Legal Impoverishment

The impoverishment of defendants is a basic strategy of federal prosecutors. Prosecutors use impoverishment as a means to cripple the ability of an accused person to defend himself. This, of course, gives the prosecutors a huge built-in advantage over the defendant in plea bargaining and in trial preparation.

First, the prosecutors seize as much of a defendant’s assets as they can get away with, including the defendant’s life savings — this is money not available to the defendant to fund his defense. Then, they force a defendant into the incredibly expensive task of trying to defend himself against the wealthiest entity in the world, the U.S. federal government. As one Enron defendant told me:

“Fighting the federal government cannot be done halfway. To have any chance at all of defending yourself, you must decide that you are willing to put everything on the line, including everything you have earned over your lifetime. You must do this because you know you are fighting an organization without a conscience which wants only to win, and it will do anything it can get away with to beat you. Guilt or innocence, right or wrong, justice, the facts … these are of no concern to federal prosecutors after an indictment has been brought — they only want your scalp.”

A defendant knows that, if he actually exercises his Constitutional right to defend himself, he is likely to lose most or all of his life savings — this is true whether the defendant wins or loses at trial or in the appeals court. As I wrote in an earlier post, “being a prosecutor means never having to say you’re sorry.”

Is it any wonder that trial by jury is so rare? It should be a national embarrassment that 97% of all federal cases pursued by the Department of Justice (DOJ) last year were resolved by guilty pleas, not by trials. In the American system of justice, a defendant must be bold, almost to the point of rashness, to try to defend himself at trial — just getting to trial is likely to impoverish his family. A plea bargain deal is simply good economics for most defendants — pleading guilty of some crime is usually the best practical decision for a defendant, even when he is innocent.

Let me give you three examples of the Feds’ use of impoverishment in the Enron Broadband Services (EBS) cases.

Michael Krautz, an accounting executive at EBS, was acquitted of all charges after two trials. Michael not only lost his savings, but he also went into debt defending himself — and when he was exonerated, he was still in debt.

Scott Yeager, a marketing executive, won acquittals at trial and then was re-indicted by the Feds and threatened with a second trial. Scott eventually had all charges dismissed based on an appeals victory at the Supreme Court. However, even in “victory”, Scott could not recover his life savings, most of which were lost in his defense.

Rex Shelby, a software engineering executive, also won acquittals at trial and then was re-indicted by the Feds and threatened with a second trial. Rex was ready and eager to go to trial, but exhausted all his life savings and could not afford the expense of a second trial. He entered into an obviously contrived plea deal — the deal itself was favorable to Rex. However, the tragedy of this example is that Rex wanted to go to trial to exonerate himself, but had been so impoverished by the Feds that he could not afford to do so.

These EBS examples are not rare — just about any attorney can give you lots of additional examples. Clearly, the strategy of impoverishment has served the federal government well, but has done so at the expense of justice and fairness.

Impoverishment is an extra-legal practice that needs to end. I will follow this post up with another post in which I propose some reforms for ending the practice of impoverishment.

No, Scott Yeager Was Not In Smartest Guys In The Room

This query has been asked at least fifteen times, probably more like twenty-five. Here are a few:

(This one I included because it has a very strange search term about Kevin Hannon)

Whoever is asking is obviously in distress so I figured I would help. No, Scott Yeager is not in Smartest Guys In The Room. As for why he was not “cast”… basically nobody accused of crimes was going to willingly sit down and explain themselves before trial. And the fact that “cast” is being used sounds like my pet peeve, mistaking Enron people (or anyone else for that matter) for cartoons and “characters”.

As for why Scott did not “appear” in the movie (as opposed to being “cast”), not every Enron executive was discussed in the movie. In fact, most Enron defendants did not appear. Only Ken Lay, Jeff Skilling, Ken Rice, Timothy Belden* and Andy Fastow were actually discussed in the movie – and what was said about them was koo-koo bananas. I’ve documented all those lies here. Scott Yeager would have ultimately destroyed the credibility of Bethany McLean since he was vindicated at the Supreme Court. Bethany and her cohorts chose to focus on the lurid, manipulatable aspects of Enron.

I hope this has helped.

*Corrected from original to include Timothy Belden.

When Is A Conspiracy Not A Conspiracy?

It is usually counter-productive for me to check out the HuffPo because I fundamentally disagree with just about every sentiment expressed in that liberal fever swamp. Today was par for the course, but Enron was mentioned. I had to chime in.

At HuffPo, a writer is screaming for more regulation and wondering why more bankers are not in prison for the 2008 financial meltdown. The reason is simple: the bankers were making home loans available to anyone regardless of whether they would be paid back – as was dictated under the Community Reinvestment Act. The people who enacted that are in congress and congress will not indict themselves.

