I love this email. It just sounds so normal. I feel a little guilty for reading their email but not enough to actually stop, I suppose.
Monthly Archives: July 2010
Financial Times has a good article about the role of remorse in convictions. There is mention of Jeff Skilling as well as Conrad Black and Amanda Knox. What I like about the article is it states something I’ve pointed out before: if a defendant claims innocence, he’s punished for being stubborn or “cold blooded.”
It’s a thorough and good article. Check it out!
I got a lovely and somewhat sad note from reporter Mark Gimien who wrote the article on “Enron Revisionists” for TheBigMoney.com.
Story’s up now, cover of Slate’s The Big Money: http://www.thebigmoney.com/
Coincidentally, by the way: it’s the last day for The Big Money. The Washington Post Co. just shut it down. Today’s the last day of publication. Proving one of your points: not every failure is the result of fraud or corruption.
I am sad to see The Big Money shut down. Hopefully others will continue to have the curiosity about Enron that Mark displayed.
Last week, I got an email from a reporter at Slate’s TheBig Money.com. Mark Gimien wanted to discuss the changing perception of Enron. We spent about half an hour on the phone. He asked some very penetrating questions, and seemed like a very fair reporter. The result is here.
The only real disappointment is Gimien’s assertion that Enron Broadband Services was “largely fictional”. That’s simply not true.
Still, it’s an enjoyable read.
July 28 (Bloomberg) — Former Enron Corp. Chief Executive Officer Jeffrey Skilling seeks to be released from prison on bail while an appeals court reconsiders convictions questioned by the U.S. Supreme Court.
Skilling, 56, is serving a 24-year sentence after a Houston jury convicted him for leading what prosecutors said was a widespread accounting fraud that deceived investors about Enron’s true financial condition. In June, the high court ruled in Skilling’s favor, saying he was prosecuted under a law barring honest services fraud that doesn’t apply to his case.
“Jeffrey Skilling should immediately be released on bail pending this court’s ruling on his case on remand,’’ Daniel Petrocelli, Skilling’s lawyer, said in a bail request filed today with the U.S. Court of Appeals in New Orleans.
Skilling also asked that his convictions be reversed and he be retried by a lower-court jury that isn’t allowed to consider honest-services fraud in weighing his guilt or innocence.
“Because it is impossible to know whether the jury convicted Skilling on any of the 19 counts without relying on the honest-services theory, all 19 counts must be reversed, and Skilling must be retried before a jury that is not permitted to rest any count of conviction on a legally invalid fraud theory,’’ Petrocelli wrote to the appellate court.
Tracy Schmaler, a spokeswoman for the Justice Department, said after the Supreme Court ruling that the government “will vigorously defend’’ the Skilling case when it returns to the New Orleans appeals court.
Petrocelli said that courts have on six previous occasions found that the former Enron executive wasn’t a flight risk.
“A decision to skip bail would be all the more irrational now that Skilling has won a landmark victory in the Supreme Court, completed close to four years of his sentence, and has every intention of continuing to pursue his legal rights to clear his good name – as he has been doing for some nine years,’’ the lawyer wrote.
Petrocelli called the court’s attention to a Chicago appeals court’s decision on July 21 to release former Hollinger International Inc. Chief Executive Conrad Black from prison on $2 million bail while it reviews his convictions. Black won a Supreme Court ruling on the same day and on the same grounds as Skilling.
Skilling was found guilty in May 2006 of 19 criminal counts including conspiracy, fraud, lying to auditors and insider trading. The same jury convicted former Enron founder Kenneth Lay, who died six weeks later and whose verdicts were erased as he’d had no chance to appeal.
Writing for the Supreme Court on June 24 of this year, Justice Ruth Bader Ginsburg said the law, which covers fraud schemes to “deprive another of the intangible right to honest services,’’ applied only to instances of bribery or kickbacks.
The appeals court must determine the extent to which prosecutors relied on the honest services prohibition in persuading jurors to convict Skilling, who wasn’t accused of bribery or kickbacks.
Ginsburg said the court’s decision “does not necessarily require reversal of the conspiracy conviction.’’ She said prosecutors could argue that their reliance on the honest- services provision was “harmless’’ because jurors would have convicted Skilling of conspiracy, regardless. Prosecutors offered evidence that Skilling had conspired to engage in securities fraud, in addition to honest-services fraud.
