. Why? Because all the markets were tanking. He still did not sell all of his stock. He sold some. If Skilling possessed insider information about a conspiracy at Enron, September 11, 2001 would have been a fine opportunity to sell off most of the stock. But he didn’t.
After September 17 – his last Enron stock sale – he still netted more Enron stock than he’d had the year before. He was a net Enron investor.
Jeff Skilling did not trade on insider information. It’s true he had plenty of insider information – he knew what the company was doing. But he had no knowledge whatsoever of any conspiracy at Enron.
The same holds true for the other defendants who are accused of selling on insider information. Indeed, the pattern of stock sales shows that most Enron defendants sold when things were good.
The allegation of insider trading at Enron simply doesn’t stand up to scrutiny.
January 23, 2010
Today In Enron History
January 23, 2002, Dr. Ken Lay resigned as CEO from Enron Corporation. He had been CEO since 1986, except for the six months in 2001 when he was Chairman and Jeff Skilling was CEO.
Dr. Lay’s resignation came when he finally decided that he was part of the ‘old guard’ and could no longer retain the trust of Wall Street, which Enron desperately needed to reclaim any part of its former glory. The company had declared bankruptcy and there was talk of re-organizing around the pipelines. But Dr. Lay, who had given much of his life to the company, simply decided it was best for Enron if he were no longer a part of it.
