F. Scott Yeager and Rex Shelby knew each other before they worked together at Enron Broadband Services. Rex Shelby was President of his company, Modulus, and Scott was at MFS Datanet, a communications company that was eventually acquired by WorldCom. At Modulus, Shelby’s team built an application which provided voice over IP. Modulus installed the application, called AudioNet, on servers in several MFS Datanet POPs around the country. Scott supported the application but could not get the MFS Datanet executives behind it, showing how smart both Shelby and Scott Yeager were to recognize the benefits – in 1996 – of telephone quality voice over IP.
Rex Shelby and Scott Yeager joined Joe Hirko at Enron Broadband Services. At trial, Yeager would be called “the idea man who created the idea of building a new network with revolutionary software.” Credit where credit is due, the Prosecution was exactly correct on this point. His idea meshed beautifully with Hirko’s knowledge and background in fiber-optic networks and it needed Rex Shelby’s masterful technical skills.
While he was at EBS, the company did well and many successes were achieved. But he was a bit of a wild card; all that fiery intelligence and drive did have the ability to knock people back on their heels. In January 2001 he was given a bad performance review. He left the company in July 2001.
On November 5, 2004, a grand jury indicted Yeager with 126 counts of five federal offenses: conspiracy to commit securities and wire fraud; securities fraud; wire fraud; insider trading; and money laundering. The Government alleged that while Yeager was an executive at Enron Corporation, he purposefully deceived the public about the Broadband Operating System in order to inflate the value of Enron’s stock and, ultimately, to enrich himself.
He was tried with Rex Shelby, Joe Hirko, Michael Krautz and Kevin Howard. Michael Krautz was acquitted; Kevin Howard was found guilty of five counts but his conviction was later overturned because prosecutors wrongly presented a theory of guilt that had already prompted an appeals panel to reverse convictions in a separate Enron case. Joe Hirko, Rex Shelby and Scott Yeager, however, received a mix of acquittals and hung counts.
Prosecutors re-indicted each with fewer counts and split them into three separate cases: Kevin Howard and Michael Krautz, and then Hirko and Shelby, and Yeager. Hirko, Shelby and Yeager appealed to the Fifth Circuit Court of Appeals and lost. They each then took their cases to the Supreme Court.
The Supreme Court denied Shelby’s motion, did not comment on Hirko’s until this week and granted writ certiorari to Yeager.
In his petition before the Supreme Court, Scott Yeager argued that double jeopardy applied because the jury had already contemplated matters of fact related to the hung counts and could not legally be considered again. On June 18, 2009, the Supreme Court ruled that Scott Yeager was correct. “We won, we were right, we cannot be retried for these issues,” said Tony Canales, one of Yeager’s lead lawyers.
The Supreme Court, however, did leave open a tiny door for the Fifth Circuit to re-examine its ruling that the jury must have found, when it acquitted Yeager, that Yeager did not possess any inside information. The government had argued that the jury did not necessarily decide that issue by its verdict.
If the government is foolish enough to prosecute Scott Yeager again, Yeager will no doubt meet the challenge with the same dogged energy that has got him this far.