So the writer quotes – of all people – Loren Steffy, who has made a career out of hating business and Enron in particular:

Three years ago, I asked Sam Buell, the former federal prosecutor in the government’s effort to indict Enron’s Jeff Skilling, the question of whether we’d see widespread prosecutions from the financial crisis. His prediction: Don’t count on it. As I wrote at the time:

In the current crisis, few people understood the complex debt instruments that had become common on Wall Street and therefore the firms failed to make good risk assessments. But what they were doing — such as packaging dodgy mortgages into investment pools that were supposed to minimize risk — was widely known.

“It’s not a conspiracy if everybody’s in on it,” Buell said. “In order to have a fraud conspiracy you’ve got to have some effort by one group to deceived another group.”

But what about the fact that America as whole seems deceived by what happened? Doesn’t matter, Buell argues. Just because Main Street didn’t understand what was happening doesn’t make it a fraud. Those who are stand-ins for investor interest — regulators, brokers, credit agencies — “seem to have known what was going on,” he said.

Sometimes I am actually embarrassed for Loren Steffy. I have said stupid things too, but usually I try to keep them to a minimum. Steffy, on the other hand, proudly flaunts his stupidity like a badge of honor.
That question: “what about the fact that America as a whole seems deceived by what happened?” is just embarrassingly inane.

If that were the standard, incidentally, we would not have a federal government, particularly a Department of Defense. The ignorance of the general populous does not create the legal grounds for conspiracy – not even for the much-despised Enron.

Buell is right, of course. There was no group of people inside Enron who were trying to deceive anyone else. I’ve always marveled that according to the naysayers, Enron managed to hire people from the mailroom to the C-Suite who were criminals. Oh, and they also did business with criminals: NatWest, Merrill Lynch, Vinson & Elkins, Arthur Andersen, Citigroup and McKinsey. And Ken Rice was actually involved in two conspiracies! One in Corporate and one at EBS. And Scott Yeager was so deceptive that he not only fooled everyone at EBS, he managed to fool Jeff Skilling too! And Jeff Skilling was also involved in a conspiracy!

How exactly is this supposed to work? How was Enron able to not only hire a statistically impossible number of criminals, but also just happen to find all the other criminals in its partner organizations? Only five people went to prison for the Watergate scandal (seven were indicted). And yet, eighteen went to prison for Enron – 36 were indicted. Was Enron really that much larger than Watergate? How was it that all these smaller conspiracies were taking place inside this much larger conspiracy? The EBS conspiracy is just ridiculous. Rex Shelby, Joe Hirko and Scott Yeager didn’t know each other outside of work. Rex and Scott had worked on one project before. But why would they agree to conspire illegally with Joe Hirko, who neither one knew? And why would Joe Hirko, who is known as a gentle, kind man decide to start fucking over Enron?

At Corporate, the conspiracies are just absurd. Jeff Skilling supposedly took reserves and added it to the earnings – while at the same time hiding earnings from wholesale. Why? If Enron was in trouble, there were thousands of things he could do to fix it. Such as start cutting costs. But during that time, Enron was buying new jets. If there was a problem, they could have delayed delivery. Jeff could have written a check for millions and laundered it through Andy Fastow and his SPEs, since that’s what the DOJ says happened at Southampton with Ben Glisan, Kristina Mordaunt, and the NatWest bankers. If he and Andy Fastow were already committing multiple felonies every day, what is one more? Why not just make up the loss with a personal check? Or he could have even done it openly and bought some of Enron’s art*. Yet the man who supposedly thought up all kinds of crazy scams just didn’t bother to anything wacky to fix this supposed earnings gap, other than take reserves which was possibly the sloppiest method known to mankind.

The idea that a bunch of smart guys who were already multimillionaires got together and then started conspiring to commit fraud is just laughable. It makes no sense at all. There was no fraud or conspiracy at Enron Corporation.

*There was a story in, I think, 2007 or 2008 where a company declared in its 10-K that the CEO had bought some art from the company and had paid something like $5 million for it. I wish I could find the details, but it was on footnoted.com, which has become a Morningstar company and I can no longer find it.

Ten Years Later, Some Press A Different View of Enron

CNBC has a pretty good report on Enron with lots of Scott Yeager and Cindy Olson quotes. I love their willingness to speak out.

When Enron filed for bankruptcy on December 2, 2001—at the time the largest bankruptcy in U.S. history—the once high-flying energy company cemented its reputation as the very symbol of corporate fraud.

Its top executives, including Chairman Ken Lay, CEO Jeffrey Skilling and Chief Financial Officer Andy Fastow became household names, and the term “Enron accounting” joined the business and political lexicons.

Eventually, dozens of high-profile convictions and some tough corporate reforms later, the public moved on.

