Monthly Archives: September 2010

An Example of Conflict of Interest

I found this in a public filing today:

Related party transactions
At June 30, 2010, the Company owed (amount deleted) to (deleted) (purchased by deleted in 2009), a former related party with common directors and officers. These fees relate to general and administrative expenses for the purposes of sharing the same office space and equipment.

A director of the Company is a partner at a law firm that provides legal services to the Company. For the six months ended June 30, 2010, no fees (June 30, 2009 – nil) were charged for services provided from the firm.

All related party transactions are conducted in the normal course of business operations and are measured at the exchange amount, which is established and agreed to based on standard rates, time spent and costs incurred.

And yet nobody seems too concerned about this. It did make me think about Andy Fastow and how people make such a huge big deal out of the fact that he was both an officer at Enron and LJM – a relationship that some may think was a conflict of interest.

But in this modern example, he’s a LAWYER providing legal advice to a company where he is also the director. That seems to me much more problematic.

I guess if anything happens at Enron, it’s automatically controversial. But if it happens anywhere else, it’s just business.

Hypocritical much?

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Today In Enron History

September 30, 1998 was the day the Modulus DASH was approved and signed by Enron Corporation, allowing Enron to buy the tiny cutting-edge software company.

Modulus wasn’t large but it was powerful. It was the workplace of some truly brilliant, amazing people. The InterAgent software developed by Rex Shelby, Larry Ciscon and David Berberian was used by NASA, IBM, Wells Fargo, and many other name-brand companies. They worked very closely with Sun Microsystems and Microsoft. So when Joe Hirko began to think about how to set up teensy EBS, Rex Shelby and Modulus came to mind.

Thus, they made an offer the Modulus Three could not refuse.

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Ken Rice and Rex Shelby Discuss The Country Music Awards

Guess what Enron did. They broadcast a program over the interwebnets on September 23, 1999. This was a huge accomplishment, made even more remarkable because customers were able to select the quality of service they received. This was an email discussion regarding that event – which the DOJ knows happened but is a subject they would really rather avoid.

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Will You Change The World Today?

This document is an email to Ken Rice from Tim Gros, and a proposed press release is attached about bandwidth trading. I love the press release; I think it sparkles.

Will you change the world today?

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Were Sun & Cisco In On The Conspiracy?

Rex Shelby’s Enron emails are something to behold in their utter brain-melting, stupor-inducing boredom. For a company that was known to be completely saturated in sex, drugs, and corruption, apparently Rex Shelby thought people were actually there to work because that’s what all his emails were about. And they were coherent and all the words were spelled correctly. What a square.

You know who could help Rex Shelby learn to write entertaining emails? Bill Collins. Bill Collins could school the hell out of Rex Shelby in this regard. Collins could teach him how to add some paranoia, sprinkle in a few bitchy comments about his coworkers and really liven these emails up for posterity.

Basically Rex’s Enron emails are only valuable as insight into the work, not the culture. In fact, all the Modulus guys were like this. I’m looking at you, Larry Ciscon, Mark Palmer, Ellis Giles, and David Berberian.

And thus, we have Exhibit 0001.

If you’re still awake you will notice that the email mentions Sun, Bulldog, Inktomi, and Cisco. I find it fascinating that these big companies would Beta test a product that didn’t exist.

Oh, and though I hear that Rex Shelby is a total bore, I’ve seen his picture. What he lacks in crazy, he more than makes up for in yumminess.

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Bill Collins’ Long Goodbye

Bill Collins’ emails never fail to cheer me up. They’re utterly perfect in their craziness. Oh sure, I feel bad for Scott Yeager, having to deal with this guy’s PMS mood swings, but I’m confident in Scott’s ability to handle it.

Stay classy, Bill Collins.

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World’s Scariest URL

Oh yes. I went there.

