Rex Shelby Heads Back To Trial

Rex Shelby’s motion to appeal was dismissed by the Fifth Circuit Court of Appeals and has been remanded to the circuit court. Shelby will returning to trail as soon as Judge Gilmore has space on her docket. The judgement badly misinterprets Yeager v. USA.

Shelby had the misfortune of having the government’s motion land in the hands of a judge notoriously unfriendly to criminal defendants. Thus, the 5th Circuit has made an exceedingly strange ruling that I believe is not only factually wrong, but violates fundamental due process as well.

This is the judgement:

U.S. v. SHELBY

UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
REX SHELBY, Defendant-Appellant.

No. 10-20148.

United States Court of Appeals, Fifth Circuit.

Filed: April 23, 2010.

Before: KING, STEWART, and HAYNES, Circuit Judges.

PER CURIAM.

The defendant, Rex T. Shelby, filed a pretrial appeal from an order by the district court that denied his motion to dismiss, on double jeopardy grounds, a Seventh Superseding Indictment filed against him on November 9, 2005. Presently before this court is the Government’s motion to dismiss Shelby’s appeal. The Government contends that we lack subject-matter jurisdiction over the appeal because Shelby’s double jeopardy claims are “not colorable” and “frivolous.” For the reasons discussed below, we agree and dismiss the appeal.

I. Background

A. Shelby’s Trial, Reindictment, and First Motion to Dismiss on Jeopardy Grounds

Shelby’s case relates to the collapse of the Enron Corporation and its subsidiaries. Shelby was a senior executive at Enron Broadband Services (“EBS”), Enron’s broadband and telecommunications unit. Shelby, along with co-defendants F. Scott Yeager and Joseph Hirko, were indicted in November 2004 on various counts of conspiracy to commit wire and securities fraud; securities fraud; wire fraud; insider trading; and money laundering. In July 2005, a jury acquitted Shelby on four of his insider trading counts—those involving trades made in the summer of 2000 (the “Summer 2000″ counts)—but hung on the remaining counts against him. The jury also acquitted or hung as to some counts against Yeager and Hirko. The district court declared a mistrial on the hung counts. The Government subsequently obtained new indictments against all of the defendants, including the Seventh Superseding Indictment against Shelby.

The Seventh Superseding Indictment recharged Shelby with four insider trading counts relating to trades made in early 2000 (the “Early 2000″ counts) on which the jury had hung. The indictment also charged one count of conspiracy and one of securities fraud. Shelby moved to dismiss the indictment on double jeopardy grounds. The district court denied the motion, United States v. Shelby, 447 F. Supp. 2d 750 (S.D. Tex. 2006), and we affirmed, United States v. Yeager, 521 F.3d 367 (5th Cir. 2008) (Yeager I), rev’d on other grounds, 129 S. Ct. 593 (2008).

In support of dismissal, Shelby’s chief argument was that in acquitting as to the Summer 2000 counts, the jury necessarily decided issues of fact that had preclusive effect as to the counts in the new indictment. Specifically, Shelby asserted that, by acquitting, the jury must necessarily have determined that he lacked the intent to defraud. The parties do not dispute that a finding that Shelby lacked the intent to defraud would defeat a necessary element of the insider trading and securities fraud counts in the new indictment, therefore precluding prosecution as to these counts. See United States v. Brackett, 113 F.3d 1396, 1398 (5th Cir. 1997) (“[C]ollateral estoppel . . . will completely bar a subsequent prosecution if one of the facts necessarily determined in the former trial is an essential element of the subsequent prosecution.”).

The district court determined and we agreed, however, that in acquitting as to the Summer 2000 counts, the jury did not necessarily decide that Shelby lacked intent. Rather, “[a]fter an extensive examination of the record,” we affirmed the district court’s conclusion that the jury’s acquittal could have hinged on the fact that the government had failed to prove beyond a reasonable doubt that Shelby actually used or relied upon material nonpublic information in his possession at the time he made the trades—another element of insider trading. See Yeager I, 521 F.3d at 372-73. The district court observed that “the government presented little to no evidence that Defendant Shelby made any material misrepresentations or acquired material non-public information in June and July 2000, the dates of Shelby’s acquitted counts of insider trading.” Shelby, 447 F. Supp. 2d at 761. The district court also noted that, by contrast, “the government presented substantial evidence that Defendant Shelby either made material misrepresentations or acquired material non-public information” before the trades that were the subject of the Early 2000 counts. Id. at 761-62.

We agreed with the district court’s reasoning, noting also that Shelby had specifically testified that he made the Summer 2000 trades “because he was uncomfortable with being in the stock market” and in reliance on a friend’s advice on when to sell. Yeager I, 521 F.3d at 372. We held that the jury was properly instructed that a trade that “used” or was “motivated by” inside information was an element of insider trading. Id. at 372-73. We concluded that the jury did not necessarily find that Shelby used insider information in making the Early 2000 trades:

In acquitting Shelby of the later [Summer 2000] counts, the jury could have differentiated between the two different sets of trades. The jury could have found that Shelby did not use insider information when he conducted the trades that underlie the Summer 2000 Insider Trading Counts but did use insider information when he conducted the trades that underlie the Early 2000 Insider Trading Counts. The evidence at trial supports this distinction.
Id. at 373. We noted specifically that Shelby’s trading patterns were markedly different between the Early 2000 and Summer 2000 trades. In the Early 2000 trades, Shelby exercised options that had vested in June 1999. We speculated that “[f]rom this delay, the jury could have rationally concluded that Shelby purposely waited for the stock price to go up before exercising his 1999 options and that Shelby knew the price would go up because of his knowledge of insider information.” We noted that by contrast, with the Summer 2000 trades, Shelby exercised his options as soon as they vested. Id.

