The Volokh Conspiracy

Skilling absolutely, positively demanded rising profits every quarter. The prosecutors absolutely, positively wanted guilty verdicts. Both brazenly ignored the rules in striving for those goals.

Well, the irony here is that Skilling may very well be guilty of the crimes for which he was convicted, but the prosecutor's withholding of exculpatory Brady and Jencks Act materials may get him a "get out of jail" card, if true.

Enron was a big financial crime, and those who are in denial about that fact are ignoring the evidence. That said, I always thought there was a possibility that Skilling was willfully blind about what Fastow was up to, and therefore not guilty. The issue to me was always whether the wrongdoing went higher than Fastow, to Lay and Skilling, or not. I think there was some testimony that Fastow admitted to Glisan that he would never be able to "get away" with some of the funds he was paying to himself from the SPEs if "Jeff knew about it." But, Skilling is a very smart guy and not much of a family person. I never bought that he suddenly resigned during the Summer of 2001, right before Enron's meltdown to "spend more time with his family."

Orin: it is much more fun to make up one's mind before the evidence is in, or even before we hear what the other side has to say.

The info contained in the brief seems pretty damning. I too look forward to seeing the government's response. I'm sure they'll claim that none of the statements in the notes cited by the defense are material and/or exculpatory. What else can they say? But, they clearly are material and exculpatory.

FBI 302s are inherently unreliable; they are nothing more than a biased FBI agent's interpretation of what a witness said.

I've followed the Enron from the outset. It was fishy from the Indictment onward. Tom Kirkendall did a great job covering these issues. Anyone interested in the other side should read his blog.

Incidentally, Media bias is a funny thing. The media loves prosecutors, except when there is "prosecutorial abuse."

But the media always hates "evil corporations." So even where, as here, there has been prosecutorial abuse, the media ignores it.

It's a shame Skilling and Lay hadn't been black. You can bet the press would have covered the case much differently. See, e.g., the Jena 6 case.

CDU: I thought they got 302s, but the 302s were "composites" based on the agents' raw notes from interviews. There were contradictions between the 302s and the raw notes (which the government always refuses to turn over w/out a court order). Only the FBI makes 302s. They do so whenever they interview a witness. Other agencies have similiar forms with different names. The FBI seems to be at fault here along with the prosecutors, because the 302s the FBI generated were only "composites" of the interviews. I take it that "composite" means just a summary of what was said (and an inaccurate one at that). The prosecutors didn't turn over the notes upon which the "composite" 302s were purportedly based.

All the contradictions and Brady material pointed out in Skillings' brief comes from the 420 pages of FBI agents' handwritten 'raw notes' taken during their interview of Fastow that the gov't didn't turn over until ordered to do so by the appellate court. And there are some seriously exculpatory bits of info in those notes.

Here is a good starting point for those interested in the Enron Task Force. Note that this post was written over a year ago.

Any time a case is promoted as the Big Bad Guys against ordinary people, you can count on the press being a cheerleader without regard to facts.
And you had better be watching the prosecution, given the press' shaping of the debate.
See, for instance, the Duke laxer rape case.
IMO, withholding exculpatory evidence ought to be right up there with felony murder.
BTW. If a witness' testimony conflicts with a 302, is the witness considered guilty of perjury?

Right now the former; I haven't followed the case closely enough to have an informed sense of the latter.

Even listening to the MSM take on this case at the time of Lay's and Skillings's trial it seemed to me that the government's case depended pretty much on what Fastow said. And Fastow was/is clearly a despicable weasel whose lies and manipulations were the foundation of the Enron disaster, who had/has no understanding of even the concept of truth, and who was clearly willing to do anything the prosecutors asked in order to escape the full measure of his richly deserved punishment. I would be surprised at any court that would not, on appeal, discount Fastow's evidence more than the trial jury did; even in the absence of this new evidence.

I've never been denied 302s in a case before, for whatever that is worth.

Orin, every prosecutor I know would say there is nothing wrong with wanting to go after a "big fish" in order to get attention and ultimately move up the ladder to a higher-paying job/position so long as there is probable cause that the "big fish" in question committed a crime.