Ginsburg also said the high court wasn’t addressing Skilling’s contention that his entire conviction hinged on the conspiracy count and thus must be thrown out. Skilling’s lawyers claim all the counts are tainted.
“The government cannot now exclude the possibility that the jurors applied the erroneous honest-services fraud theory to convict Skilling for conspiring to commit an act of fraud that does not legally exist, and then applied that finding to convict Skilling on every other count,’’ Petrocelli said in court papers filed today.
Prosecutors also urged jurors to wrongly convict Skilling for the illegal acts committed by other Enron employees under the theory that each conspirator is equally guilty of all acts in the scheme, Petrocelli said.
“For every securities-fraud count, one or more of Skilling’s alleged co-conspirators testified that they themselves had committed the acts of securities fraud at issue (and in many cases formally pled guilty to them), while Skilling himself often had little involvement in the statement (or underlying conduct affecting the statement),’’ Petrocelli said.
Parallel Enron Case
Petrocelli also called the New Orleans appellate court’s attention to an earlier ruling it made in a parallel Enron case, reached three months after Skilling’s conviction, which rejected the honest-services theory. Relying on that decision, U.S. Circuit Judge Patrick Higginbotham said in a later ruling concerning Skilling’s bail that there were “serious frailties’’ in 14 of the 19 counts against him.
At that same time, Higginbotham wrote that Skilling “raises no substantial question that is likely to result in the reversal of his convictions on all of the charged counts.’’ He denied Skilling’s request to remain free on bond while he appealed his case. The former executive is serving his sentence in a federal prison in Englewood, Colorado.
More than 5,000 jobs and $1 billion in employee retirement funds were wiped out when Enron plunged into bankruptcy following the revelation of widespread accounting fraud. The December 2001 bankruptcy of what was then the world’s largest energy trader cost investors more than $60 billion in market losses.
The prosecutors may be ready to “vigorously defend” Skilling’s convictions, but they must know that their case is scoliotic and completely without merit. I have assiduously avoided giving any kinds of odds for success at any step of the way, but I think that Jeff Skilling has a better than fifty percent chance of succeeding. This is why:
* I know that the most powerful witnesses against Skilling will not testify again.
* On the other hand, numerous unindicted co-conspirators are happy to come to his defense now that the ETF can’t threaten them with prosecution.
* I know that with Scott Yeager, David Bermingham and Gary Mulgrew speaking out against prosecutorial abuse, there is much more scrutiny on the prosecutors.
* John Kroger did not assist his cause with his tell-all book, Convictions. Indeed, he admitted to much of the abuse that defendants and witnesses had long been claiming. With the former ETF prosecutor admitting as much, it will be harder to convict Jeff Skilling.
* The truth about Enron is coming out, day by day. There’s no way to accuse Jeff Skilling of doing anything illegal (such as “conspiracy”) when the facts are out there, and they do not add up to conspiracy.
* The United States is broke. Spending millions of dollars to re-try a man for something that happened eleven years ago seems wasteful. Don’t we have bigger fish to fry?
* Without “honest services”, the Prosecution has nothing on Jeff Skilling. NOTHING. Every count – conspiracy, insider trading, fraud – relies on honest services. Poof! There goes Jeff Skilling’s convictions.
* Without Ken Lay, a trial with just Jeff Skilling is likely to render a much simpler trial in general.
* The jurors are much more educated now. They’ve seen AIG, Bear Stearns, Lehmans and others collapse with no convictions. They seem to understand companies can suffer a liquidity crisis without criminality.
* The media are a little more abashed. They are, in fact, sucking up to some of the defendants released from prison, and are eager for their side of the story now.
The chances of Jeff getting out of prison permanently and soon are better than not.
1. Misspelling Jeff Skilling’s name. It’s not Schilling or Skillings. It’s Jeff Skilling. At least spell correctly the thing you despise, people.
2. Trying to defend capitalism as part of the Enron story. I will do it quite happily, but it’s very hard to explain to someone who is ideologically socialist why Enron was a good thing.
3. The accusation that Ken Lay is “on a beach somewhere”. Enough said.
4. The utter lack of knowledge of critics. It’s fine if you want to argue about Enron, but please have a little more knowledge at your disposal than just what you’ve seen on television.