Three days after granting certiorari as to his co-defendant Yeager, Yeager v. United States, — U.S. —, 129 S. Ct. 593 (2008), the Supreme Court denied Shelby’s petition for certiorari, Shelby v. United States, ___ U.S. ___, 129 S. Ct. 595 (2008); reh’g denied, ___ U.S. ___, 129 S. Ct. 977 (2009).

B. Yeager’s Trial, Reindictment, and Motion to Dismiss on Jeopardy Grounds

In Yeager I, 521 F.3d at 367, we also rejected the double jeopardy claims of Shelby’s co-defendants, Hirko and Yeager. At the 2005 trial, the jury acquitted Yeager of securities fraud, wire fraud, and conspiracy but hung on 20 counts of insider trading and 99 counts of money laundering. The government reindicted Yeager on the hung charges.

Yeager moved to dismiss the new indictment, urging that double jeopardy barred the insider trading counts. Yeager argued that in acquitting on the fraud and conspiracy counts, the jury necessarily decided that he did not possess insider information, an element of insider trading. We agreed that “the jury, acting rationally, could have acquitted Yeager on securities fraud only by concluding that he did not have insider information.” Id. at 376-77. We nevertheless concluded that collateral estoppel did not bar the insider trading counts. Applying our precedent in United States v. Larkin, 605 F.2d 1360, 1370 (5th Cir. 1979), we considered the hung counts and observed that if “the jury found that [Yeager] did not have insider information, then the jury, acting rationally, would have acquitted him of insider trading and money laundering. Instead, the jury hung.” Yeager I, 521 F.3d at 379. We reasoned that the hung counts therefore created uncertainty about what the jury necessarily decided. Id. In light of this uncertainty, we concluded that collateral estoppel did not apply. Id. at 379-80.

The Supreme Court granted certiorari on Yeager’s appeal. The Court then abrogated our precedent in Larkin and reversed, concluding that we erred in weighing the effect of the hung counts in determining the preclusive effect of the acquittals. Yeager v. United States, ___ U.S. ___, 129 S. Ct. 2360, 2368 (2009) (Yeager II). The Court held:

[T]he consideration of hung counts has no place in the issue preclusion analysis. . . . To identify what a jury necessarily determined at trial, courts should scrutinize a jury’s decisions, not its failures to decide. A jury’s verdict of acquittal represents the community’s collective judgment regarding all the evidence and arguments presented to it. Even if the verdict is based upon an egregiously erroneous foundation, its finality is unassailable. Thus, if the possession of insider information was a critical issue of ultimate fact in all of the charges against the petitioner, a jury verdict that necessarily decided that issue in his favor protects him from prosecution for any charge for which that is an essential element.
Id. at 2368-69 (internal quotation marks omitted). The Court reasoned that a “contrary conclusion would require speculation into what transpired in the jury room,” and noted that “[i]f there is to be an inquiry into what the jury decided, the evidence should be confined to the points in controversy on the former trial, to the testimony given by the parties, and to the questions submitted to the jury for their consideration.” Id. at 2368 (internal quotation marks omitted; quoting Packet Co. v. Sickles, 72 U.S. (5 Wall.) 580, 593 (1866)). On remand, we dismissed the indictment against Yeager. United States v. Yeager, 334 F. App’x 707 (5th Cir. 2009) (Yeager III).

After Yeager II, the Court granted certiorari as to Hirko and remanded for further consideration in light of Yeager II. Hirko v. United States, 129 S. Ct. 2858 (2009).

C. Shelby’s Second Motion to Dismiss on Jeopardy Grounds

After the Court issued Yeager II, Shelby renewed his motion in the district court to dismiss the indictment, contending that Yeager II was an intervening change in the law that provided a new basis to evaluate his jeopardy claims. On January 29, 2010, the district court denied Shelby’s motion to dismiss, but declined to find his claims frivolous. On January 29, 2010, Shelby filed an interlocutory appeal from that order, premised on raising a colorable issue of double jeopardy. See Abney v. United States, 431 U.S. 651 (1977); United States v. Dunbar, 611 F.2d 985 (5th Cir. 1980) (en banc).[ 1 ]

The Government then brought the present motion to dismiss the appeal, arguing that we lack jurisdiction over the appeal because Shelby’s double jeopardy claim is “not colorable” and “frivolous.”