While I personally consider it a conflict of interest when securing a guilty verdict means career advancement (in other words, I contend 99% of prosecutors operate under a conflict of interest), the law as it stands agrees with the prosecutor such that Mike's accusation does not amount to formal misconduct.

Any prosecutor who has a conviction overturned due to actual innocence or prosecutorial misconduct should have to serve the sentence in place of the now-acquitted defendant whose life he/she ruined. As it stands right now, they don't even lose their law license.

Similarly, 4th Amendment violations by the police should not result in exclusion of the evidence, but rather, punishment of the police officer equal to the punishment the defendant receives due to the introduction of the tainted evidence. If a cop violates a defendant's 4th amendment rights to acquire drug evidence and the defendant gets life in prison, the drugs should not be suppressed at trial, but the cop should have to join the defendant in prison for life. This will provide a better incentive to not violate the constitutional rights of suspects while simultaneously maintaining the truth-seeking function of the courts which the exclusionary rule acts against.

I should do a master post, collecting some of the best examples of prosecutorial misconduct. I haven't yet because no one seems to care. But for those who do, here is yet another example: Fastow testified on cross-examination that his plea agreement would mean ten years in prison for him. The truth was that, because of his testimony, he would only have to do 6 years in prison. Here's the post noting this.

The judge also exhibited an extremely pro-prosecution bias. Everything from denying a motion to change venue to denying defense requests for witness immunity, the trial court ensured that Skilling and Lay were convicted.

I am absolutely willing to concede that, because of the broadness of the laws that Lay and Skilling were charged with violating, that they may have been technically guilty. But those men did not receive anything approaching a fair trial.

Fub: Be careful about agreeing with me on here. Just a word of advice....

The judge also exhibited an extremely pro-prosecution bias. Everything from denying a motion to change venue to denying defense requests for witness immunity, the trial court ensured that Skilling and Lay were convicted.

So these ruling are evidence of the judge's "unfairness?"

I am curious about whether the motions were meritorious. Is there information to show that they were unable to find an unfair jury?

And what legal merit did the "defense requests for witness immunity" have?

Can someone very simply state the particular action that Enron took that was criminal? Not a conclusion or a label like "Fraud," but just state the particular action. What did they do that was illegal?

For example, Bernie Ebbers capitalized expenses. Koslowski used company money for personal expenditures. what action did Enron or its officers take?

To the extent that the problem involves the 302s omitting exculpatory evidence from the raw interview notes, accusing the prosecutors of any sort of intentional misconduct seems wildly unfounded, especially if no prosecutors were present during the interviews in question. I don't know any federal prosecutor who has ever reviewed the raw FBI notes and compared them to the resulting 302, or even talked about doing so, which is not to say that it never happens but only that the common practice appears to be otherwise. I haven't read the brief, but based on the skeletal outline of facts provided, it's possible the prosecutors had no idea the comments in question were ever made. Without knowing more, any suggestion that this case was tainted by intentional and malicious prosecutorial misconduct should not be taken seriously. That holds doubly so given the nature of this case: it was immensely high profile, and everyone involved surely knew that the defendants would be paying a great many smart and ruthless lawyers an immense amount of money over many years to try to poke holes in any resulting convictions. I suspect the likelihood of prosecutorial misconduct increases in an inverse relationship to the amount of attention a given case gets.

Some of the posters seem to have a very narrow view of what constitutes prosecutorial misconduct. Perhaps it ought to be called governmental misconduct. The government is the prosecutor. The duty to disclose exculpatory evidence extends not only to the attorneys who actually prosecute the case but to the governmental agents investigating it.

Prosecutorial Indiscretion:

That's crap. The prosecutors are the ones who refused to turn over the government agents' rough notes. The defendant asked for them and the prosecutor said no, we don't wanna, and you already got the 302s (which turned out to be summary/composite 302s).

To suggest the prosecutors on the Enron Task Force didn't read every word of every note taken by every government agent involved with interviewing witnesses in the case is absurd.

To suggest the prosecutors on the Enron Task Force didn't read every word of every note taken by every government agent involved with interviewing witnesses in the case is absurd.

