Rex Shelby is a serial entrepreneur, a man who started several successful companies before founding Modulus. Modulus developed distributed communications middleware. InterAgent was the messaging middleware that routed information through networks – and it was this piece of the software that Enron wanted. (Incidentally the VoIP application that Scott Yeager supported was made with InterAgent as well.) In late 1998, Enron made an offer for Modulus. Rex Shelby and his partner accepted, then Shelby went to work for Enron as Senior Vice President of Engineering and Operations for Enron Broadband Services.
Rex brought with him his core Modulus group. These engineers were accomplished men in their own right. Many were entrepreneurs themselves. They were the ones who built InterAgent. They were not in the business of building vaporware, as the government accused them. One of these men, Larry Ciscon, would later be threatened by the Enron Task Force against testifying. Yet he stood up to the Task Force and testified on his friend’s behalf. Ciscon is a Rice Ph.D. and the primary author of the Broadband Operating System patent. Yes, the group filed a patent for the software which the government claims did not exist, and it was granted in 2005, shortly before the Broadband trial. Another of Shelby’s men is Mark Palmer, who also testified on Shelby’s behalf. These men – and several others – are “Shelby’s guys”. While Shelby did have friendships and great working relationships with EBS engineers, these were the men that Shelby loved and trusted. When Shelby was accused of lying about the BOS, he was enraged not just on his own behalf, but for his friends and these engineers who had put so much of their lives into this product. He had created a close, convivial group. For instance, all the Modulus guys knew about JO Shelby and talked about him. They even used his name in some of their emails to describe potential business strategies.
At Modulus, Rex Shelby would host an annual Christmas party. He would reserve a room at a nice restaurant just for the Modulus employees and their spouses or guests. One of the traditions was that he got up before the meal and gave a “State of Modulus Address” — he always made it fun and made a point of mentioning people and what they had accomplished. The employees would clamor each year for him to stand up and talk.
For the first party, on a whim, he clipped on this cheap red bowtie — a gag gift someone gave to him. Apparently the employees loved this, because someone mentioned it the next year, and he wore it again. But the third year, he didn’t think about it and went to the party without clipping it on. The employees (and especially the spouses) were visibly disappointed. So he apologized during the State of Modulus Address, but never forgot the bowtie after that.
These silly traditions were important. They gave each Modulus employee a common background. And it demonstrates that Rex Shelby was deeply involved in his company, he passionately loved the work and he loved his employees.
By every account, Rex Shelby is a brilliant technical mind and “a good guy.” He is obsessive about work to the most extreme degree; his entrepreneurial mind and technical insight make him a danger to the status quo.
Friends describe him as “brilliant”, “honest”, “a great guy”, and “stubborn.” (Curiously, even a prosecution witness described him as “stubborn” and “a good guy”.) At Enron, he was well-liked. Former Enron engineers remember him walking the floor (much like Jeff Skilling did) to chat with ordinary engineers and not just the executives. He was considered approachable, honest, and extremely smart.
While at EBS, Rex Shelby continued to make progress with the BOS. A core concept of the BOS was the idea of services embedded in the network. The BOS already provided distributed caching as a native part of the EBS network that could be accessed by any application written using the BOS SDK. There were roughly a dozen key services that the BOS allowed developers to access within the EBS network. Pretty cool. As Kirkendall once wrote, based on the current success of the technologies pioneered by EBS, the company was grossly undervalued by the market (rather than overvalued as the government implied).
Enron Corporation collapsed before the success of the products could be proven.
John Kroger – by literally every account – is an egotistical idiot. Even prosecution witnesses agree on this point. Kroger was without a doubt the very worst of the prosecutors, too stupid and blinded by his own enormous ego to realize that he was intellectually outmatched. He wrote in his book that he wanted to be “the first on the boards”, so he rushed an indictment so he could beat the other ETF teams to the punch. The first indictments – against the Broadband defendants – in the Enron cases were issued by John Kroger. And notably, they’re still going on, some seven years later.
Rex Shelby was accused of lying about the ability of the BOS, thus inflating the stock and ultimately enriching himself.
This is absurd. Anyone who knows Rex Shelby will tell you the man does not care about money. He lives modestly, he doesn’t care about designer clothes or fancy cars. He is obsessed with work, not the rewards of work. He had never owned even a single share of stock before he sold the Enron stock. One of the Modulus friends, in fact, had told him when to buy and sell. Rex Shelby was too busy working to care about something as ephemeral as money.
Mr. Shelby was acquitted on insider trading charges. The jury hung on the conspiracy, fraud, and money laundering counts.
Prosecutors re-indicted him with Joe Hirko. Shelby, Hirko 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.
When the Supreme Court ruled in Yeager’s favor, it was a victory for Rex Shelby too. The Supreme Court ruled that collateral estoppel is invoked when an issue of fact has been determined by a jury and can not be litigated again by the same parties in any future lawsuit – the same fundamental principles enshrined in the Double Jeopardy Clause of the Fifth Amendment which protects a defendant from being retried for a crime for which he has already been acquitted.
Mr. Shelby is expected to appeal to Judge Gilmore to dismiss the case. If she doesn’t dismiss, it will be just one more travesty in a long list of travesties. If she does, Rex Shelby will finally be returned to his real life, no doubt not even taking a well-deserved break before he stalks off in search of the next enormous challenge.