II. The Legal Standards

Under the collateral order doctrine, we have jurisdiction under 28 U.S.C. § 1291 to review a pretrial order rejecting a claim of double jeopardy, provided the jeopardy claim is “colorable.” Richardson v. United States, 468 U.S. 317, 322 (1984) (“The appealability of a double jeopardy claim depends upon its being at least colorable.”). A colorable claim “presupposes that there is some possible validity to a claim.” Id. at 326 n.6. A claim is not colorable if “no set of facts will support the assertion of [the petitioner's] claim of double jeopardy.” Id. “It is well within the supervisory powers of the courts of appeals to establish summary procedures and calendars to weed out frivolous claims of former jeopardy.” Abney, 431 U.S. at 662 n.8; see also United States v. Bobo, 419 F.3d 1264, 1267 (11th Cir. 2005) (“[F]rivolous claims and arguments that have already been squarely decided by precedent do not afford appellate courts jurisdiction to review interlocutory orders.”).

Shelby disputes that the colorability requirement is in fact jurisdictional, pointing to the Tenth Circuit’s conclusion in United States v. Wood, 950 F.2d 638, 642 (10th Cir. 1991), that “[t]he summary determination of whether a defendant has raised a colorable claim is not necessary to our jurisdiction. Rather, it is a discretionary action within our `supervisory powers’ to ensure that defendants do not engage in `dilatory appeals.’” Richardson, however, states that a “colorable double jeopardy claim [is] appealable under 28 U.S.C. § 1291,” and that “the appealability of a double jeopardy claim depends upon its being at least colorable.” 468 U.S. at 322. Read together, these statements strongly suggest that a colorable claim is a prerequisite for jurisdiction. The majority of the circuits to have considered the issue treat colorability as jurisdictional. See United States v. Bhatia, 545 F.3d 757, 760-61 (9th Cir. 2008) (“Because [the defendant's] claims of res judicata and collateral estoppel are not colorable, we dismiss this interlocutory appeal for lack of jurisdiction.”); Bobo, 419 F.3d at 1267; United States v. Hickey, 367 F.3d 888, 891 (9th Cir. 2004) (“Both the Supreme Court and this court . . . have held that we have interlocutory appellate jurisdiction to reach the merits only of `colorable’ double jeopardy claims.”); United States v. Abboud, 273 F.3d 763, 769 (8th Cir. 2001) (“The Abbouds have not raised colorable claims of double jeopardy . . . . For th[is] reason[ ] we lack jurisdiction over these interlocutory appeals, and they are dismissed.”); United States v. Andrews, 146 F.3d 933, 942 (D.C. Cir. 1998) (“[T]he Supreme Court held in Richardson v. United States that a claim of double jeopardy must be at least `colorable’ to confer interlocutory jurisdiction on an appellate court.”). We join these circuits in concluding that a colorable, non-frivolous claim is a prerequisite to our jurisdiction under 28 U.S.C. § 1291 to hear a pretrial double jeopardy appeal.

We have already ruled upon and rejected Shelby’s motion to dismiss the present indictment, and “[a]bsent an en banc or intervening Supreme Court decision,” we may not overrule any part of that prior panel’s decision. United States v. Martinez-Rios, 595 F.3d 581, 586 n.5 (5th Cir. 2010). Therefore, jurisdiction, and ultimately relief, are available now only if the Court’s intervening decision in Yeager II raises a colorable issue as to the correctness of Yeager I. We conclude that it does not.

III. Analysis

Shelby asserts two reasons why Yeager II casts the correctness of Yeager I into doubt, both of which we conclude, after careful consideration, are frivolous.

1. The “Points in Controversy” Claim

Shelby first contends that Yeager II set out a requirement that a court attempting to determine what a jury necessarily decided must restrict its inquiry to the “points in controversy” at the trial. According to Shelby, this requirement represents a “correction” in the law that affects the result in this case. Shelby draws his argument from the Court’s statement in Yeager II that “[i]f there is to be an inquiry into what the jury decided, the evidence should be confined to the points in controversy on the former trial, to the testimony given by the parties, and to the questions submitted to the jury for their consideration.” Id. at 2368 (internal quotation marks omitted; quoting Packet, 72 U.S. (5 Wall.) at 593).

Shelby argues that whether he “used” insider information for the Early 2000 but not for the Summer 2000 trades was never a “point in controversy” in his case. Shelby contends that the Government never argued that Shelby relied on different information in completing the Early 2000 and Summer 2000 trades—to the contrary, the Government argued that Shelby made these trades based on a cumulation of inside information and did not differentiate between the types of information that may have motivated each trade. Shelby further urges that he, too, in defending his case, did not differentiate between trades but instead argued as to all of the trades that he had other reasons, unrelated to insider information, for selling his stock. Shelby argues that because the issue of whether or not he “used” insider information in the Summer 2000 trades as opposed to the Early 2000 trades was never a “point in controversy” at trial, we must necessarily conclude that the jury’s basis for acquittal was lack of intent.[ 2 ]

This argument has no merit. The test, as described by the Yeager II Court, is that in attempting to determine what the jury necessarily decided, the evaluating court should look not only to the “points in controversy on the former trial,” but also to the parties’ testimony and the questions submitted to the jury. The parties disputed as to all of the trades whether insider information was used. The testimony and evidence showed that different amounts of available information and different trading patterns were associated with the Early 2000 versus the Summer 2000 trades. And the jury was instructed that “use” was an element of insider trading. The district court and this court looked to precisely these things in concluding that the Summer 2000 acquittals had no preclusive effect as to intent.

