Previous month:
December 2005
Next month:
February 2006

The Case Against Ken Lay

[Ed's note: In July 2004 I analyzed most of the charges against Ken Lay.  I'll be reproducting those posts here. This first post gave a brief overview of the original indictment against Ken Lay.  I haven't seen the amended Indictment, but even so, this post will give you a nice overview of the case against him.]

I plowed through this 65-page monster so you do not have to.  Most of the Indictment deals with Ken Lay's alleged co-conspirators, Richard A. Causey and Jeffrey K. Skilling. This post will only focus the counts alleged against Ken Lay. 

The Key to the text is as follows.  First, I replaced "Charge" for "Count" because we are only worried about the case against Ken Lay here.  The "p." or "pp." symbol refers to the page number of the Indictment.  The "Count" notation in parenthesis refers to the Count charged in the Indictment. (The Indictment charges 53 counts.  We only care about Lay's 11.) When I say Ken Lay did such-and-such, I refer to the government's allegations: The text flows more smoothly when I do not constantly say "allege," "theorize," "contend," etc. 

Charge 1
- Conspiracy to Commit Securities and Wire Fraud (p. 36-39; Count 1).  Lay agreed with Skilling and Causey to lie (or not tell the whole truth) to the Securities and Exchange Commission (SEC) and the investing public.  The three of them also agreed to use the mail, phone, fax, or video to lie to others outside of Texas.  They told these lies in order to steal. 

Charges 2 & 3 - Wire Fraud: False and Misleading Statements in Employee Meetings (pp.45-46; Counts 12 & 13). Ken Lay lied to his shareholders when he said on two videos (that were later broadcast outside of Texas) that Enron was fiscally sound. His lied to steal in two ways.  First, by not telling the truth, he deprived shareholders, the investing public, and the SEC of his "good and honest" services.  As the Chief Executive Officer of Enron, he owed the shareholder a fiduciary duty.  He breached his fiduciary duty by not fully disclosing the state of affairs at Enron.  Second, Lay lied in order to induce members of the investing public to give money to Enron, i.e., purchase stock. NOTE:  There are a lot of holes in these and the other charges.  I will deal with these holes and provide substantive legal analysis later on.  Remember, it's Ken Lay week.

Charges 4-7
- Securities Fraud (pp. 48-49; 27-30). Ken Lay lied (or failed to tell the whole truth) to members of the investing public or the SEC about Enron's financial condition.     

Charge 8
- Bank Fraud (p. 53-57; Count 38). Ken Lay lied in a loan application about what he was going to do with the money he borrowed from Bank of America.  Hence he obtained loans from Bank of American fraudently.  Regulation U prohibits a person from using loan money to purchase or carry margin stock.  Yet Ken Lay used money he borrowed from Bank of America to purchase or carry margin stock.   

Charges 9-11
- False Statements to Bank (pp. 57-58; Counts 39-41).  Ken Lay lied on bank forms.  Somewhere on the forms (in very large print I'm sure) it said, "You can't use this money we are lending you to buy or carry margin stock."  Yet Lay used the loan money to borrow margin stock.  See Charge 8, above. Some initial thoughts... The prosecution's case against Ken Lay has more holes than the moon has cheese.  A specially created task force, after 28 months of investigation, could only come up with 11 charges against Lay.  And as you can see, almost 30% of the case against him has absolutely nothing to do with the collapse of Enron.  I wonder if you read the fine print before signing a loan application.      Students of the world take note!  If you use your student loan money to take a someone out on a date, you may have comitted a federal crime.  How is that for overcriminalization?

Marsh v. Chambers redux

Ernie Chambers is both icon and iconoclast in the state of Nebraska.  A former Black Panther who holds a law degree, Chambers is Nebraska's only African-American state legislator - - in state history.  He is also the longest-serving member of the one-house legislature

In 1983, the United States Supreme Court heard Chambers' taxpayer challenge to the practice of allowing a chaplain to open each day in the legislature with a prayer.  This practice also involved payment of public funds to the chaplain, a Presbyterian clergyman.  Chambers argued that this practice violated the Establishment Clause.  United States District Judge Warren Urbom, and thereafter the Eighth Circuit, enjoined the payment of the chaplain with public funds for his prayers, albeit did not enjoin the prayers themselves.

