Starting with the Skilling / Lay trial, the ETF preferred to group defendants together, creating a Prisoner’s dilemma, a game theory problem that demonstrates why two people might not cooperate even if it’s in their best interest to do so.
If you’ve never seen the prisoner’s dilemma, you can see it on every single Law & Order ever made. If you’ve never seen Law & Order, go up to any television, any random time of the day, on any random channel, and you will see Law & Order. More formally put, from the Wikipedia website:
Two suspects are arrested by the police. The police have insufficient evidence for a conviction, and, having separated the prisoners, visit each of them to offer the same deal. If one testifies for the prosecution against the other (defects) and the other remains silent (cooperates), the defector goes free and the silent accomplice receives the full 10-year sentence. If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge. If each betrays the other, each receives a five-year sentence. Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act?
So basically the ETF would use this strategy, putting pressure on defendants to turn on each other. To convict Jeff Skilling and Ken Lay, they used:
Andy Fastow
Ken Rice
Mark Koenig
Ben Glisan
Kevin Hannon
Rick Causey
Timothy Belden
Jeffrey Richter
Larry Lawyer
John Forney
Dave Delainey
Timothy Despain
To convict Andy Fastow they used Lea Fastow.
Ben Glisan, Michael Kopper, and Andy Fastow turned on each other, and then on Skilling as they attempted to get a good deal for themselves.
To attempt to convict Rex Shelby, Scott Yeager, and Joe Hirko, they used Ken Rice. They also wrote in their 302 notes that Scott Yeager blamed everything on Joe, and Joe blamed everything on Scott. This was NOT TRUE. Neither man blamed the other for anything, but the government’s strategy was to turn every defendant on the others he was indicted with. Thankfully, neither man rose to the bait; they were too principled.
In the Nigerian Barge trial, they used Ben Glisan to go after the Merrill Lynch bankers and an Enron mid-level executive, plus an accountant who was acquitted.
It’s no surprise, of course, that prosecutors use prosecution witnesses, but what does surprise me about the Enron cases is that each prosecution was so nakedly for the purpose of getting someone else.
John Kroger said in his book that he indicted Ken Rice and Kevin Hannon for the specific purpose of getting them to flip and testify against Jeff Skilling. That’s all well and good, but what if Ken Rice and Kevin Hannon hadn’t done anything wrong? That hardly seemed to matter. There were witches to burn, damnit, and he was going to burn them. If two innocent men with children had to go to prison, so be it.
Something else began to emerge the closer I looked. The government was accusing defendants of conspiring together – people they didn’t even know or like! In Broadband, for instance, Rex Shelby, Scott Yeager, Ken Rice and Joe Hirko – the technology defendants – were not friends. They never had an after-work drink or emailed funny jokes. They were all business. And Ken and Joe had a bit of a strained relationship, so why would they conspire together? Over in the financial side, Kevin Howard wasn’t exactly best man at Krautz’s wedding. They worked together. That was it. So why would these people who didn’t even know each other very well conspire together? Why would they trust each other?
The phenomenon wasn’t confined to Broadband. One former defendant told me he’d met one of his co-defendants exactly four times. Yet he was supposed to have conspired, in those scant meetings, to do something criminal.
The NatWest bankers worked in the same group together, but like the Nigerian Barge, Corporate, and Broadband defendants, they didn’t spend time together outside of work.
Timothy Despain turned on Jeff McMahon, who was named an “unindicted co-conspirator” and McMahon barely knew the guy.
So why would all these disparate groups decide quite spontaneously to start committing multiple felonies with complete strangers?
They wouldn’t.
Furthermore, why would these men who had spent their lives working and achieving spontaneously throw it all away, all at the same time?
Not to put too fine a point on it, but most of the executives were not hurting for money. Many of them (most, in fact) had made millions before they ever heard of Enron. So why would they suddenly “get greedy”?
Imagine a group of forty men. I’ll eye-ball their median age as 42, average them married with at least one child, and worth at the minimum six figures. So these forty men, who have never had any criminal record, suddenly begin to conspire with their coworkers. All in the same company at the same time. Why would they do that? How would they even approach each other? Did Ken Rice leave his desk, meet Joe in the hallway, and suggest they get together this afternoon to start lying about the software? Did Jeff Skilling approach Ken Lay and say, “I have been at this company ten years. I think it’s time we started lying to analysts and making real money.” That makes exactly no sense at all.
Nothing about the prosecution’s case makes any sense. They spin these outlandish theories that no serious thinking person can believe.
The worst thing about the prosecutions is that these men are good men. They are the achievers, the smart, the funny, the enlightened. They laugh with their wives; they are silly and sweet and shockingly gentle. They haven’t a criminal bone in their body.
They aren’t guilty.
Curiously, it is much easier to believe a group of twelve ambitious lawyers, in the glare of the media spotlight, railroading the executives. Prosecutors are worse than guilty. They are an abomination.
Actually Rick Causey did not contribute to the Lay/Skilling conviction ….haven’t you wondered why the prosecutors never called him in the trial….he told them he would only tell the truth not their perverted version of the truth…
Seek the truth and it shall set you free minus if there is prosecutorial misconduct running rapid in the Enron Task Force.
Tom,
I guess I think of Causey could have helped the Skilling / Lay prosecution, and therefore, his absence, by default, hurt. I think the ETF would have had a much harder time convicting all three if all three, sitting at the same table, said the exact same thing.
But you’re right – Causey didn’t testify against them, nor did he ever mention them in his plea or his sentencing.
I have heard Rick Causey was told shortly before the trial started that there was a 0% chance he would get a fair trial. Thus, the plea at the late hour. Rick Causey would have been a great defendant but not even Rick Causey could have overcome the fact that ultimately the truth did not matter in the trial.
I agree that getting a fair trial would have been impossible. But my instinct – and I could be wrong – is that there would have been much less damage if Causey had been a defendant in that trial.
Truth didn’t matter in any of the Enron trials. That is an incontrovertible fact.
That said, I understand why he took a plea deal. He’s a good, honest man and he, like everyone else, didn’t want to go to prison for 20+ years. Better to take a certain 5 than gamble on 30.
Cara,
I’ve been visiting your blogs off and on, and find the whole thing fascinating, if both sick and sad. However, it re-enforces the reason I can’t read Atlas Shrugged- I read novels to escape, not to be reminded of what can really happen.
Christopher, thank you for your comment. Yes, it can happen. That’s why Enron is so vital, even for people who don’t care about Enron per se. If the government could do it to the Enron execs, they can do it to you, or someone you love.