5. The personal questions about people I love, admire, and/or respect. I never quite know how to tell someone they’re being rude; I suspect they think its not rude because they consider them public people. They’re not public people. They’re businessmen and women who had something horrible happen in their lives. They’re not celebrities, and except for Sherron Watkins, they don’t ask for attention.
6. Battling the myths, such as “Execs locked people out of their retirement funds,” “the top execs sold stock while telling employees to buy,” and/or “Mark to market contributed to Enron’s collapse.” It gets exhausting repeating the same things over and over again for me, but apparently not for the people who keep blathering on.
7. The personal attacks and accusations that I am getting paid for writing this. I don’t even advertise on my blog (I know that WordPress occasionally puts Blog Ads on my blog; I didn’t ask for that, I don’t like it, and I do not see one red cent from it.) I am not being paid by anyone to write my blog. I do it out of love.
8. That the prosecution has the presumption of innocence. It is difficult to believe that the DOJ is corrupt, that they would alter emails (Gary Mulgrew) lose documents (Skilling, Broadband), intimidate witnesses (Nigerian Barges, NatWest, Broadband, Skilling), and outright lie (Nigerian Barges, NatWest, Broadband, Skilling, Arthur Andersen) but they do. I wish our country were a little more cynical about the government. At least in the Enron cases, they were absolutely evil.
9. The fact it is difficult to organize. I’ve tried to organize it with the Enron Index, but goodness, there’s so much material and it all fits together. It’s hard to give an overview just because the material is so dense.
10. The fact that the good people at Enron had to go through something as awful as all this. It genuinely bewilders me. All I can do is write about it, I suppose, and hope others see it the same way.
An article on The Daily Beast mentions that Google is working on a rival to Facebook. Then some ding-dong commented thusly, which amused me greatly:
Lately, there has [sic] been privacy concerns expressed over some privatized social networking sites.
America has had My Space, Face Book, and rivals trying to make a mint out of the slack in social networking. Mind you, I am not a socialist at heart, I believe an individual should be able to benefit from his own creativeness, inventiveness, and ingenuity; however, I trust my government more than any privatized capitalistic venture that pretends trust. In difference to My Space, Google, Enron, or Face Book, I would welcome a U.S. Government social network that would officially guarantee security of my privacy of the individual. Frankly over the years, I have trusted most my Post Office, my Social Security, and as bad as it is, my Internal Revenue Department. I trust my America with my mail, my Social Security check, and my income tax; I do not trust Enron.
I disagree with Right Wing-Nuts that the American democratic Republic is incompetent, totally corrupt, and ineffective. If the U.S. Government provided a social network, I would subscribe because I trusted them more than privatized ones: socialism be damned.
AT&T was supposed to be trustworthy with my phone and internet, but when the Bush
Administration spied on Americans without a warrant, AT&T cooperated with them to listen to my phone calls and read my email; consequently, I do not trust AT&T or the Bush Administration but in choosing between the two, I would choose to trust any American government under a different President than Bush more than any other private corporations.
God bless America; I am a patriotic American even if that sounds funky and naïve to Republicans and Fox News.
I left all the crazy socialist apologia in there so that you could see I wasn’t taking anything out of context (and God knows there is a LOT I could correct in this imbecile’s thinking, but alas I would like to focus only on Enron.) I must ask: since when is Enron in the business of social networking? I love how she writes:
“My Space [sic], Google, Enron or Face Book [sic].” Like they were all competing together.
The sad thing is that Enron would have kicked Facebook’s scrawny ass in the social media arena. I say this because one look at Enron Broadband Services shows us they were miles ahead with the technology. They were cloud computing in 1999 – when there wasn’t even a term for it. They *invented* YouTube, even if they didn’t call it that.
If they had survived, I am convinced that the technology we love – iPads, YouTube, Flickr, Facebook – would be far advanced, and it would have been Enron’s first. If the DOJ had left them alone and let them do what they were supposed to do and wanted to do, we would not be stuck laughing at lolcats and doing status changes on Twitter. We’d be onto the next big thing, and the thing after that.
Enron could have eaten Facebook for lunch. If there is a modern analogy to Enron Broadband Services, it is Google. And I have no doubt that Enron would have eaten them too.