That may be right. But there are cases in which prosecutors shield themselves from knowledge so that when the shit hits the fan they can maintain their innocence. They allow other law enforcement agents to do the dirty work and then proclaim lack of knowledge. Or the agents, of their own accord, shield the prosecutors from knowledge. Under Hoover and, after his death in 1972, at least into the mid-1970s, the FBI often did the dirty work while protecting the prosecutors from actual knowledge.

Could it be that this is an imperfect sampling of such cases?

Could it be? Sure.

I will, however, note that I've seen cases where a new prosecutor was willing to admit the possibility of error.

I don't understand why FBI (or other federal) interviews are not routinely recorded. This stuff of relying on notes that some guy took of his impressions of what was said in an interview is crazy.

I had not realized the defense specifically requested the notes - at that point, even if the prosecution doesn't want to turn them over as Jencks, they should have combed the notes for any potentially exculpatory evidence. Given the volume of interviews in the case, though, I strongly suspect that the prosecutors did not review every set of notes - though you'd expect Fastow's, of everybody's, would be the notes they'd check. I don't know how accurate Conspiracy of Fools is, but after reading that I felt like Fastow was by far the most culpable person and deserved the most severe punishment.

With respect to my earlier comment, on further reflection I recall several cases where I combed the raw notes for Brady, so I misspoke above. Brady in agent notes is rarely a practical issue - defendants know they're guilty, and they almost always plead out long before the time comes around to check the notes. That rarity, I think, accounts for my earlier misstatement.

What strikes me as decidedly absurd, however, is your proposed strict liability felony for wrongful conviction of an innocent person. Never mind that in your rush to kill off prosecutors you neglect to take into account that generally the decision of whether to pursue the death penalty does not lie in the hands of the person who actually prosecutes the case. If the evidence is strong enough to get a conviction past twelve jurors and a judge, then absent willful misconduct there's no rational justification for jailing the prosecutor. If there is misconduct, I favor of severe penalties. But if a prosecution proceeds in good faith and reaches a wrong result despite the numerous systemic checks in place to prevent such outcomes, it would be ridiculous to punish one actor among many who, in doing his job in accordance with all the relevant rules, achieved that outcome. It would create perverse incentives to refrain from prosecuting cases provable beyond a reasonable doubt for fear of long incarceration. It would reduce demand for prosecutorial jobs, leaving a less-capable pool of applicants for jobs that, as a result of their power and autonomy, should only be filled by people with good judgment and impeccable integrity. I'd quit my job in a second if your proposal were to become law, as under your system I could do everything by the book to the best of my ability and still end up in jail. While convicting an innocent person is an absolute nightmare scenario and every instance of it happening is tragic, the system works pretty well right now and the radical criminal law revolution you propose is disproportionate by many orders of magnitude to the problem and would have consequences that cause vastly more harm than the harm you seek to combat.

TLove,

I don't think Skilling is guilty of anything at all. "Absolutely"? Have you actually read the trial transcripts?

One thing that haunts me is John Hueston's law review article in which he wrote that there is no proof that Ken Lay or Jeff Skilling did anything wrong but he "just knew" that they were guilty.

Can you imagine if the prosecutor said that in a rape or murder case? Maybe you can; it was essentially what happened in the Duke Lacrosse case when Nifong said he wasn't sure what happened because the "victim" hadn't told him but yeah, those guys were guilty. With a capital G.

Oh, and the funny postscript: I found Hueston's essay on his company website. You however will not. Since the Skilling defense quoted liberally from it, it is perhaps not a shock that the document has since been removed from the company's servers.

Bruce,

You said: In most cases, without prosecutorial misconduct, the evidence would be legally insufficient to convict.
***

There was nothing to bind Skilling to a giant conspiracy, and so the prosecution used literally "the nothing" against him. How is a defendant supposed to defend against Nothing? Prosecutors berated JKS for not keeping notes, then said he didn't keep notes because he was getting rid of evidence. They accused him of avoiding email as not to leave an electronic trail of his supposed nefarious activity. What is a defendant supposed to say to that? You can't prove a negative. I found that to be one of the most devious aspects of the case - the way the prosecutors used his innocence to appear like guilt.