But on a sprawling, picturesque ranch here in the Texas hill country outside Austin, F. Scott Yeager can’t move on. Not yet.

“I try to put behind me, I try to go on with life,” Yeager said in an exclusive interview. “But the part that keeps taking me back, let’s call it, the injustice anger part.”

After years of silence, Yeager agreed to speak to CNBC in hopes of changing the widespread public perceptions about Enron and the sweeping federal investigation that followed. He was one of dozens of executives ensnared in that probe, but in 2009 became one of the only ones cleared of criminal charges, in a case that went all the way to the Supreme Court. He has left the bustle of Houston and moved to the ranch in Llano, where he does consulting.

But rather than be content having cleared his own name, he wants to clear Enron’s name as well.

“I think that the perception—and I’ll call it the Enron myth—is very solidified in the country,” he said. “And it is definitely incorrect and inaccurate.”

Yeager, 60, is one a small but increasingly vocal group of ex-Enron employees still trying to rewrite the legacy of Enron, ten years after the firm’s epic collapse.

He was a top executive at Enron Broadband Services (EBS)—a tiny division, but one that prosecutors claimed was a prime example Enron’s fraud. They accused executives of misleading investors by over-hyping the division’s prospects at the height of the technology bubble.

Yeager, who helped develop many of the unit’s products in the 1990s, was accused of conspiracy and insider trading for selling stock with the knowledge that the technology being touted to investors didn’t actually work.

“Yes, it did work,” he said. “In multiple ways.”

Prosecutors claimed Enron did not yet have the software it would need to run its broadband network, but Yeager said it did.

“I was in New York, and saw it work. I was in San Francisco and saw it work. I personally used streaming media. So I know it worked.”

He still holds onto hundreds of computer files and video demonstrations that he says are proof Enron was not a fraud, but a pioneer in many technologies that are commonplace today.

One demonstration from 1999 narrated by Yeager appears to show an early concept of cloud computing, in which a user could access online applications or “apps” through an Enron network.

“You would ride across the Enron ‘cloud’ all the way to the source of the content,” the video says.

“We drew everything as a cloud back then,” Yeager said. “We didn’t coin it. But the notion of cloud computing as a bunch of servers distributing inside of networks—the internet—and that you would get services from them close to where you are physically, we did come up with that idea.”

Another video from 2000 shows an early concept of video conferencing. “Enron Communications is changing how the world communicates,” the video says.

And yet another presentation from 2000 includes a demonstration of an on-demand movie service similar to those available on most cable TV systems today:

“Once the end user selects the movie, it takes just a second for the video stream to begin,” the demonstration says.

Enron had a deal with Blockbuster to provide movies on demand, but prosecutors claimed Enron over-hyped the prospects for the venture, and underplayed licensing issues with Hollywood studios.

Five Enron Broadband executives ultimately pleaded guilty to reduced charges, but Yeager says all were pressured by prosecutors.

“There were tens of thousands of really good employees, honest people, top people that were very proud to work for Enron that worked very hard on all kinds of innovative things of which EBS, our group, was just one of those,” Yeager said.

“It was a great company. It was an exciting company,” said Cindy Olson, Enron’s former Executive Vice President of Human Resources.

Olson instantly became part of Enron lore when investigators uncovered video of her answering questions at an employee meeting in 1999, the year before Enron’s stock price hit its peak.

“Should we invest all of our 401k in Enron stock? Absolutely,” Olson says, the room erupting in laughter as Jeff Skilling and Ken Lay look on.

“Everybody burst out laughing. I mean, it was a joke,” says Olson, now 59 and living in Colorado. “Never in a million years did I think that one little second of being humorous or flippant would turn into investment advice.”

Nonetheless, Olson found herself testifying before Congress and questioned by the Department of Labor about the 401k plan following Enron’s collapse. She also testified in defense of Chairman Ken Lay at his 2006 criminal trial.

“I was proud to work for Ken Lay,” she said. “You know, I dealt with a lot of CEOs in Houston, and Ken Lay was the best.”

Olson wrote a book about her experiences, The Whole Truth So Help Me God (Tate Publishing & Enterprises, 2008), that is being re-released this month to coincide with the tenth anniversary of Enron’s bankruptcy.

“I want to talk,” she said. “I want to talk about what a great company it was.”

She is not alone.

Olson is prominent in a web site, Ungagged.net, created by Houston video producer Beth Stier and purporting to tell “the other side of the Enron story.”

As an outside contractor who handled Enron’s corporate video production, Stier was the official custodian of thousands of hours of videotape. As a result, she found herself at the heart of the investigations of Enron, and, she says, under unrelenting pressure from federal prosecutors.

“Not one of the Enron defendants got a fair trial because of vicious and deliberate prosecutorial abuse,” she said. “During the Enron trials, I experienced it myself and I also saw it happen to many other people with my own eyes.”