In allowing the prayers to proceed, the Supremes observed that Congress had authorized the appointment of paid chaplains in 1789, and that the practice of allowing opening prayers had been followed consistently in most states.  Writing for a divided Court, Chief Justice Burger explained that "the content of the prayer is not of concern to judges where, as here, there is no indication that the prayer opportunity has been exploited to proselytize or advance any one, or disparage any other, faith or belief ... it is not for us to embark on a sensitive evaluation or to parse the content of a particular prayer."  The footnotes to Marsh v. Chambers advise the reader that the prayers were nonsectarian, and contain no references to Christ, in deference to concerns voiced by a legislator who was Jewish. 

And so the practice of opening each session with a prayer continued.  Over the years, the Nebraska Unicameral modified this practice.  Contemporarily, the clergy who present the opening prayers changes from day to day.  The legislators invite clergy from their districts to travel to Lincoln and present a prayer that is ostensibly nondenominational.  Chambers, in protest, skips the opening prayers. 

Last week, the Rev. Tom Swartley accepted an invitation to deliver the opening invocation, as sanctioned by the Supremes.  His prayer went as follows:

Almighty God, we come humbly into your presence this morning, seeking your favor.

I thank you, God, that in the great state of Nebraska we do have a Legislature that does not deny you God, but who rather seeks your favor and guidance. I do ask, Lord, that you would guide these leaders of our people. I ask that you would give each of them a renewed sense of conscience, of conviction and courage to do what is right.

I do also come, Lord, this morning with a heavy heart. I ask your forgiveness on our people, a people who have killed 47 million of my fellow Americans since the year I was born. We have aborted 47 million babies made in your image. God, forgive us. Forgive us for our complacency. We go to work and school, and come home and watch television, while genocide, infanticide and homicide is being committed on our own children. Open our eyes, Lord. Open our eyes to your morality that when you said "thou shalt not murder," you meant even the most innocent and unwanted among us.

Open our eyes to the other aspects of this 33-year-long bloody nightmare. Open our eyes to see that we've killed 47 million young American taxpayers, and indeed Social Security is in crisis. Open our eyes to see that 47 million of our countrymen are gone - doctors, lawyers, inventors, authors, musicians and artists. Forgive us, oh God, and open our eyes and change our path. Comfort the mothers and fathers who have great wonder and regret. Heal us, oh God.

Forgive us also, Lord, for the teaching of the religion of evolution to our young citizens, a religion that tells us that we are only here by chance; that we are here for no reason and human life means nothing more than any other life; that we will never face a Judgment Day. We've put our children into the same category as other mammals, and we wonder why sometimes they act like animals. Forgive us for sowing the seeds of anarchy in the hearts of children

Open our eyes, God. We can see, when we look at our wristwatches, intelligent design, but when we gaze into the incredible complexity of biology and nature, we see chance. Open our eyes; change our path.

Lord God, I pray that in these halls this and every day our leaders would make the right choices; they would make decisions based upon right and wrong, not on politics. I pray that you and your will would indeed be done through these leaders. Bless them, oh God; strengthen them; guide them. I pray that your will indeed would be done on earth as it is in heaven, for thine is the kingdom and the power and the glory forever. Amen.

This prayer raises questions, of course.  Does it fall within the Supremes' generalizations regarding why opening prayers do not run afoul of the Establishment Clause?  If so, what else qualifies as acceptable under Marsh v. Chambers?

And aside from the legalities of it all, are there concerns regarding the veracity of a pastor who represents to the Legislator that his prayer will meet the guidelines, so that he can get permission to address this particular audience?  I seem to remember something about how bearing false witness falls short of Christian guidelines ... even if it is constitutionally acceptable.

