The Lipstick That Launched a Prosecution

Today is National Lipstick Day, and, believe it or not, lipstick played a key role in the Enron Broadband Services (EBS) indictments!

John Kroger was the federal prosecutor on the Enron Task Force (ETF) who was charged with finding a crime at EBS. We know quite a bit about Kroger and the ETF because Kroger wrote an autobiography titled Convictions in which he describes the ETF’s tactics in pursuing convictions of Enron executives. Kroger wrote the book because he was running for Attorney General of Oregon, and he thought the book would be good PR. But the book backfired on him because it reveals abusive prosecutorial tactics — in fact, it irritated the other prosecutors of the ETF because it reveals that abusive tactics were widespread within the ETF and not limited to Kroger.

Kroger tells us that the Bush administration charged the ETF with “getting scalps quickly” at Enron. Kroger tells us how there was no evidence of any crimes at EBS, but that he was charged with finding some criminals anyway. He describes how everyone he talked with told him that there were no crimes at EBS. He explains how he decided not to use any of the EBS technical documents (even though this was a case about technology), including weekly status reports, because he could not understand them — therefore, he decided the only way to build a case against EBS was to find “witnesses” who he could strong-arm into “cooperation”.

After being completely unable to find any evidence of criminal activity at EBS, Kroger finally interviewed Bill Collins, a former sales guy at EBS who had been fired by Scott Yeager due to incompetence. Collins, who has a history of work issues and who is described by the people who worked with him as “crazy”, “a total liar”, and “paranoid”, was just what Kroger was looking for — a person he could manipulate. After all, Kroger shares a lot of Collins’ traits — journalists, attorneys, and witnesses describe Kroger as “arrogant”, “amoral”, and “mentally imbalanced”. Indeed, Kroger admits in his book that he joined the ETF because his girlfriend had left him for another attorney, and he wanted to feel the “power” that being on the ETF gave him where, he writes, he “wore power like a second skin”. And this is where the lipstick comes into play …

Kroger wrote that the email that most impressed him — the email that caused him to indict several innocent men on security fraud charges — was an email from Collins to a few EBS people in which Collins compares the Broadband Operating System (BOS) to “a bitch on a sofa wearing lipstick”. Tellingly, nobody responded to the email at the time because, as they said on the witness stand, they considered the email nonsense. And, more tellingly, Collins did not send the email to any of the engineers actually working on the BOS who could have straightened him out. And yet, that loony, ridiculous email was enough to cause Kroger to indict several innocent men and launch them and their families on a multi-year struggle against the ETF.

And did any of the people who Kroger accused of crimes ever get the opportunity to face him in court? The answer is NO! After Kroger brought the indictments, he left the ETF and scurried away to the West Coast to teach at a college. So the defendants of EBS never had the opportunity to face their real accuser at trial.

If you ask me, the biggest villain and wimp in the EBS story is John Kroger — he is the “bitch on the sofa wearing lipstick”!

The ObamaCare Decision and Enron

The Supreme Court decision on ObamaCare was a shock to just about everyone. The logic of the decision itself makes little legal and rational sense, as scores of both Liberal and Conservative attorneys and legal academics have pointed out. Most analysts see it as Justice Roberts’ ploy to protect the Supreme Court against accusations of being “partisan” if the vote had been strictly along “party” lines. People applaud or denounce the ploy, of course, largely along partisan boundaries, but few disagree that it was a results-oriented ruling, not a rational legal decision.

I denounce it because it was weak-kneed, and it will not even accomplish Justice Roberts’ sorry attempt to protect the Supreme Court’s reputation. Now the Supreme Court looks like an institution that will vote to protect its own appearance of bi-partisanship above its core responsibility of making objective legal rulings. The fact that the Supreme Court played this game on a matter of fundamental Constitutional importance is appalling. It actually makes the Supreme Court look less reputable, less reliable, and more susceptible to partisan influence and manipulation.

The practice of results-oriented “decisions” is common in the federal appeals court system. We saw it happen a number of times with the 5th Circuit Court of Appeals in the Enron cases. Perhaps the most abusive example happened to Enron Broadband Services (EBS) defendant, Rex Shelby. In the initial EBS trial, the defendants received zero convictions — they received acquittals on some counts, and the jury hung on other counts. Instead of dismissing the hung counts, as is fairly common practice, the Feds re-indicted the defendants on the hung counts, simply because they knew that they could get away with just about anything in an Enron case.

Scott Yeager won a motion to dismiss his hung counts at the Supreme Court based on a double jeopardy provision, one of the most basic Constitutional protections of this country’s legal system. This should have made the dismissal of Rex Shelby’s hung counts a foregone conclusion because his situation was essentially the same as Yeager’s case. However, in order to avoid that outcome, the 5th Circuit Court of Appeals, in a shockingly ridiculous decision, ruled that the Supreme Court decision in Scott Yeager’s case did not change any law and that, therefore, Shelby could not appeal his case.