Allegations of misconduct on the part of prosecutors have been raised in a number of Enron-related cases, some still pending. But officials have always insisted their actions were above board.

The site, which Stier calls a “webumentary,” includes dozens of interviews with former Enron employees, attorneys and legal experts detailing what it was like to be on the inside of the Enron scandal. Ironically, the site uses some of the internet video technology Enron helped develop.

“Politically, I knew the case was driven to indictment,” says Lay’s defense attorney Mike Ramsey in an interview on the site. “I think many of us who were reasonably sophisticated in the law knew that. Ken never was willing to believe that.”

Lay, the politically connected founder of Enron, was convicted on six securities fraud counts and four bank fraud counts in 2006, but the convictions were wiped out when Lay died before he was able to appeal.

A former assistant to Enron CEO Jeffrey Skilling says on the site that FBI agents tried to intimidate her colleagues.

“I mean, the FBI is acting like the KGB for heaven’s sake in this case,” says Sherri Sera. “And they were given carte blanche to do it.”

Skilling, now five years into a 24-year prison sentence for conspiracy, fraud and insider trading, is continuing to appeal his convictions, including a new petition to the Supreme Court just this week. Neither Skilling nor his legal team are involved in the “ungagged” web site.

Leslie Caldwell, the first director of the Justice Department’s Enron Task Force, discounts the web site’s central theme that the Enron prosecution was politically motivated and aimed at a solid company that had suffered a “run on the bank.”

“There was absolutely no political pressure to get indictments or to not get indictments,” said Caldwell, who left the task force following the 2004 indictment of Jeff Skilling, and is now a partner at Morgan Lewis in New York.

“There definitely was a lot of pressure, but the pressure that we felt as a team and as professional prosecutors really was let’s make sure we get this right.” Caldwell is confident they did.

“I know there were a lot of really good, solid, talented people who worked at Enron,” she said. “But it was not a run on the bank.”

The problems occurred, she said, when Enron decided to move beyond its roots as a pipeline company and expand into more risky ventures like energy trading. By the time investors and counterparties began abandoning the company in 2000, she says, the die was already cast.

“They were a company that was teetering and that was basically counting on its continued rise in its stock price for its survival.”

Even Cindy Olson, the former human resources chief who worked at Enron from the time it was founded in 1985, acknowledges that by the time Enron reached its peak, the company had somewhat lost its way.

“We didn’t require that some of the upper management people live the values of integrity, respect, communication,” she said. “And I think that’s what happened. I don’t think we were true to our values.”

Those values are laid out in a 1998 corporate video featuring Lay and Skilling entitled Enron Vision and Values. “There probably are times that there’s a desire to cut corners,” Skilling says. “We can’t have that at Enron.”

“Enron is a company that deals with everyone with absolute integrity,” Lay adds. “We play by all the rules.”

Brilliant, except I would like to point out that Leslie Caldwell is lying. On May 16, 2005 Leslie Caldwell gave the following remarks in a talk to the Association of Business Trial Lawyers in San Diego:

But we didn‟t have any of the people, we didn‟t have Osama Ken Layden. We didn‟t have Jeffrey Skilling. We didn‟t even have Andrew Fastow. So, by the summer of 2002, there was a lot of new pressure from Congress and from the press. This quote is just one of many uh similar quotes that were being uttered by members of Congress at the time, the summer of 2002, um, about how incompetent the Enron Task Force was and the general theme was, “Well, what did you expect? I mean, this is the Bush Justice Department. They can‟t possibly be expected to actually really thoroughly investigate Bush‟s cronies, Ken Lay and Company. So we really need, we needed something. We needed a special prosecutor, because Bush and Lay, it‟s obvious that Lay is being protected by Bush”. Meanwhile, little did they know that in the halls of the Justice Department, people were saying, “Can‟t you please indict somebody now? Anybody? Just indict Fastow.” People were saying, “Indict somebody before Congress comes back from their holiday”, which was after Labor Day.

That clearly spells out political pressure. Leslie Caldwell is arrogant for thinking she would get a pass on her lies. I suppose – as the CNBC article illustrates – she does get a pass from the mainstream media. That doesn’t make it right.

Scott Yeager Desires To Hunt Quail

I don’t know why this is so amusing to me. I guess I just have a weird reaction to these productive, brilliant, self-reliant, beautiful men having to ask the State for permission to live their lives. Mr. Yeager was out on bail when he wanted to go hunting for quail with his lawyer. So Tony Canales asked for an amendment to Scott’s bail. Luckily, it was granted.

(I deleted the location of the quail hunt because it revealed personal information.)