Enron and Apple would have eventually partnered on something great. It is too bad we will never know exactly what, and all these years of technology are lost. It is actually quite sad, if you allow yourself to think about it.
It’s been a while since I’ve done this so I figure what the heck. These are search terms from the last 8 hours (I’ve deleted the repeated ones and some of the stupid ones and some of the completely bewildering ones).
Ken Rice Enron Biography
This is getting weird. Stop searching for that. There are a few Rice posts, but you are starting to freak me out with your weekly searches for Ken Rice stuff.
This is better than the guy yesterday who was searching for “Anthony Fastow.” Imagining Fastow being Italian puts all kinds of funny ideas in my head.
This person found the Cara Ellison Org Chart.
bad company mission statements
ask why enron
Aww, some people remember. Good!
Some better search terms might be “liar”, “prosecutorial abuse”, “moron” and “ego-manic”.
The NatWest bankers are innocent.
Oh you’ll find plenty about the BOS. See also: EIN.
gas bank enron
I love that people remember this stuff.
enron casefamous whistleblowers
There are a couple of posts on the prison sentences of Enron executives. Unless you mean “sentence” as in a sentence of words, like: “There was no fraud or conspiracy at Enron.”
lynch mob and ken lay
Awesomest dude around.
michael kopper enron
I have a couple of solo Kopper posts but mostly he’s mixed in with other posts. See “Andy Fastow” and “NatWest Three.”
The subject makes me queasy.
enron world trade center
This is either someone looking for Enron’s annual report with a picture of the WTC on it, or its a conspiracy theorist.
Many posts about the buildings here.
Oh great subject. I have a few in depth essays about that.
rex shelby enron
Nothing I say about him can do justice to the man he is. He is magnificent and perfect.
kevin hannon enron
Kevin Hannon stuff is usually found with the Skilling stuff. I’ve mentioned him a few times when discussing prosecutorial abuse.
enron and gas bank to buy gas
Essay about something Michael Krautz’s attorney said during closing statements.
lea fastow children
God, what a tragic subject.
why was gas bank successful for enron
Somebody’s in an MBA program.
enron email transcript
enron broadband trial
A subject very well covered.
The video of David Bermingham and Gary Mulgrew on Ungagged.net has unveiled a trove of details about their case, but what strikes me the most is how similar the case was to all the others. There was a coordinated strategy among the Enron Task Force with a singular goal to get Ken Lay and Jeff Skilling. As Gary Mulgrew says in the video, “we were just in their way.”
Some examples of what I mean by a strategy:
The allegations against Gary Mulgrew, David Bermingham and Giles Darby center around a personal transaction they did with Andy Fastow. They were accused of misleading their employer about the value of an asset. Bermingham states in the video, “the asset was worthless.” Even NatWest, the entity they were accused of defrauding, told the FSA that they were “content with the price.”
This reminds me of the Nigerian Barge deal, in which all the parties were content with the deal, and yet the government strived to criminalize it. Oddly, or perhaps not, both deals were worth $7 million.
In February 2002, the FSA (which is the British version of the American SEC) investigation concluded. None of the NatWest defendants heard anything more about the investigation until June when they discovered – by watching television – that they were the subjects of criminal complains. They had never spoken to anyone at the Department of Justice.
This is like the Broadband defendants. Rex Shelby answered his door one August evening to find two FBI agents standing there. As they came inside, he asked if he was being accused of something. They said no. Later, a friend stated that they had been at his place too, and they had said “Shelby’s fingerprints are all over this.” Shelby offered numerous times to speak to the prosecutors in order to explain the EBS technology and they flatly refused him. The DOJ in the EBS and NatWest cases had no interest whatsoever in speaking to the actual people they were accusing.
In the video, Gary Mulgrew’s describes a horrific strategy in which the DOJ simply manipulated his email, taking phrases from one document, pasting them into another document. He said in the video that while reading the doctored emails, he said to his brother, “I must have had a lobotomy. It seems to me, reading this, I did this. I stole this money.” His astonishment is clear. He says, “I didn’t think these people lied. I didn’t think these people manipulated. I didn’t think that they would cut and paste and do things. I grew up watching Law & Order, and I thought these were good guys… and instead what you get is this contorted load of rubbish.”