The Enron Voir DIre

Jury selection begins in the Enron case today. If United States District Court Judge Simeon Lake III has his way, it will also end today. That has some jury selection consultants shaking their heads. Houston's too raw to pick in a day, they say. When Enron collapsed, all of Houston shuddered.

Kenneth Lay and Jeffrey Skilling are rumored to have set aside $20 million for their joint defense. I wonder how much of that money was wasted on jury consultants. On the defense payroll? Pollsters, political scientists, sociologists and jury consultants.

"To get this [jury selection] done in one day would be a travestry of justice," one consultant, Howard Varinsky, told The New York Times. Why is that? Not enough billable hours for the collateral class?

Picking a jury for Enron executives in Houston is no doubt a challenge. But most criminal defense lawyers with more than a stray gray hair to show for their troubles have faced similar challenges before. Defend a man accused of a heinous rape or shooting in a small town some time, and you will face hostility.

But you will also face something else -- indifference. I am always amazed that more jurors don't have settled opinions or views about the characters in a case I am trying. I assume that prospective jurors are as immersed in other people's troubles as I am. Jury selection usually disabuses me of this illusion of being at the center of all things important. Much though folks will have superficial views on Enron, I doubt most Houstonians dwell on it daily.

In Connecticut, where I practice, state-court jury selection proceeds on the basis of individual sequestered voir dire. We question prospective jurors one at a time outside the presence of others. It is not uncommon for jury selection to take longer that the evidence in simple cases. One thing that voir dire has taught me is that most folks are decent and fair-minded, striving to do the right thing and mindful of their solemn oaths as jurors. They can distinguish between a preconception and evidence.

A criminal trial is not voodoo. The government chooses a theory, and elects to bring charges. The charges can be distilled to their elements. Facts are presented in support of those theories and charges. The defense, in the meantime, chooses a theory of its own, and chips away at one of more the elements of each crime; it brings out its own facts, either through cross-examination or witnesses of its own.

It's not that simple, of course. Facts aren't "found." A juror draws inferences and weighs all she hears. Finding a juror's center of gravity is the art of jury selection. From whence will this soul respond to the drama of trial? That is the only question.

But it doesn't take millions of dollars worth of consultants to figure this out. All it takes is one lawyer open and able to gauge a venireperson's response to simple questions. Trial lawyers tell stories, and a good story is far more compelling than a statistical compendium.

Lay and Skilling are wasting their money; I doubt Judge Lake will let them waste the court's time. If guilty verdicts are returned, do the defendants get a refund from all the "scientists" helping pick the jury? I doubt it. By then the scavengers will be looking for another high-roller in trouble.

The Value Some People Place On Legal Advice

If you've never done so, I encourage you to look around Google Answers.  Google Answers is a simple yet brilliant system: Ask a question, telling the person who will answer your question in advance what you're willing to pay for an answer, and wait for an answer.  Anyhow, I found this interesting question:

My son destroyed a personal item of another student which was left in the hallway of his dorm.  The campus police was called and they said that if he paid for the item he would not be charged with what they said would be a felony.  When asked the owner said the item was worth $2000 (which we feel is quite high for an item like that - especially since it was left out in the hallway).  My son agreed to pay, but the owner told him to wait until yesterday when he informed my son that he wanted $3400 for the item.

Does he have any choice but to pay the increased amount?  Should we pay with a certified check?   Should we demand to get the remains of the damaged item when we pay?  Should we demand to have the item appraised by a third party? What if he claims to have discarded the item? What else do you recommend?

The person might overpay by thousands of dollars.  What was he willing to pay for an answer that might have saved him hundreds or thousands of dollars?  Ten bucks.  I'm beginning to feel less and less sorry for people who talk to the police without representation because they're unwilling to pay a reasonable legal fee.  This guy might get his son sent to prison, or he might lose $1,400 he didn't have to lose, because he wouldn't pay a lawyer a $100-or-so bucks to look at his case.