What Rex Shelby Said

A week has passed since Rex Shelby’s sentencing hearing, and I am collecting more information on it. Everybody tells me that Rex’s statement before the judge was beautiful. I will post the full transcript of it soon. But, for right now, let’s just analyze the tiny fragment that was seized upon by most of the articles that mentioned the hearing. When invited to speak by the judge, the first words out of Rex’s mouth were:

“Your Honor, I take full responsibility for my actions at Enron. That means all my actions. All the decisions I made were mine alone. Nobody forced me to do anything. I am responsible for my actions.”

When I read the reports of this, I grinned to myself. From everything I have learned, this is classic Rex Shelby. This is like the opening statement of a character from an Ayn Rand novel! This is not an admission of guilt — this is what Rex would say at any time! I have never heard anyone, friend or foe, claim that Rex did not take full responsibility for his actions — that is the essence of Rex Shelby.

But it is that third sentence which is pure brilliance, “All the decisions I made were mine alone.” In the context of the government’s EBS case, this statement by Rex is revolutionary. Rex is saying, publicly and openly before the court, that there was no conspiracy at EBS! (He is also making sure that he does not implicate anyone else in the troubles which the government has heaped upon his shoulders.)

For those of you who have followed this blog and the EBS case, you know that the government’s entire EBS case rested on the existence of a conspiracy. The government banked everything on the theory that Rex and other conspirators hatched a “scheme” and that the inside information they all used was the result of that scheme. Without a conspiracy, there was no inside information, and Rex’s plea deal about an insider trade is baseless. Pure elegance!

By the way, this is not simply my opinion. This is the opinion of the US Supreme Court. The reason Scott Yeager won his appeal before the Supreme Court is because a jury had acquitted him of the conspiracy count. The Supreme Court ruled that, without a conspiracy, there was no insider information and no insider trades.

I don’t want to leave you with the impression that I think Rex Shelby pulled something over on the government or the judge during his sentencing hearing. To the contrary, I believe that everyone in the courtroom that day already knew that Rex is innocent — they had likely known it for a long time. Rex was out of money from defending himself for eight years by the time of that hearing, so the government had all the advantages over him. If Rex was not innocent, there is no way he would have gotten the plea deal and the sentence he got.

I will write more about Rex Shelby’s sentencing soon.

Enron Broadband Services Org Charts: How John Bloomer Fit In

September 1999 org map
Feb 2000 org chart

You’ll notice that in September, Rex had all technology under him and Berberian and Palmer were under him. Then when Bloomer came in, he was put in the SWAT team which is temporary, then he finds problems and gets Cox to fight for him and Yeager agrees.

Then by February of 2000 Bloomer is his own department and has a lot of people — 50 people or so. He goes from nothing to 50 people and all product development in 4 months. (See the Phoenix Meeting Notes from March 2000 that outlines his roles and responsibilities.)

The government said that Yeager was somehow responsible for not standing up or for things not working at the Analyst Conference 2000. Contrast that to Bloomer’s responsibilities and people in the unit. The government completely excused him because he was a gov witness.

During the same time frame, Yeager could fire a secretary and did have a budget for up to 5 people in the 2000 budget. He did not hire people but he would get people handed to him, train them on the strategy and hand them off to other departments. That was part of his role so they would understand the strategic vision of the company, and he was good at it, so it was a good thing.

But Bloomer was the one with clout. He took it from Shelby and Berberian, he bad mouthed them, he made himself the key guy and he did have authority to hire and fire a bunch of people to get the job done.

A small sidebar discovery: Bloomer wanted to web cast via the EIN using Media Cast, the training being developed by John Hay (Yeager was Hay’s resource for help in that initiative). (See this email from Bloomer. Why would he want to do this if it did not work, if it was a farce? If the software did not have QOS? Does he want to prove to everyone in the company that his product does not work so he will do a webcast of it?

Curious.

What If EBS Had Survived?

What If EBS had not been pulled down by the Enron bankruptcy?

There would have been a big clash between the bandwidth traders who thought that was the future and the apps over the Net group who believed that was the future — Kevin Hannon, the consummate trader, and Scott Yeager, the prime evangelist for apps over the Net, would be at each other’s throat. Rex Shelby would attend the meetings, suggest EBS spin the apps over the Net into a separate business unit (which he really did). When the traders refused, Rex would leave EBS (cordially and on good terms), contract to use the EIN to launch an apps over the Net business, and become disgustingly successful.

(Note: The Modulus people actually developed a presentation to ECI in 1998 [before the acquisition] titled “Changing the Rules of the Industry: It’s the Applications, Stupid!”. So my “what if” scenario for Rex is really not so far-fetched.)

John Bloomer would have gotten fired and then prosecuted for stealing EBS technology (which he actually tried to do). Bill Collins would have gotten fired and ended up in an asylum when EBS turned out so successful. Joe Hirko would have become the CFO when Johnathan Schwartz of Sun was offered the CEO job. Larry Ciscon would be offered the CTO job, but would leave to create an Android-like operating system for Rexoogle.