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A Christian Judgement of Enron

Enron & Ezekiel appeared on my radar today and it completely blew my mind. Not because it was so great, but because I could not believe that a woman whose entire blog seems to be about Christianity would spend a whole blog post judging Ken Lay based on a few sound bytes she’d no doubt picked up on some second rate slander-blog.

To whit:

During my morning quiet time I was reading in Ezekiel 33 and the words made me recall the Enron scandal. If you had no personal stake in energy stocks in the 90’s Enron may cause only a dim flicker of recognition. A quick reminder: “At the end of 2001, it was revealed that (Enron’s) reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud, known as the ‘Enron scandal’. Enron has since become a popular symbol of willful corporate fraud and corruption. The scandal also brought into question the accounting practices and activities of many corporations throughout the United States.”

The particular moment in the Enron scandal that came to my mind was of Ken Lay, CEO, who said as he was being led away, “I have made my peace with God.” It was this quote that came to mind as I read Ezekiel 33:10-17. Verses 12 & 13 specifically: “The righteous man, if he sins, will not be allowed to live because of his former righteousness.’ 13 If I tell the righteous man that he will surely live, but then he trusts in his righteousness and does evil, none of the righteous things he has done will be remembered; he will die for the evil he has done.”

Funny, I don’t remember Ken Lay saying, “I have made my peace with God.” What does it mean to be “led away” anyway? Is she talking about his brief comments to the media when he was arrested? You know, when he said that he had nothing to say but might later on this morning?

Or after trial? When he said that “we love our Lord“?

Either way, she’s got the facts wrong.

And why does she have such a hate-on for Enron? I am no theologian, but she seems to be saying that just because Ken Lay loved God doesn’t mean he wasn’t going straight to hell. In which case, I think about my young years at Sacred Heart and ponder the quotation, “Judge not, lest he be judged.”

She emphasizes this point:

Ken Lay is just a public example of how often we consider ourselves “good people” and yet knowingly and willingly do wrong. We are quick to justify our deeds; it’s a white sin it’s no big deal, it’s an acceptable sin. Justifications alone signal we need to check our actions.

What did Ken Lay do wrong?

I know some devout Christians, and I respect them. I know three devout Enron executives. I asked each of them if they believed Sherron Watkins’ newfound Christianity was real and each of them said – quite firmly and without fail – that he would not dare judge what is in someone else’s heart.

If Enron can refuse to pass judgement on someone who has done it harm, why can’t this woman abstain from judging someone she never met, into whose eyes she has never peered, and whose heart she will never know?

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Enron Employed 100 Million People

I know it’s ridiculous to try and answer every stupid-head that comes down the pike, but this amused me.

A hundred million people? That’s a third of the population of the United States. That’s ten times larger than the population of Houston, where Enron was headquartered. Is it possible this person has made an error?

The whole screed is a socialist whine about how big business is so mean so we know that this person hasn’t the foggiest idea of economics. I guess it’s not that big a shock that he would so vastly overestimate Enron’s workforce.

But it’s still funny to think about. Not even Cara Ellison Corporation has that many employees.

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WSJ & USA Today Highlight Prosecutorial Abuse

For the past six months, I’ve watched as several DOJ officials have come forward to complain that the DOJ has been whitewashing prosecutions, refusing to prosecute crimes against white victims: notably, the Black Panthers case in which two Black Panthers stood outside a polling place in Pennsylvania, uttering epithets, including the line that he wanted to kill “cracker” babies. This took place during the Obama/McCain election.

Eric Holder’s ascendancy to the role of Attorney General has wiped the Black Panthers case off the map. But two whistleblowers have come forward to complain that the DOJ is refusing to prosecute crimes in which a white person is the victim.

I’ve watched all this, hopeful but not too hopeful, that something good could come out of it. I’ve attempted to defend the Enron defendants, but it is difficult to get people to pay attention when the victims are a bunch of rich white guys. Whereas Obama’s DOJ is looking the other way because of racial issues, I believe that the Bush and Obama DOJs are prosecuting because of class issues. Either way, it simply isn’t right.