He also discusses an internal RBS report from early 2002 when the Financial Services Authority were investigating the transaction after the NatWest Three had come forward to them and self-reported. The DOJ deliberately restricted their document subpoena to pre-bankruptcy times, because they didn’t want to get hold of reports like that which would have completely undermined their case. They knew of its existence, though, because the FSA sent a huge pack of documents (which the NatWest defendants had given them) to the SEC, under a covering note which included a summary of the FSA’s conclusions, including the information that RBS had been asked to go back and look at everything again and had concluded that all procedures had been folllowed and that the price paid was fair.
This, sadly, is par for the course. Despite the fact that the entire world say “the Enron dataset”, numerous important emails were kept from the Broadband defendants until well after the first trial. Other documents, such as the new discovery in the James Brown case, are clearly exculpatory and were released only on March 10, 2010. The manipulation of email and documents is shameful, but when the DOJ has a case to make, nothing – not even civil rights – is sacred.
Mulgrew also said Caldwell gave a speech in which she said that all the people in Washington were urging an indictment. This sadly is almost word-for-word what John Kroger said. He was eager to be the first to get some “scalps on the board.” His book, Convictions, details the passion with which he was determined to convict Enron executives whether or not they were guilty.
One of the most troublesome things in the prosecutions was the way the government used anyone and everyone to get Ken Lay and Jeff Skilling.
The charging document alleged that the NatWest Three conspired with Andy Fastow and Michael Kopper. The Three were charged. Michael Kopper and Andy Fastow were not. The document was used to get Kopper and Fastow to talk since they had pled the Fifth. When Michael Kopper talked, Andy Fastow still refused. Then they indicted his wife.
The NatWest Three and the Nigerian Barge defendants were used to go after Andy Fastow. Andy Fastow, Ken Rice, Kevin Howard, and Kevin Hannon were used to go after Skilling and Lay, which is who they really wanted. The fact that thirty-six other people got trapped under the wheels did not matter one bit to the DOJ. Lea Fastow, for God’s sake, was a mother with two young kids. And John Kroger openly admits that not only would her “crime” usually not be punished, but she was being punished BECAUSE HER HUSBAND REFUSED TO TALK!
All the men they sent to prison under pernicious plea deals had children and wives and lives. David Bermingham had a three month old baby when he discovered he was subject to a criminal complaint in the USA.
And yet it didn’t matter.
None of the lives of these people mattered one bit to the DOJ. They were happy to separate a father from his infant son, or in the case of Ken Rice, his four children or in the case of Lea Fastow, her two young boys. It simply made no impact on them at all that they were deeply hurting innocent people. And these innocent people had no recourse.
I am so proud of both Gary Mulgrew and David Bermingham for speaking out. I think the big break-through in the way Enron is perceived by the majority will come when those who did plea deals start speaking out too, when they let it be known that they were manipulated and used by the DOJ for the stupid reason of putting Jeff Skilling and Dr. Lay behind bars.
So thank you, Gary and David, for being the first.
The leadership of Enron was accused of locking employees out of their stock plans in late 2001. This was not exactly true. Enron was changing administrators and employees had known for months that they wouldn’t be able to touch those assets during the switch.
What annoys me so much about the accusation is that if anyone bothered to notice the stock price, they would see that Enron’s decision actually helped its employees because during that time, the stock price fell and then began to pick up again. They made more money selling after the switch than if they’d been free to sell during the panic.
Here’s one of the emails that gave them notice that they couldn’t sell for a month:
Enron Benefits…Keeping Pace With Your Lifestyle
Just released! Beth Steier has two hours of footage of David Bermingham and Gary Mulgrew talking about Enron. Both are lovely people – you can see their genuineness in the video. In the fourth installment, you can see it is still painful for Gary Mulgrew to admit that Andy Fastow was a thief. That struggle, that hesitancy to acknowledge the darkness in another human being, touches me. Both are compulsively watchable. Both are innocent; it is impossible to believe otherwise once you see the video. Check it out!