Rexoogle being the name of Rex Shelby’s venture.

David Berberian and Mark Palmer would launch Rexoogle smartphones long before the iPhone. Ellis Giles would work with Ciscon to create the first fully functional tablets, called the RexTab.

Rexoogle headquarters would be located outside Fredericksburg, TX along a large flowing creek. The office space would be a strange combination of the sublime and the bizarre. The employees have a lot of say in what goes on, so the interior is quite eclectic. The carpet in the huge open, meandering lobby (which has lots of places to sit and drink coffee) is a shade of blue so beautiful that people are starting to spend too much time there without consciously knowing why.

Larry has a huge photo of his souped-up Mini Cooper on his door. The car contains the slogan, “Rexdroid Operating System — Lean, Mean, and Blazing Fast!”

During the annual May Day party on the Rexoogle grounds, Rex is showing a visiting reporter the site of a famous Texas Ranger/Comanche battle on the banks of the creek. In his enthusiasm for the topic, Rex slips on an exposed tree root and tumbles head-first into the creek. He pulls himself out, with a big smile on his face. Unfortunately, the reporter snaps a photo which then makes it into newspapers all over the country with “clever” headlines such as:

“Is Rex Shelby Too Wet Behind the Ears to Lead Rexoogle To Industry Domination?”
“Is Rexoogle Swimming Against the Current with their ‘Apps over the Net’ Concept?”
“Can Rex Shelby Keep His Head Above Water as the Competition Lines Up Against Rexoogle?”

And, of course, the gossip blogs:

“Beautiful Reporter Pushes Software Playboy into the Creek!”
“Terrorist Reporter Tries to Drown Texas Entrepreneur!”

Bill Collins As Background

Bill Collins was becoming dangerously erratic. He was literally endangering Enron’s reputation by telling outrageous lies to Enron’s partners such as Microsoft and Sun. One of his bosses described him as the “highest maintenance employee ever”. And his relationship with Scott Yeager was just… it makes me feel sorry for Scott Yeager. Scott brought him on board because he had one pretty good idea, and then he quickly turned into a crazy person. He was alternately angry at Scott and trying to kiss up to him. One of the best exchanges during the Broadband trial was when the amazingly talented attorney Tony Canales had this exchange with Mr. Collins:

Q. Did you, sir, at any point in time describe your relationship to Mr. Yeager as a marriage without sex?

A. Yes.

Q. Now, was that ever a good marriage, by the way?

A. Indeed, it was.

Q. Did the marriage turn sour?

A. At times.

Q. Was the marriage confrontational?

A. Oftentimes.

Q. Were you the cause of the break up of that marriage?

A. I believe there’s two sides to every story.

Q. Yes. Do you agree, sir, that you are the kind of person that — at least you’ve described — have you ever described yourself as a person with a chip on his shoulder?

A. Yes.

Q. What does that mean?

A. It means I struggle emotionally with all kinds of things.

So you can see at the minimum he has no idea how he’s perceived by others.

This gem goes on to emphasize the point. It is a letter from Bill Collins. Backstory: at a meeting, Bill Collins threatened Joe Hirko. The thought of that alone cracks me up. I can just imagine Hirko sitting there in his calm composure and Bill Collins becoming every more insane by the second. Anyway, as a result of the threat, Scott Yeager dismissed him for a week. When he came back to work he had that little note prepared.

To my ear, these words sound so whiney and manipulative and passive-aggressive. He basically seems to be saying that “you’ve forced me to be quiet so please don’t punish me for being quiet, boo hoo.”

His next bullet point actually comes close to demonstrating that he has some perception of what he’s done wrong, but then he fumbles and it becomes pretty standard Bill Collins fare: whiney, manipulative, passive-aggressive:

Obviously he knows there’s something wrong with going over the heads of his managers, but he seems to think that if he is more collaborative, it’s all good. The problem was bigger than that. Bill Collins regularly took credit for other people’s work. He claimed to have invented InterAgent, the brainchild of Rex Shelby, Larry Ciscon, and David Berberian, and the cornerstone for their company, Modulus, which Enron acquired. In other words, Bill Collins wouldn’t know InterAgent if it punched him in the nose. Copypasting from this post about Bill Collins, here are more of his crazy lies:

Collins was impeached numerous times on the stand. But let’s remove that fact. Let’s just agree for a moment to conform to Bill Collins’ world where everything he says is true. These are some of Bill Collins’ claims:

He invented InterAgent.

He was going to start a company with Rex Shelby, David Berberian, Scott Smith, Scott Yeager, and some others (this one has a lot of tangents, so I will refer back to this.)