Then today, USA Today did something extraordinary: they ran a 4,000 word article about prosecutorial abuse. WSJ chose to highlight it in its own newspaper. I quote the WSJ:

It’s not every day that a major daily newspaper runs a 4,000-word article.

But the USA Today has seen fit to spill more than that much ink on a topic near and dear to our hearts: prosecutorial misconduct.

The piece begins with this anecdote:

The jurors who helped put Nino Lyons in jail for three years had every reason to think that he was a drug trafficker, and, until July, no reason to doubt that justice had been done. For more than a week in 2001, the jurors listened to one witness after another, almost all of them prison inmates, describe how Lyons had sold them packages of cocaine. One said that Lyons, who ran clothing shops and nightclubs around Orlando, even tried to hire him to kill two drug suppliers.

But the federal prosecutors handling the case did not let the jury hear all the facts.

Instead, the prosecutors covered up evidence that could have discredited many of Lyons’ accusers. They never revealed that a convict who claimed to have purchased hundreds of pounds of cocaine from Lyons struggled even to identify his photograph. And they hid the fact that prosecutors had promised to let others out of prison early in exchange for their cooperation.

The story reveals the results of an investigation undertaken by the paper on prosecutorial misconduct. The investigation found that prosecutors “repeatedly have violated that duty in courtrooms across the nation. The abuses have put innocent people in prison, set guilty people free and cost taxpayers millions of dollars in legal fees and sanctions.”

Yes! Thank you! Someone else is saying it now.

Much of the problem, reports the paper, rests with the fact that too often prosecutors put aside judgment and discretion, and “deliberately cut corners to win.” Prosecutors are overworked and, have insufficient oversight and, according to Loyola law school professor Laurie Levenson, are the A+ students who aren’t accustomed to losing.

“Prosecutors think they’re doing the Lord’s work, and that they wear the white hat. When I was a prosecutor, I thought everything I did was right,” said Jack Wolfe, a former federal prosecutor in Texas and now a defense lawyer. “So even if you got out of line, you could tell yourself that you didn’t do it on purpose, or that it was for the greater good.”

Furthermore, there’s often a lack of accountability. Department records show that its internal investigations often take more than a year to complete, and usually find that prosecutors, at worst, made a mistake, even when judges who presided over the trials ruled that there was serious misconduct.

The comments are very insightful too:

The problem is that many of the prosecutors, whether federal or state, are using the job as a stepping stone and rather than furthering the justice process, they are trying to win at all costs. My suggestion would be that since someone’s liberty is at stake, if a prosecutor fails to disclose information, especially exculpatory, automatic disbarrment for 2 years.

Ask Jeff Skilling or James A. Brown about the failure of the DOJ to produce exculpatory evidence. I’m sure they could talk your ears off. It’s done all the time.

Then there was this harrowing story from another commenter:

My miserable experience shows that prosecutors don’t even comply with the minimal requirements. When I lived in Steamboat Springs CO, I was prosecuted by Elizabeth P. Wittemyer. I am totally convinced that she prosecuted me because she thought it would benefit her husband Chris Wittemyer’s real estate business. I was accused of yelling “you are violating my constitutional rights” while I was standing on the street in front of my home and directing it to the wife of the city council president who by her own account was behind her garage going into her house or alternately at her husband and two construction workers standing on the second floor of a building (that violated the zoning) that they were then building. That was not a crime. I was prosecuted without a warrant or an arrest and the so called criminal summons and arrest was signed only by Jane Bennett my former neighbor and the wife of the city council president. She signed in the line marked police officer. There was never any written statement of probable cause and Wittemyer also skipped an arraignment although that was required. She never talked to me, I never met her. Then after I pled not guilty she dismissed the charges but she skipped the required oral hearing and refused to have one even when my lawyer filed a motion requesting one. She made a public statement that there was probable cause and that Jane Bennett was my victim but that a trial was too expensive. She altered the preprinted dismissal form. Then she bought insurance from Underwriters at Lloyds London, which isn’t even listed on the State of Colorado Division of Insurance form as being authorized to sell insurance in Colorado. They sell it over the Internet to hard to place firms. Furthermore she knew that a restraining order was issued on me for the stated reason that she was criminally prosecuting me but was maintained after the criminal charge was dismissed, again contrary to Colorado statute. With her knowledge, my neighbor followed me around town trying to get me arrested for normal errands and even for being in my own yard. Furthermore I found out later that Kevin Bennett had a felony record for conspiracy to sell hash meaning he had a NCIC record which I think she was privy too. And she knew that the reason I was complaining is that my neighbors both extorted me and built in violation of the zoning. She knew that the planning services director said in court while under oath “my professional societies, American Planning Association and American Institute of Certified Planners” but that when I contacted the AICP they said she was not a member (which requires testing, references, and an ethics oath). She still lives in Steamboat and she knows that the extra buildings, which had heating and plumbing, aren’t on the Routt County property tax rolls for Kevin and Jane Bennett.