And since when is "he didn't" permissable as evidence? Unless Berkowitz et al know exactly what criminals do in every circumstance, it seems ridiculous to say he wasn't acting like a criminal, therefore he's also a CONSPIRING criminal.

If you'll excuse the expression: Seriously? WTF?

Though it was too late at this point to matter, Sherri Sera, Skillings longtime assistant, said during sentencing that in over twenty years of working for the man she'd never seen ANYTHING that would indicate Skilling was involved in criminal enterprise. That's always stuck with me. He trusted this woman with his entire life. All his communication flowed through her. Yet she knew nothing. Saw nothing. Because NOTHING was there.

And that's what convicted him: nothing.

Cara Ellison: Yeah, if you want to improve the fairness and quality of the criminal justice system overnight by making one little change, get rid of the crime of "conspiracy" ... it's too easy to convince a jury that someone may have kinda sorta knew about something that some other people kinda sorta may have been doing. That's where things like "he didn't" become circumstantial evidence.

Steve2: One witness may not be lying through his teeth, though. One may be mistaken. Eyewitnesses are mistaken all the time. It's been shown time and again to be the most unreliable form of evidence. So the defendant is not lying through his teeth when he says he was at home and didn't kill the victim, and the witnes is not lying through his teeth when he says he saw the defendant do it. Both can be quite confident and sincere about their testimony.

Even if one witness does seem twitchy and nervous and studders and stammers on the stand, he could just be nervous. That alone shouldn't be enough evidence to use to convict someone of a crime beyond a reasonable doubt. You think someone should be in prison because he gets nervous when their life is on the line and someone is a better public speaker than he is? I don't think you really think that, but it seems like you do.

Harsher punishments are never more admirable. You really want to execute people for not filing Currency Transaction Reports for deposits or withdrawls over $10,000? Jeez.

Steve2: my point is that resolving which witness is right may not be possible by the requisite burden of proof (thus the defendant wins by default).

There are simply some cases where there is absolutely, positively, no matter what questions can be asked or evidence dug up, way to determine which witness is correct.

Consider this example:

A guy goes up to a cash register and buys something. The clerk gives him $5 change. The customer says "Uh I paid with a $20 bill, you owe me $15 back." The clerk says "No you gave me a $10 bill, I only owe you $5." Assume neither of them have criminal convictions for fraud or theft or perjury.

Now consider two scenarios. First, the customer is arrested and prosecuted for attempted theft. The clerk testifies under oath that the customer/defendant only gave him a $10 bill and was lying to get more change back, a common street hustle. Second, the customer sues the store (civil suit) to get the $10 he says the store took from him by giving him the wrong change.

Assuming no other evidence (no fingerprints, traced bills, video tape, etc.), I contend that that as a matter of law the state cannot prove its criminal case against the customer beyond a reasonable doubt, no matter how convincing a witness the clerk is. On the other hand, I do believe a jury could legally find for the plaintiff-customer in the civil case, though I'd be somewhat skeptical of the verdict.

Do you not agree?

Implicit in a jury's verdict is answering the questions "what happened, who did it, etc." If they find for one party, those questions are answered, unless they're legally irrelevant. Two people robbed a store and the clerk was shot, both robbers saying the other one pulled the trigger. Both will be charged with murder and it doesn't really matter who pulled the trigger. Maybe it should... I've never liked the idea of party liability to crime, every person should be charged with an individual crime, not aiding or abetting or coconspiring or whatever.

Oh, to add to my truck analogy, suppose that the evidence at trial that there was a secret promise was someone (A) who was told by someone else (B) that there was a secret promise to buy the truck back. B also testifies that he told A about the secret promise.

In this analogy, the withheld evidence would be that B gave a completely plausible (and legal) reason for lying to A about there being a secret promise even though there wasn't one and claimed that this was specifically what he had done.

Richard,

You are the first person I've encountered who actually voiced one of my thoughts re: the shareholders. I will even go a step further and say that those who are taking any money from the Enron settlement fund are basically saying, we want the fraudulent money that was rightfully ours. Well, make up your mind, was it a good company or a bad company and if its a bad company, by taking the profits you become party to fraud.