He was responsible for the idea to attend a trade show in Las Vegas. (This, incidentally might be true. What grates on my nerves about it is that he is bragging about it. He does that a lot. Everything is his idea.)

He was responsible for designing the trade show booth.

He was going to make $100 million “in the next few months”.

He also admits that “I was intolerant of opinions besides my own.” And in one of his many temper tantrums when he wanted to be made Vice President, he threatened Joe Hirko.

The big problem with Bill Collins is that he was a know-it-all and a man who just didn’t think it fair that he wasn’t getting what he deserved. He believed that because he had a journalism degree, he should be put in charge of all the press releases for Enron Communications. He believed that because he had written his stupid little plan, he should be Rex Shelby’s boss. Oh, and he hated Rex Shelby.

The fact that the DOJ manipulated him like a fine Italian puppet is shameful. Though I find his actions at Enron ridiculous, he is in fact a sad figure. He obviously had very real problems and the fact that the DOJ used him to attempt to impeach the Enron defendants speaks to the desperation of the prosecution’s case.

This is what you need to know before we discuss John Bloomer.

(Oh, and Bill never apologized to Joe Hirko for threatening him or anything else.)

Scott Yeager & Ken Rice Discuss Yeager’s Title

I like this interaction because of what it isn’t. It isn’t Scott whining that he wants to be Sr. this or that (unlike Bill Collins and his desperate pleading for a better title.)

I also like it because Scott was too busy working on stuff to care what his title was. He was a man who knew his worth, and left it for others to discover it for themselves without relying on his title to command respect. Incidentally I also like Rice’s answer here. It’s thoughtful – (ie, the stuff about Europe and Asia).

It all began because Scott needed new business cards:

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.

In A Corn Field With My Shorts Around My Ankles: More Bill Collins

Back in the day, when Bill Collins was literally losing his mind, he went around two of his bosses and talked to Microsoft, and flat out lied to Microsoft; this is not in doubt. He admitted under oath that he lied. Anyway, his cracked-up self was starting to make Enron and EBS look bad, so Joe Hirko stepped in and told him that from now on, only Jeff Skilling would be talking to Microsoft. He viewed this as Joe getting between him and success, and he threw his hissy fit about it.

So not only are these emails funny, they demonstrate a very salient point about an incident that came up again and again.

Here, Bill does what he always did: ran to Scott Yeager and begged him to kiss his boo-boo. Also notice the paranoia in his reply, claiming Joe Hirko was “hostile” when he only asked to see where Bill was getting these cockamamy numbers.

With everyone babysitting Bill Collins, I’m shocked any work got done at all.

In A Bill Collins Mood

Bill Collins was an epic email writer. In all my days, I’ve never seen anyone write such amazing, crazy-ass emails. He was very prolific, very unorganized, very crazy, and very passionate – a cracktastic combination of self-delusion, illusions of grandeur, petty jealousy and greed. If he were a party, he’d be Burning Man. He was just awesome in the best, most hilarious way. Those who worked with him have told me, in no uncertain terms, he was a whack-job. I think I would have enjoyed working with him just to observe the slow unraveling of a human being but I am cold that way.

This is part of one of his crazy-mails to one of his favorite email victims, Scott Yeager. As usual, he is unhappy about his job, and he has some ideas how he can get happy.

Poor Scott Yeager. He had to deal with this day after day after day. If that does not demonstrate his strength of character, nothing will.

The Broadband Verdict

Five years ago today, the jury delivered its verdict on the initial Enron Broadband trial: some acquittals, some hung counts, and *zero* convictions. This was a disastrous outcome for the government’s Enron Task Force which had charged five defendants (Kevin Howard, Michael Krautz, Joe Hirko, Scott Yeager, and Rex Shelby) with nearly 200 counts among them. The trial lasted more than three months and took place during the height of the press and public anti-Enron witch hunt frenzy. The Houston jury pool was strongly biased against anything or anybody associated with Enron. The Enron Task Force was confident of an easy victory and assumed that the expected convictions would build momentum for the upcoming trial of Ken Lay and Jeff Skilling. The Task Force used every dirty trick in the book, all the same abuses which they also used in the Lay/Skilling case. The judge at the trial heavily favored the government in all pre-trial and trial rulings.

So, with all those massive advantages, why did the Enron Task Force lose the trial?

Pundits have given various explanations. One popular theory is that the “mistakes” of the Enron Task Force prosecutors cost them the trial. Perhaps the most mentioned mistake is when the prosecutors coached one of their witnesses into saying a video was played at the January 2000 Enron Analyst Conference which, in fact, was not shown there. Such a mistake undoubtedly did not help the prosecutors, but I just don’t buy the mistake theory as an explanation for the trial’s outcome. Sure, mistakes at trial always hurt the people who make them. But, from my reading, both sides made mistakes during the trial in about equal measure. And the video mistake occurred so early in the long three-month trial that there was plenty of time for the prosecutors to recover if they had actually had a case.