Then, after a conference w Lloyds about case assignment, my case against Wittemyer et al. in federal court, D of Colorado 02-1950, was transferred directly for former judge Naughty Nottingham. I am convinced that wasn’t a random assignment. Nottingham was already having weekly prostitution appointments and hanging out at the Diamond Cabaret lap dance club. He dismissed my section 1983 complaint and he didn’t even write an opinion. Then her lawyer filed in the 10th Circuit his notice of appearance and claimed that there were no additional parties without acknowledging the interest of Lloyds which was required. Also, Wittemyer went along with an attorney fee shifting order that was issued without any finding of fraud on my part — there were no rule 11 c 6 orders, her lawyer didn’t even file a rule 11 motion. This was not $500 or $5,000, it was $104 K and designed to bankrupt my family and ruin our credit. The amount was supposed to be because I had alleged that my neighbor might be dealing drugs and the bills from their attorney show him discussing Bennett’s NCIC record in 2003. Last fall he publicly admitted his felony record. The magistrate recommended dismissal of the claims against Wittemyer based on the idea that prosecutors have absolute immunity even for press conferences after a criminal charge is dismissed. That is specifically contrary to the Supreme Court decision in BUCKLEY v. FITZSIMMONS et al. which I had found and quoted.

Then Wittemyer and her lawyer got Nottingham to put me in jail for 5 months without any criminal information, any arraignment, any bail hearing, any trial or any sentence. One of the volunteer prosecutors, an insurance defense lawyer, said that I was not entitled to a lawyer and not entitled to an evidentiary hearing. Nottingham said that I would only be allowed to make a five minute presentation and vowed that he would not listen.

As part of that I was also brought into the federal court in Madison WI. The hearing was not even on the court calendar. The person who officiated wasn’t on the court calendar at all the entire year and was listed on the court website as a clerk. She created a so called criminal docket and listed opening pending and terminated charges as “none”. The assistant U.S. Attorney showed up and said “the government isn’t a part of this”. There was a public defender and he said that I wasn’t accused of a crime not even contempt and if I was I was entitled to a bail hearing. I was not told any of my rights. I wasn’t arraigned, I wasn’t told my right to plead not guilty, I wasn’t told my right to a hearing about where I would be tried, I wasn’t told my right to a speedy trial, there wasn’t a bail hearing and no one even suggested I might be dangerous. I am a middle aged woman with no criminal record who has never owned a gun. The prosecutor didn’t complain when I was ordered held without bail as a high security prisoner for three weeks and then taken 1200 miles in chains. The officiator asked him “Anything further from the Government?” and he said “No, your Honor”.

I don’t even know what to say to that.

These USDOJ prosecutors are not A+ students, they are the lowest of the low whose attitude is no different than that of Mafia dons like John Gotti. But with lames like Ashcroft and Holder in charge of the USDOJ, there is no accountability or oversight at the USDOJ. So the federal prosecutors can go about arresting the usual suspects (minority drug addicts and the like that fill to the brim federal prisons) and the politically motivated prosecutions like those against Gus Boulis, Conrad Black and Elliot Spitzer.