Even if the test described by the Yeager II Court were not followed, however, there is no basis to conclude that Yeager II’s reference to “points in controversy” represents a “correction” in the law. Yeager II reached only the “narrow legal question” of whether a court may consider the effect of hung counts in evaluating what the jury necessarily determined. 129 S. Ct. at 1270. The Yeager II Court clearly found the consideration of hung counts to be a speculative undertaking out of keeping with the rule—which the Court did not otherwise accuse this court of violating—that a court must cabin its inquiry into what the jury necessarily determined to the points of controversy in the case, the arguments and evidence in the record, and the questions presented to the jury. And indeed, except for permitting the consideration of hung counts in determining what the jury “necessarily decided,” our court has consistently followed this rule. See, e.g., Garcia v. Dretke, 388 F.3d 496, 503-04 (5th Cir. 2004) (in evaluating a jeopardy claim, a court is required “to examine the record of a prior proceeding, taking into account the pleadings, evidence, charge, and other relevant matter” (quoting Ashe v. Swenson, 397 U.S. 436, 444 (1970)); United States v. Brackett, 113 F.3d 1396 (5th Cir. 1997).

In short, even if the district court and this court did not adhere to the “points in controversy” test that Shelby urges—and the record does not support this contention—there is no basis to conclude that Yeager II created an intervening change or “correction” in the applicable law. Therefore, we have no basis to consider this issue as a basis for finding jeopardy in Shelby’s renewed motion.

2. The “Consideration of Hung Counts” Claim

Shelby’s second argument, on which he places considerably less emphasis, is that the district court and this court in fact considered the hung counts in determining that the Summer 2000 acquittals had no preclusive effect. Shelby contends that this conclusion (reached by both this court and the district court) necessarily resulted from “the need, since absolved, to reconcile the acquittals with the hung counts.”

This argument has no merit. The district court’s and this court’s conclusions as to the Summer 2000 acquitted counts do not depend on any reference to the Early 2000 hung counts. We concluded that the Government presented very little evidence that Shelby had access to insider information when the Summer 2000 trades were made; we credited Shelby’s testimony that he did not rely on such evidence; and we noted that the jury had properly been instructed that the “use” of or reliance on insider information was an element of insider trading. These findings, by themselves, sufficiently support the conclusion that the jury’s acquittal as to the Summer 2000 counts could have been premised on insufficient evidence of “use” of inside information.

It is true that both the district court and this court compared the substantial evidence of “use” of insider information that accompanied the Early 2000 hung counts to the relative absence of such information accompanying the Summer 2000 acquitted counts, and cited this distinction as one reason to conclude that lack of insider information, rather than lack of proof of intent, could have led the jury to acquit as to the Summer 2000 counts. But this type of comparison does not run afoul of Yeager II. Yeager II stands for the proposition that if an acquittal establishes that the jury necessarily determined a certain element of an offense, the court may not examine the effect of hung counts to undermine that determination by showing that the jury was necessarily inconsistent or confused in its conclusions. Nothing in Yeager II prohibits the type of comparison drawn in this case, in which the distinction was cited simply to demonstrate one possible rational basis for the jury’s acquittal.

3. Shelby’s Claims are Not Colorable

Shelby has failed to cite any intervening change or correction in the law effected by Yeager II that has relevance to his double jeopardy claim, which a panel of this court has already considered and squarely rejected. The issues, as alleged in his motion to dismiss the indictment and in his response to the Government’s motion to dismiss his appeal, are not close and are without arguable validity. Accordingly, Shelby has not raised a colorable claim and we are without jurisdiction to consider his appeal from the district court’s denial of his motion. Richardson, 468 U.S. at 322.

Our conclusion as to the colorability of Shelby’s claims is bolstered by the fact that his invocation of Yeager II appears largely to be pretext for revisiting the reasoning and outcome of our prior panel decision. Shelby’s motion to dismiss the indictment argues at length that the prior panel made “factual errors in its analysis of Shelby’s acquittals” and erred in its conclusion that “legally significant differing evidence” underlay the Early 2000 as opposed to the Summer 2000 trades. Shelby does not contend that these conclusions are affected by Yeager II, but appears to assume that we could revisit these issues if Yeager II affected some other issue in his jeopardy claim. This of course is false—absent any change in the intervening law on a particular issue, we have no power to revisit another panel’s legal and factual conclusions. See Martinez-Rios, 595 F.3d at 586 n.5.

IV. Conclusion

Shelby has failed to raise a colorable double jeopardy claim. Accordingly, we DISMISS, for lack of subject-matter jurisdiction, his appeal from the district court’s denial of his pretrial motion to dismiss and REMAND for trial.

DISMISSED and REMANDED.

Today In Enron History

April 26, 2002, Sempra Energy Trading announced that it completed acquisition of the metals concentrates business of New York-based Enron Metals & Commodity Corp.

Enron Metals & Commodity Corp. was a top global trader of copper, lead and zinc concentrates. Sempra Energy Trading purchased the metals concentrates business for a cash price of $43.5 million, after approval by the U.S. Bankruptcy Court April 24, 2002.