Based on my reading of the trial transcript and exhibits, the reason the Enron Task Force got zero convictions at the Enron Broadband trial is because it had no case, pure and simple. It is genuinely impossible to decipher a coherent story from the prosecutors’ meanderings during the trial. The tales of the prosecution witnesses were vague and often unrelated to the charges. And the prosecution witnesses performed horribly on cross-examination by the defense attorneys because they could not keep their lies straight. Basically, the government and its witnesses zig-zaged on their story more often than a squirrel crossing a busy highway.

In contrast, the defense witnesses were generally much more compelling and consistent. From my reading, the best witnesses were the defense team’s technology guys, the engineers who had worked with Rex Shelby at Enron Broadband. Those guys gave awesome testimony which made logical sense and which held across both direct and cross examination. In addition, each of the five defendants also took the witness stand in his own defense and did a good job. In other words, the defendants beat the prosecutors because the prosecutors had no case and were unable to manufacture one during trial which would convince even an initially biased jury. It is pretty much as simple as that.

In any case except an Enron one, the prosecutors would have dismissed the hung counts after the trial. Instead, the government continued to hound all the defendants. The government forced Howard and Krautz through a second trial and then threatened Howard with a third trial! The government is currently threatening Shelby with a second trial in spite of the fact that his co-defendant, Scott Yeager, just won a Supreme Court appeal on the very grounds that Shelby also has for dismissal of his remaining counts!

I get the sense (and I hope this is true) that people are finally starting to look at the Enron cases without the blinders of witch hunt bias. Most of the Enron cases have been shameful exercises in federal government abuse and over-reach. The Enron Broadband case has been a particularly shameful and sickening medicine show by the prosecutors, especially the Enron Task Force. For anyone out there who has not been paying attention to the government’s Enron fiasco, now is a good time to start!

The Legend of the Yeagermonster

The city floated on a sea of black oil. The city was vast and rich and the townspeople were generally very happy. There was one problem though. Every morning, the doj would run through the forest to the city, harassing citizens. Doj were large rodent-like creatures with blank eyes, a long snoot and a diabolical grinning mouth. Their bristly fur was black and oozed a fine oil that left a stink on everything to touched. They were wily, athletic enough to climb trees to find the citizens hiding in the branches, and they used their long snoots to root in the ground to find those who tried to hide beneath the surface. They were relentless. Some townspeople, in an effort to mollify the doj, would leave saucers of tender stewed meat in thick cream on their doorsteps. Even after devouring the dish, the doj would demand more.

The doj were ruled by Gov, the lord of all creatures. Gov was tall as the Transco Tower and his power was absolute. On every cobbled street were a tangle of chains, for Gov had forced each business and each home to commit to keeping itself tied to Gov. The men were sheepish about the chains. The ladies wore theirs as necklaces and bracelets.

But the Yeagermonster was unlike anyone else in the town. The Yeagermonster was huge, but not as huge as Gov, and he was beautiful and fierce, and many townspeople adored him, though others were frightened at his refusal to obey. When the doj came to his abode each morning, he crushed their necks with his giant foot, and threw the fetid bodies into the bog for the other doj to devour. He refused to don chains. Gov would move his massive arm, and shuffle the chains that coursed through the city like golden snakes, and Gov became suspicious that the Yeagermonster would not chain himself. Gov had sent doj only to lose them by the hundreds. But now Gov had lost patience.

Gov dragged his massive chains behind him and came to visit Yeagermonster at home. Yeagermonster refused to let him in! Because Yeagermonster refused to even discuss putting chains on himself or his business, Gov, whose word was final, accused him of doing something illegal.

Yeagermonster infused the air with information. Gov replied he could not see information in the air and thus his business did not exist. But Yeagermonster knew that it did, and he would not allow Gov to have authority of himself. He refused the doj and the chains and he would defy Gov himself.

Finally, one morning Gov demanded Yeagermonster answer for himself. Yeagermonster was angry. He had enough harassment! With a mighty sweep of his sword, he cut the chains of all the other businesses, and because Gov was so large and suddenly untethered by the millions of chains, Gov toppled backward, and fell in the bog and drowned.

The townspeople looked to Yeagermonster with awe. Because he had conquered Gov, they believed him to be all powerful and they quickly bowed and attempted to fasten their chains to him.

Yeagermonster refused. He did not want others’ chains. He only wanted the freedom to be unchained himself. But in giving himself freedom, he had given the whole city freedom.

Yeagermonster expected no gratitude. He wanted no fame. So after Gov was defeated, he left the townspeople to themselves and returned to the city, to work.