And John Kroger, Sean Berkowitz, Andrew Weissman, Kathy Rummeler, Doug Wilson, John Houston, etc. etc.

It sounds like the culture of the DOJ is to put down cases, whether or not justice is served by a conviction. If the police are going to cut corners in their investigations with the support of prosecutors who will put forth charges without regard for exculpatory evidence, then the entire system is biased toward feeding the career needs of it’s practitioners rather than the people it serves. The real embarrassment are the bar associations which seem to be even less effective than medical boards at excluding the dangerous and unethical members of the profession. Who speaks for the people? DOJ should be doubly embarrassed that it was the USA Today, an institution unknown for its reporting prowess, that broke this story.

Interesting point. It’s USA Today (the “US Magazine” of the newspaper world) who actually put forth some journalistic muscle and wrote the truth. It’s odd that USA Today has this story and the National Enquirer had several stories that turned out to be true (i.e., John Edwards’ affair.) It still seems like the reputable journals don’t dare defend the people “everyone” knows are guilty, such as Enron defendants.

It’s a shame. But I hope that by shedding light on the problem of prosecutorial abuse, maybe we can advance ourselves into a more civil, more honest society.

But as long as the Holder DOJ is in charge, I wouldn’t count on it.

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A Plaque For Jeff Skilling

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Enron Makes Appearance In “My Generation”

WSJ has a review of the new tv show, My Generation. Apparently in the show, Enron touches the lives of two families. So sayeth WSJ:

And the crumbling of Enron touched two characters’ families. Disillusioned by the downfall of his father, a top executive at the company, Steven (Michael Stahl-David) gave up his MBA dreams and moved to Hawaii. Meanwhile, Kenneth’s (Keir O’Donnell) dad, an Enron investor who was financially ruined by the collapse, killed himself.

I am not too much of a curmudgeon to realize that yes, it works as a plot device. But I fear this helps to spread the myth that there was a wave of suicides after Enron, when in fact there wasn’t. One precious soul, Cliff Baxter, killed himself. Nobody else did.

And the fact that someone would give up his MBA dreams and move to Hawaii is just… that’s lame. I don’t think any kind of non-violent zeitgeist event would have that kind of effect on any rational person. But it’s tv and it’s Enron so anything goes.

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Skilling Oral Arguments Set For November

The Fifth Circuit Court of Appeals has set oral arguments for November 1 in Jeff Skilling’s bid for a new trial.

The Supreme Court ordered the appeals court to reconsider Skilling’s case after the high court ruled that a central legal theory in the case was flawed.

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Blockbuster Declares Bankruptcy

Blockbuster has declared Chapter 11 bankruptcy.

I got a few notes about this but I’m pretty much incapacitated with the flu right now so I probably didn’t answer them. If I did, the Nyquil has obscured any recollection of it. One such note says:

I don’t know much about EBS’ Blockbuster deal because I had already left by the time that effort really shifted into gear. But I wonder if Blockbuster would have been leading the pack now if it had listened to EBS instead of fighting?

To which my reply is:

If EBS had survived, I have no doubt that Blockbuster would have quickly adopted the “Apple TV” model, and we’d all be watching our iTunes videos and movies on EBS TV right now. Blockbuster would have taken the place of iTunes in this illustration.

So when Apple TV finally gets good, be prepared for me to have a hissy fit about it and scream that EBS could have done it better – and ten years ago.

EBS really was a very cool company and I miss the idea and the spirit of it every day. My iPhone is awesome, but there are a lot of days I look at it and know for sure that EBS could have produced it in 2002 if it had been allowed to survive.

Big dramatic sigh. My heart will go on.

Reluctantly.

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Second Quarter 2001 Conference Call Transcript

Transcript of Q2 2001 earnings conference call

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