Previously, on Feb. 4, 2002, Sempra Energy Trading completed the acquisition of London-based Enron Metals Limited, the leading metals trader on the London Metals Exchange, for $145 million, and renamed the company Sempra Metals Limited.

On the same day in 2002, a bankruptcy judge approved the Houston Astros’ $2.1 million buyout agreement with bankrupt Enron Corp. over the naming rights to team’s stadium.

With creditor approval, Judge Arthur Gonzalez allowed Enron to terminate its 30-year, $100 million deal with the Astros. By this date, the Astros had already removed all signs of Enron from the ballpark.

Also: this picture was taken of Jeff Skillig leaving the court house on April 26, 2006:

Sherron Watkins Ties Compensation To Ethical Problems

I was surprised to learn that Sherron Watkins has connected corporate ethics to compensation policy:

Of particular interest was [Watkins'] answer to the question of how such egregious behavior could exist in a business. She believes that such behavior primarily comes from faulty compensation policy. She commented that if you divided the people in the room into groups, 10% would always do the right thing no matter what, 10% are likely to be ethically challenged from the get go and 80% could go either way depending on their compensation plan, direction from a superior or recognition that everyone else is doing it so it must be ok.

Their compensation plan? This is silly on its face. Andy Fastow was well compensated; he was making millions of disclosed dollars and millions more that were not disclosed. So he acted unethically…why? And by the way, Watkins was compensated pretty well too, and she acted unethically – she traded on insider information, which she admitted in open court, under oath.

Why is she some great ethical leader? She’s not – and it bothers me that so many people think she has something to teach about being ethical. It is not ethical to trade on insider information, to write an anonymous letter stating that there’s a PR problem, and if there is fraud she wants in on it, and then to wait until the company collapses, step in, and call yourself a whistleblower. No, that isn’t ethical.

Here’s something to think about. One hundred percent of the Enron executives I speak to on any given day are some of the most ethical, kind, generous people you will ever meet. I would absolutely trust any one of them with my life, or my life savings. They are not predators or money-hungry monsters.

I can’t say the same about Sherron Watkins.

Enron Charities: Largess Even In Crisis

This post on a blog called The Cohen Report, dated December 2007, has an interesting breakdown of various Enron charities. One thing that screamed out at me was this:

Inexplicably, as [Skilling] left Enron and the corporation melted, in 2002 he donated more money to his foundation and then made another $166,000 grant to the high school, followed by still another $86,000 grant in 2003.

Actually it is not inexplicable. All the Enron executives were generous, and Skilling was no exception. He cared a great deal about people and attempted to share his wealth with almost anyone who needed it. Also, I think it speaks to his innocence that he did not start hoarding money.

I’ve mentioned the following two examples of Skilling’s largess many times:

Skilling left Enron spurning a $20 million severance payment that he was in theory entitled to, a perk that is hard to imagine anyone else in the rapacious culture of Enron executives rebuffing, and left before a $2 million company loan would have been forgiven.[50] Likewise, Skilling, like Lay, could have spread some philanthropic green around town to burnish his image, but he put it into Junior Achievement, the training ground for potential new young Skillings of the world, and to the high school that educated his son. But Skilling flouted convention, running his foundation with only one trustee—himself—contrary to the typical corporate exec practice of sprinkling a few family members on the board,[51] and cultivating none of the civic persona that Ken Lay wrapped around himself like Cicero’s toga.

I don’t really agree with the tone of the article, but anyone who actually accepts the positive facts about the Enron executives, and reports them, has my respect.

Gallup Poll Shows Enron, Arthur Andersen Viewed Negatively

A Gallup poll showed that Americans viewed Enron and Arthur Andersen negatively in May, 2002. In other news, cows go moo.

News about corporations has moved beyond the business pages to the front pages of most newspapers in 2002. For much of the earlier part of the year, the collapse of the Enron energy corporation and the role its accounting firm, Arthur Andersen, played in its demise were major news stories. Last week, Bill Gates, the chairman of the Microsoft Corporation, testified in a federal court against proposed changes to the company’s software products. These changes are sought by nine state attorneys general who have refused to accept a consent decree between Microsoft and the Justice Department that would resolve the company’s antitrust case.

A recent Gallup poll shows the public has very negative views of Enron and Arthur Andersen, though many Americans are not familiar with the accounting firm.

See, this is what I hate. When some moron hears “Enron” or “Arthur Anderson” or “Vinson + Elkins” and automatically has a knee-jerk reaction.

The poll shows that the public is not negative toward all large corporations, however. Nearly eight in 10 Americans say they have a favorable opinion of the Microsoft Corporation, the most positive reading Gallup has recorded for Microsoft over the five years these attitudes have been measured.

Arthur Andersen, Enron Images Suffering From Energy Company’s Collapse

The poll, conducted April 22-24, shows that nearly half of Americans, 49%, have an unfavorable opinion of the Arthur Andersen accounting firm, while just 11% have a favorable opinion. A substantial number of Americans, 40%, are not familiar enough with Arthur Andersen to rate it. A federal grand jury indicted Arthur Andersen for obstruction of justice for the destruction of evidence related to a federal investigation into the Enron collapse. A trial is scheduled to begin later this month. The company just announced layoffs of roughly one-quarter of its workforce.