Is eBay a Criminal Enterprise?

According to this New York Times article (and other related stories), eBay has been serving as an outlet for thousands of transactions of counterfeit goods.  EBay accepts payment from those selling counterfeit goods.  It seems like eBay, by having knowledge that a substantial amount of jewelry sold on eBay is counterfeit, is aiding-and-abetting the counterfeiters.  If I have time tomorrow, I'll show why there is likely a prima facie case against eBay under the RICO statute.  Your thoughts?   UPDATE: Aaron Larson notes that eBay's feedback policy likely aggravates the problem of dishonest sellers.

Embedded Narcissism

News that Robert Woodruff and Douglas Vogt of ABC News have been seriously injured by a road-side bomb in Iraq saddens, but does not surprise. Did we expect celebrity immunity?

What surprises is the media's narcissistic reaction.

Woodruf, 44, is one of the co-anchors to ABC World News. He replaced Peter Jennings. Vogt is a veteran cameraman. Both were embedded with U.S. troops in Iraq, and both risked their necks to satisfy our craving for immediacy.

The practice of embedding journalist with troops makes no sense. Must we be voyeurs of war? Are our lives so devoid of immediacy and compelling drama that we must get up close and personal with each shattered limb, each life taken?

More than 1,000 U.S. military personnel have died in this senseless war; thousands more have been maimed for life. Each volunteered to serve and each accepted the risk that comes of being a combatant. Not one enjoyed the wealth of easy familiarity with a camera.

All the hand-wringing and chest thumping of the media about Woodruff's and Vogt's injury is repulsive. Why not mourn the kid who chose the military because he had no other option? Is the war real now only because it wounded in a way makeup cannot cover?

Woodruff and Vogt are undoubtedly men with virtues common to us all. But the media's narcissistic blather about their injuries looks more like the entitled cry of the privileged. Did the uber-anchors really think the world's suffering and folly was beneath them -- a feast on which they could grow wealthy while reporting with such empathy?

Enough on Woodruff and Vogt. Ordinary Americans are dying almost daily in a war based on a lie, and pursued with no realistic prospect of success. That is the real story.

Donald Chump?

Guess what? Donald Trump's feelings are hurt. His reputation has been tarnished. He wants damages, I tell you, and billions and billions of dollars of damages, too boot.

Lawyers for the real estate developer have filed suit in New Jersey against Timothy O'Brien, a business reporter for The New York Times, and the publishers of a book called "TrumpNation: The Art of Being the Donald."  Among O'Brien's suit-worthy claims? Trump is worth $150 miliion to $250 million, not the $2.7 billion the developer claims. O'Brien also calls the Trumpster the "walking embodiment of financial pornography," and described the developer are "an unskilled and dissembling" businessman.

Trump is seeking $2.5 billion in compensatory damages and another $2.5 billion in punitive damages.

Give us a break, Donnie. If ever there were a public figure who invited this commentary, it is Trump. He's a media whore always eager to spread his lips. Can he be defamed when he casts his image to the world on demand and recasts it constantly to suit everchanging ratings and marketing schemes?

I say never trust a man who combs his hair so as to cover his shiny dome, and then flaunts a wife young enough to be his daughter. Oh, Trump has issues, all right. But there isn't much reputation to damage. He took care of that long ago.

When One Government Offical Acts for the Government

Under Section 1983, a person's whose civil rights have been violated can sue the person who violated her rights, the government official's supervisor, and sometimes the governmental body itself.  Since there is no respondeat superior liability in Section 1983 cases, the plaintiff has to prove that the governmental body qua governmental body violated her rights.

But governmental bodies don't act on their own; they act through people.  Thus, whether and to what extend the acts of one government official will be imputed to the governmental body is a hotly contested issue.  Steve Minor, a civil rights lawyer who blogs at the SW Virgina Law Blog, has a extremely interesting discussion of the Fourth Circuit's approach in these types of cases.  Check it out.