This, of course, was transparently a results-based decision by the 5th Circuit. The text of the ruling is so inane and illogical that even a layman can see that the 5th Circuit was determined to have the outcome it wanted even though there was no rational basis for it. Clearly, the Supreme Court did, in fact, change the underlying law in the Yeager case — in fact that decision has already been used by a number of non-Enron defendants to gain dismissals of counts. But because Rex Shelby was associated with Enron, the legal protections accorded to all other defendants in this country were denied him.

This is one of those details of the Enron prosecutions that is largely unknown and uninteresting to the press and public because it deals with a level of detail in the legal process that people generally do not want to even try to understand. But it is a stark example of how the Constitutional protections of our legal system can be denied to individuals when the courts do not do their jobs and when the press and public accept the misconduct. And the lack of outrage by the press and the public about the misconduct of the Feds in the Enron cases show how “morally flexible” people seem to be — they are entirely willing to accept abuse, just so long as that abuse is heaped on the people they do not care about. As I have said before, I am fond of people in general, but sometimes I despair about the shallowness of humans — we seem to choose to be morally outraged only when it is convenient for us and when if fits with our biases.

Conversation With Big About Ballerinas

Big: I used to date a ballerina. She was pretty but had ugly feet.
Me: How come you never told me about her?
Big: I did. You said you were going to travel back in time and kill her.
Me: Oh.

The Enron Broadband Technology Concepts

My research on Enron Broadband Services (EBS) is bearing fruit. Rex Shelby ended up at EBS because his software company, Modulus Technologies, was acquired by EBS at the end of 1998. The key executives at Modulus were Rex Shelby, Larry Ciscon, and David Berberian — I call this group the “Modulus Three.”

The seminal document for the original EBS direction is a Modulus PowerPoint presentation, created by the Modulus Three, titled Changing the Rules of the Telecom Game, presented by the Modulus Three to EBS (then ECI) in June 1998. This was before Modulus was acquired by EBS — back then, Modulus assumed the deal with EBS would be an InterAgent licensing deal (InterAgent was Modulus’ commercial software product) rather than an acquisition.

That presentation analyzed the state of the communications industry, pointed out areas of opportunity for improvement, proposed a business model and technology for EBS, and put forth a list of 6-month and long-term business steps. It included the first presentation of the Broadband Operating System (BOS) idea to EBS — in that PowerPoint, it was referred to as a “WAN-OS”. It also set forth the basic concept of what an “intelligent network” meant.

The Enron Task Force (ETF) prosecutors and the Judge managed to keep that document out of evidence at the EBS trial. It exonerates Shelby and the other EBS defendants by showing that the definitions of technology terms that the ETF and their sorry witnesses tried to use at trial were not the definitions used by the people at EBS who actually created the concepts and built the technology. It also shows that the engineers at EBS accomplished exactly what they proposed in that presentation and that EBS public statements were utterly consistent with both the concept and the status of the BOS technology.

The seminal document on the Enron Intelligent Network (EIN) is a December 1998 white paper, authored by Ciscon and edited by Berberian and Shelby, titled The Enron Intelligent Network — Software Concepts. Again, everything in that document is completely consistent with what EBS actually developed and with what was said publicly about the technology.

There is also an excellent video of a presentation by Rex Shelby at a big EBS training meeting in August 1999. It explains the high points of the EBS business model and describes how the business model drove the technology approach. Scott Yeager talks right after Shelby at that meeting. It’s a pretty good primer, I think. And it was also kept out of evidence by the ETF and the Judge at the EBS trial.

These key documents were based on an even earlier presentation by the Modulus Three, titled Changing the Industry: It’s the Applications, Stupid. The modern concepts of services embedded in the network, cloud computing, “we have an app for that”, etc. are in those materials. What the Modulus Three wrote about back then is now the preferred architecture of today’s most successful technology companies!

Oh, and one other thing. EBS received a patent on the BOS. The primary patent author was Larry Ciscon — other contributing authors included Steven Reynolds (another Modulus guy) and Scott Yeager. The writing of the patent application was begun as soon as Modulus was acquired by EBS, and it was finalized in 2000 and submitted in 2001. Ironically, final approval of the BOS patent was granted in 2005, just a few months before the EBS trial began. Again, the BOS patent exonerates Shelby and the other EBS defendants by showing that the definitions of technology terms that the ETF tried to use at trial were not the definitions that EBS had documented in the BOS patent. The depth of the ETF’s incompetence (or misconduct) is seen in the fact that these definitions were submitted to the government in 2001 (years before the EBS indictments) and, yet, the ETF still insisted on using false definitions at the EBS trial.

The more I research EBS and the EBS indictments, the more angry I become. People may choose to quibble over the witch hunt aspects of the Skilling/Lay indictments, but the misconduct of the Feds in the EBS indictments is stark. And the tactics used by the ETF in the EBS case are essentially the same ones practiced by the ETF in the Skilling/Lay case. At a minimum, the obvious abuse in the EBS case should motivate people to examine all the Enron-related cases with a more objective and skeptical eye.