And it’s convictions were unanimously overturned by the Supreme Court.

Nearly three in four Americans, 74%, have an unfavorable opinion of the Enron energy corporation, while only 8% have a positive view. The Houston-based energy company filed the largest bankruptcy claim in U.S. history last December, leaving many employees jobless and without much of their retirement savings. Several Enron executives have already testified before Congress about the company’s collapse. About one in five Americans do not have an opinion on Enron.

So even at the height of Enron’s collapse, 20% had no opinion? That’s kind of intriguing.

It would be interesting if Gallup did another poll to see if the numbers have shifted more positively. I’d bet a stack of Enron stock certificates that it has.

Some other interesting Gallup info about Enron:

Questions and Answers about Enron

Enron scandal has yet to taint Bush administration [January 02]

Growing number of people think Enron acted illegally [Feb 02]

Weissmann Catches Enron Play

Bloomberg has the story of Weissmann watching the play then having dinner with the interviewer after, and complaining that only Sherron Watkins stood up and said something was wrong.

This is a lie. Sherron Watkins did not say there was anything wrong. She said there was a PR problem, and if there was fraud, she wanted in on it.

She admitted to insider trading under oath in a federal courtroom.

She was not a hero; she was a lying coward.

But Weissmann sees it differently. It’s an intriguing article. I wonder, if Jeff Skilling were free, if he’d watch it. I know that none of the executives I’ve talked to have seen it. I imagine its not on their list of Things To Do Before I Die.

Enroncore

I don’t know what to call this. It starts out as a review of the Enron play and then goes all over the place. A fun read, but keep in mind that the author, Mimi Schwarts, assisted Sherron Watkins in her go-nowhere tell-all, Power Failure. So just remember she’s got skin in the game by portraying the real Enron in a negative light.

Enron Poetry

Via Culturemap, about creative writing in Houston:

7.) Write an ode to the tragic fall of Enron. Or WorldCom. Or Bear Sterns (a company: not a leather bar). Or pick your favorite collapse. There are so many you might wonder if the corporation is more endangered than poetry.

Start with “Oh, Enron, how low thou hast fallen!” Try alliteration: “Oh curs, oh collapsing corporation, I castigate your criminal consciences!” The sky’s the limit. Lucy Prebble created the blockbuster theatrical hit Enron, which premiered in the UK but just opened on Broadway. In a play someone gets stuck playing Ken Skilling, but in a poem, you can unleash torrents of rage to your heart’s content and still claim that no human subjects were injured or killed in the making of your masterpiece.

Oh Enron, how low thou hast fallen! is a great line.

For never was a story of more woe,
Than this of Ken Lay, Jeff Skilling, and Joe Hirko.

Here was a poem from July 8, 2009:

Two businesses, both alike in dignity in fair Houstontown, where we lay our scene
From ancient grudge to new mutiny where civil blood makes civil hands unclean
Government witnesses speak to utter lies, while media mouths repeat and hypnotize
Good counsel does not cause remove from jealous minds, nor scrupulous accounting
Nor love, nor work honest and plain, nor philanthropy or success of the highest regard
Even before a Skilling was born, this sad destiny was so written in the stars

From the house of Skilling came traders and Rice and Baxter and men of such integrity
And from the house of Fastow, the system worked, the system of reciprocity
To whose fortune did we invest so wisely? In whom did we entrust our treasure?
Such sweet returns and in the year of our Lord 2000 there was simply no better
Secret partnerships kept far from light as certain men schemed to make artificial night
And forfeit of peace and sanctity came this sad tale of misbegotten woe
Star cross’d lovers could have told no sadder tale than that of the company’s CFO

Did he disturb the quiet of our streets, from Smith to Wall and did he look upon his death
The government who could hear no protestations but from the guilty, including he
But saint-seducing gold has lusted in every heart: what man remains untouched?

Aye, we know his grievance well, for it is our own!

But no, the man from the house of Skilling did not hear evil men, nor was he seduced
Luxury? But what is luxury that I do not already have, asked he, and found no answer.
Do you quarrel, sir, he asked and the words sparked flames among the masses from floors
Of Trading to houses of Broadband and origination, for the hatred could not be contained

And in the house of Broadband the men dwelled in exuberance as they toiled
Tasked with heavy deeds they toiled as slaves toil, with not even the sun to reward them
Yet they toiled and worked and bled as they invented what had never been before
And the wicked fires did consume them too and many perished and were taken captive
What is liberty if one does not deserve it? What is captivity if one does not deserve it?

The end is still coming, time competes with fortune
See what a scourge is laid upon your head? Finding the means to kill the men you need!
And I have discoursed and broken upon ignorant heads, urging the blind to see.

All are punished.
ALL ARE PUNISHED

Enron On Drudge

It’s nice to see Enron in the news these days. You can read the article about Enron/Bush vs. Goldman/Obamahere. The money quote is here:

It would be fair to say that the total amount the Obama administration has received from those affiliated with Goldman Sachs is ten times that of what Bush received from Enron.