And the Potemkin Village trading floor was another myth. It was a fake story by Jason Leopold (Jason is a bad name to give a kid who grows up to be a journalist). Never happened.

Leopold has quite a colorful history of lying about Enron. An article Leopold wrote for Salon in 2002 used a mysterious email that nobody could verify to prove that Thomas E. White, secretary of the Army, was involved in accounting practices that led to the collapse of Enron while he was vice chairman of Enron Energy Services.

Paul Krugman (D-NYT) cited the article for an Op-Ed piece critical of Mr. White. Later he wrote that he was not sure Mr. White was indeed the author of the email in question and "As long as the authenticity of the message remains in doubt, it should be considered unsubstantiated. I erred by citing it in my column."

Anything with a Leopold byline, you're free to ignore.

Richard and Cara: You point out one issue that has long be-deviled economists and others in assessing harm cause by shareholder fraud, which is identifying the true victims from the speculators and those who didn't lose any money from fraud. However, I will say it is likely that there are thousands of people who bought Enron's stock when its price was inflated due to materially false financial information published by the company. They are not all saying "gee, I wanted to be able to dump my stock on some other unsuspecting sucker" and many might say"I wouldn't have bought Enron's stock at all if I knew this information was false." So, however you slice it, there are some innocent victims of this debacle, but I agree that not every Enron shareholder is a victim.

Cara: absolutely, positively Enron's SEC filings were not Kosher.

Enron guaranteed the liabilities of the SPEs they set up, with their stock. None of those transactions should have been booked as sales of assets and Enron should have been made to assume all of the liabilities of the SPEs. That is why Fastow pled guilty.

But, I try to keep an open mind about Skilling/Lay, and their knowledge of, or involvment in, any hanky panky.

Correction: Skilling said at trial that LJM was a "horrible idea." LJM was a partnership, not a Special Purpose Entity. Raptors was an example of an SPE.

Fastow benefited from his role at LJM.

Cara: A Special Purpose Entity can and frequently is a partnership, the two concepts are not mutually exclusive. You are confusing the form of a business entity with the accounting purpose of it. A SPE is an entity that is set up to acquire an asset from another business. I forget the details of the accounting rules at the time of Enron, but it was essentially that the SPE would be considered a separate business from the corporation that sponsored it if a certain percentage was owned by outside investors (I believe this number was 2 percent), it had independent management and its risks were independent of the sponsoring business. SPEs were frequently used for very legitimate purposes. Airlines, for example, use SPEs to acquire the planes that Boeing or Airbus builds for them. The SPE would be funded with money from institutional investors, as well as from the corporation. The airlines lease the planes from the SPEs. This allows the airline not to have the asset and the depreciation costs associated with it on the airline's balance sheet, while the SPE and its investors get the lease payments from the airlines. Now, as I recall, Enron set up a series of SPEs using Star Wars names (Fastow was a big fan), and used Enron's stock to guarantee the SPEs from losses, which is what Sharon Watkins complained about in Aug. 2001 as being totally wrong (and she was right).

Cara: Causey and Fastow admitted that there were side deals. Skilling may or may not have known about them, but there were side deals. That is why they --Fastow, Causey, Glisan-- pled guilty. The SPEs did not comport with GAAP, and that is why Enron restated its financials.

The appellate brief "blows" out of the water whether there was exculpatory evidence in the FBI's notes of their interviews with Fastow (which, according to their brief, there were, in terms of Fastow saying he did not share the contents of the Global Galactic List with Skilling). The brief does not address whether this list was genuine, at least not in portions that I have seen quoted on Ribstein's website, just whether Fastow told Skilling about it.

Another "deal" that had a side deal was the Nigerian barge transaction with Merrill Lynch. The emails on that deal show that Enron (Fastow) offered to take back the barge the next quarter. That is not a true sale, and recording it as such violates GAAP rules on revenue recognition. I forget the rest of them, but I suggest you look no further than Enron's own SEC filings, which summarize all of the transactions that the company booked in a materially incorrect manner, which is why Enron restated its financials (before it collapsed).