A difficult admission: Bethany McLean reminds me of me. Or rather, how I used to be. I identify with her ambition, and the fact that she tried to join a man’s world. For her, it was the Goldman Sachs trading program. For me, it was engineering. I hated engineering, but I felt it was important to complete the program because I wanted to prove that I was smart, and that was the single best way I could think to do so. Bethany’s presence in the Goldman Sachs program was probably a lot like mine in engineering school: since she was one of the few women in the program, and because she was very pretty, the boys inflated her ego with their attentions, and probably covered up her lack of accomplishment for a while. This is how it was for me in engineering. When I could not complete a problem set, there were constellations of boys who would offer to help, and then when I still wasn’t understanding it, to just do the work for me so I could turn it is as mine with the promise to spend a weekend studying so I really grasped the material.
Unlike Bethany, I didn’t wash out. I gutted it out, slaving for C’s, ecstatic when my models worked, in tears when I couldn’t get through the calculus of a particularly petrifying problem. At some point, Bethany threw up her hands and left the program. Then she did something she probably knew, instinctively, that she should have been doing the whole time: writing about the men who actually could do the things she had dreamed of doing.
The fundamental act of writing is observing. And I can imagine she was observing the traders with their high-frequency intelligence with both awe and envy.
I know because that’s how I observed real engineers. They seemed to have more substance than me. They were doing work that was somehow more genuine than my own. They were the really smart ones; I was just a girl.
For Bethany, it was easier to write than to do. And she probably enjoyed being in the confidence of the men she admired. So when business leaders and hedge fund managers began to confide in her, it was probably a satisfying substitute to genuine achievement. It felt very close to accomplishment.
That is why I understand why she began to do the dirty work of James Chanos. He was important! He was rich and famous and he was a player, all the things that made her feel seen. So when he asked her to “look into” Enron, of course she would! Someone at the top was finally giving her some attention. Her journalism skills could be put to work for something meaningful.
Her passion for the prosecution of Enron is matched only by my passion for the defense of Enron. I understand how the subject can fascinate, and drag you into its vortex. It creates its own orbit. And with so many people – not least of which her husband, the prosecutor Sean Berkowitz – feeding her information, urging her on, of course she would abandon her journalist ethics and become just a pundit.
Basically Bethany and I took the same path and ended up in two different places.
Someone who used to work with her said to me that it wasn’t personal with her. I believe she doesn’t think its personal but when she began to date Sean Berkowitz, of course it was personal. She wanted her boyfriend to win. That is completely understandable. Like all of us, she has an agenda.
I don’t hate Bethany. I know it sounds like I do, but I don’t. She is unlike the other Enron-bashers. Sherron Watkins isn’t a fair fight for me because she’s so obviously an opportunistic nothing: she is far too easy to dissect and expose. Others suffer the same lack of challenge. But Bethany is my equal. Bethany and I both consider ourselves writers, we have followed similar career paths. Bethany is prone to over-admiration of her subjects as I am. So we have a lot in common.
Our likenesses diverge there, however.
The difference between us is I finally learned the brain-meltingly dull skills of engineering. I finally got my hands dirty with it, and achieved a reasonable level of competence. Bethany never did learn how to be a magnificent trader. She’s still writing about Wall Street. She somehow never moved on.
WordPress has a new feature where bloggers can post by phone. I tried to do it twice but in the middle of my speaking, there was a beep like it was telling me the box was suddenly full or something. It posted to the blog and I deleted it, but I am sorry to those who are getting this by RSS. You’ve received two truncated messages, one of which I used a swear word. Oops.
I will try to find out what’s going on with it and may or may not try to post by phone again.
Last night I was running through the crumbling streets of this cow-town when I noticed something on the ground, literally in the middle of my path. I stopped, and blinked, unsure of what I was seeing. When I recognized the familiar shape I felt an almost supernatural sensation of irony and pleasure. I snapped a picture with my BlackBerry:
I walked over to it, and just starred down at it. Suddenly my mind was washed clean. I know one could say it was just a piece of cardboard, it meant nothing. A piece of cardboard in the shape of an E. On my path, literally in the middle of my path, so I could not fail to see it. One could say that, but instinctively I felt it was all wrong.
I struggle (a lot) with the concept of God and questions of why we are here and if there’s a God why does he even care what we do. But then I saw this and I felt like there was some benign force out there, and it was telling me, literally, I was on the right path.
As soon as I took the picture, I felt happy. I turned and ran, all the way to the Transco Tower. Someone out there wants me to win.