Iron Man and Enron

As I was watching Glee the other night (I am both a Gleek and a geek!), a trailer for the upcoming Iron Man 2 movie was shown. It stars Robert Downey, Jr. — yummy! The movie trailer was sponsored by Oracle/Sun Microsystems. For the other geeks out there, you know that Sun was recently acquired by Oracle. After the Iron Man 2 trailer, the Oracle/Sun logos stamped onto the screen, and the words “Applications — Middleware — Database” appeared in layers next to the words “Software — Hardware” which also appeared in layers!

Interesting, Cara, but what does this have to do with Enron, you ask. Well, for those of you who have been following my Enron Broadband posts, you know that this screams EBS! It was the appearance of Scott McNealy, then CEO of Sun, during EBS’ presentation at the January 2000 Enron Analyst Conference that made a huge impression on the financial analysts in attendance. Everybody I have ever talked to who attended that conference tells me that it was the endorsement of Sun that most impacted the analysts’ confidence in EBS’ direction. In spite of the ridiculous government indictments which tried to paint an innocuous Broadband presentation as lies, it really was nothing EBS presenters said about technology that influenced the analysts. It was what McNealy said that left the analysts with a positive impression of the potential of EBS.

But there is something even more exciting about the Sun/Oracle television commercial. Those words which appeared in layers can be seen in identical fashion in lots of EBS materials from the period of the conference. And notice the word “Middleware”! There are a number of varieties of middleware, but basically it is the software which sits between apps and infrastructure and which, hidden to us end users, makes app creation easier and faster for developers. Middleware has been around forever, but now it has finally made it to television!

So what’s your point, Cara, you ask! Well, the last man standing in the inane EBS indictments is Rex Shelby. Shelby was the head of a software company called Modulus, a pioneering middleware company. Modulus helped establish some of the industry standards in middleware, working closely with Sun’s Java efforts. Sun even licensed the Modulus middleware and rolled it into numerous Sun products, including it’s Solaris operating system. Sun then rolled the middleware onto Linux platforms and even Windows computers. So the Modulus technology is now spread all over the world, even though nobody knows this.

And Shelby, and the brilliant Modulus engineers, came to EBS via the acquisition of Modulus by Enron. The Modulus middleware became a component of EBS’ Broadband Operating System (BOS), a component that essentially would have provided a doorway to the BOS where ever it resides. And it now resides on computers and servers and networks all over the world! So, this software which the government prosecutors claimed didn’t exist is now all over the place. There is something downright poetic about this!

Hmm, I wonder if Rex Shelby is secretly Iron Man!

Happy Jeff Skilling Day!

Last year, on April 17, I declared it Jeff Skilling Day. Jeff Skilling Day celebrates not only Jeff Skilling for his amazing ability to create and move markets, but businessmen around the globe who are merely trying to do their work, sometimes in the face of oppressive regimes who view them as criminals, not heroes. Today is a day of thanks. It is the day we express our gratitude for the people who brought us iPads, flat-screen tvs, heart medications, derivatives, and billions of other products and services our society needs.

Thank you, Jeff Skilling, and thank you to every person who gets out of bed in the morning, exciting about creating something brand new.

Thank you.

Minyanville Screws Up Enron Article

Minyanville has an article about something – I really wasn’t even paying attention because the grammar was just awful, I couldn’t wade through it. But I did force myself to read the Enron parts:

I was an investor in Enron and was on the earnings conference calls with Ken Lay, Jeff Shilling, and Andrew Fastow. I knew something was wrong with Enron’s meteoric rise, but I couldn’t put my finger on it and consequently I lost money. I subsequently learned during the collapse about the new world of offshore accounting and financial instruments such as SPEs (Special Purpose Entities). How companies could legally move debt off their asset ledger. A few years later, I again knew something was terribly wrong as I watched housing prices explode and witnessed kids buying McMansions and driving prestigious cars, with jobs that didn’t appear to be able to support this lifestyle. I subsequently learned during the financial crisis about the mysterious world of financial instruments such as CDS, CDO, CLO et al and the vehicles such as SIVs (Structured Investment Vehicles) that allowed banks and financial instruments to circumvent capital requirements and move debt off their balance sheet. The resulting Shadow Banking System flooded the global financial markets with cheap, highly available credit to anyone that had a pulse.

I left a comment on the site point out that the name is Jeff Skilling, and that the SPE’s didn’t “collapse”. I probably over-criticized the writer, and I do regret that. But we have had ten years – a whole decade – to try and figure out what happened at Enron. At the very, very least I would ask that anyone who writes about Enron actually get the names correct and secondly, please have a basic grasp of the facts.

It is so easy to smear Enron. You will seldom be cross-checked because most people generally believe that Enron was corrupt and the list of crimes you heap upon the company is never ending. It’s false; Enron was not corrupt. I won’t even argue about that if journalists and commentators actually start getting the basic facts correct.

I ask for so little. I just ask that you know what you’re talking about when you’re talking about Enron. I don’t have to agree with your opinion, I just have to agree on the facts. So please, Minyanville (who I actually like – I read that website almost every day), get your facts straight.

Nigerian Barge Case May Not Go To Trial

Via the chron:

It appears the Justice Department and ex-Merrill Lynch executive Robert Furst are likely to reach a resolution to his pending Enron-related case rather than going back to trial.

Furst, his attorney Paul Coggins and prosecutor Patrick Stokes appeared in Houston federal court this morning. The lawyers said they are confident the Nigerian barge case can resolve itself and asked U.S. District Judge Ewing Werlein to postpone a May trial date until June to give them time to do that.

“You all have made this a much happier hearing for me than I had anticipated,” the judge told the lawyers.
Furst is no longer the only defendant from the first trial with a case pending in Houston. James A. Brown’s case has returned to Houston court from appeals and is scheduled for a hearing this afternoon.

“Little by little, it’s dawning on the DOJ that there is no crime here,” Coggins said previously of this case, though he had little comment today.

The case centers on Enron’s 1999 sale to Merrill Lynch of power plant barges off Nigeria, allowing Enron to book higher year-end earnings. Prosecutors said the sale was a disguised loan and that Enron executives promised to resell or buy back the barges within six months.

Furst’s conviction from the first Nigerian barge trial was overturned with others when the appellate court found prosecutors wrongly accused the defendants of depriving their employer of their “honest services” when their actions were aligned with Enron’s goals and they didn’t steal or embezzle.

The “honest services” issue is currently before the U.S. Supreme Court in three cases, including the appeal of former Enron CEO Jeff Skilling.

Great. But it’s still awful that Furst and Brown and countless others are in the obscene position of having to negotiate for their freedom. They are innocent.

Today In Enron History

April 11, 1986, an AP story ran in the Houston Chronicle announcing the formation of a new company called Enron:

HNG/InterNorth to become Enron Corp.
Associated Press

OMAHA, Neb. – Stockholders of HNG/InterNorth have voted to change the diversified energy company’s name to Enron Corp.

Chairman and Chief Executive Officer Kenneth Lay, standing at a podium decorated with the new Enron logo, told shareholders at their annual meeting Thursday that he expects the company’s first-quarter profit to exceed $80 million.

The outlook for the company in 1986 is unclear because of volatile changes in oil and natural gas prices, Lay said, but he was optimistic that Enron will be successful.

“We do expect to perform as well, and we expect much better, than other companies in the industry,” Lay said. “Our goals are relatively straightforward. We will concentrate on businesses we know best.”

Lay denied a stockholder’s suggestion that the company had become a “beached whale” because of bad management.

“We intend to outperform our industry in bad times and good times,” he said.

HNG/InterNorth was created in July by the merger of InterNorth Inc. of Omaha and Houston Natural Gas Corp. of Houston . The company reported a $14 million loss in 1985.

Lay, talking about operations, said the company had about 1,000 fewer employees than at the time of the merger and that an additional 500-person reduction is expected by year-end.

“In payroll costs alone, this represents annualized cost savings of about $70 million,” Lay said.

Lay said the corporation has sold $372 million of assets since the merger, has agreements to sell an additional $384 million, and is actively negotiating to sell assets valued at about $450 million.

“With these sales, the corporation expects its debt to total capitalization will be reduced to about 60 percent by year-end,” Lay added.

The company’s new stock ticker symbol is “ENE,” and Enron stock will trade under the new name for the first time Friday, Lay said.

Company officials initially wanted to change the name to Enteron Corp., but that idea was scrapped after news accounts pointed out that the dictionary definition of enteron was the alimentary canal, a part of the digestive system.

Enron was decided upon, and 92.4 percent of the shareholders voting approving it.

Jeff Skilling Vs. Karl Rove

Oh my heart. I am just not sure I can tolerate this. Karl Rove gave an interview to KansasCity.com. The interviewer seems to be a partisan, but more than that, he seems to just want to pick a fight. Watching them spar is like watching a fly pick a fight with a gorilla; whatever you think of Karl Rove’s politics, the man’s intelligence is unassailable. You can not spend thirty seconds in his presence without acknowledging that you are in the presence of a huge, towering intellect. And yet.

Yet he used Jeff Skilling to insult the health care bill. And then he set the record straight about Ken Lay’s relationship with George W Bush. I respect Karl Rove; it’s fun to see him slice and dice this moron he’s talking to, but ouchie, why did he have to use Jeff as an example?

Q: The program that was just passed does have funding. You may not agree with it, but…

Rove: It doesn’t have funding. This is Bernie Madoff-style economics…I think they bailed out Jeff Skilling (of Enron) to design the financing of this thing.

Q: You don’t want to go down the Enron road, do you? Ken Lay was a good buddy of the president’s.

Rove: He wasn’t. You haven’t read my book, my friend. Ken Lay was for Ann Richards when George W. Bush ran for governor…I want to go back to Medicare part D (the drug benefit.) Guess what? It didn’t end up being $450 billion over the first ten years. We’re seven years into it, and it’s not going to be $450 billion. It’s going to be $300 billion.

Despite Rove’s dig at Skilling, he is right about Ken Lay. Also, when idiots like to chirp that Ken Lay and G.W. were besties…” I always want to smack them. If they were besties, wouldn’t George Bush bail them out instead of letting them collapse? Furthermore, wouldn’t he have helped his personal friends? Instead, Ken Lay and Jeff Skilling and a slew of others were tried and convicted, and now, ten years later, some are still fighting charges stemming from the collapse of Enron.

With friends like those, who needs enemies?