Legal Ethics and Reform

You Just Want to Weep for America

Ms Sidney Powell, an experienced appellate lawyer, has written an insightful non-fiction book (Licensed to Lie: Exposing Corruption in the Dept. of Justice; Brown Books Publishing Gp.; copyright 2014) about her client, Jim Brown, who got caught up in one of the several Enron related prosecution.

Brown’s tale of woe began when his employer, Merrill Lynch, over Brown’s objection, decided to purchase a minority ownership interest in an Enron project to place an electric generating plant on some barges parked along the coast of Nigeria. The idea was to use Nigerian hydrocarbons (eg natural gas) to bolster the amount of electricity available to the Nigerian electric grid.

Despite Merrill’s policy of helping deals happen by serving as an agent for one party or as a broker facilitating the meeting of other parties, Enron had been such a good customer in the past, Merrill decided to take an actual ownership position when Enron requested their participation.

So despite Brown’s objections, upper management at Merrill went forward with this barge investment. There was discussion between Enron and Merrill about a formal exit clause for Merrill in their agreement but Enron’s lawyers thought it would be better to let the document remain completely silent on the exit issue and say instead that the document covers “all agreed to matters” regarding the barge deal.

Later when the Justice Dept. decided they needed some Wall Street scalps as part of their Enron prosecutions, this barge deal caught their attention. But how to get some Merrill criminal convictions out of a legitamate purchase of a minority interest in a Nigerian project. The creativity here was world class. The Enron accounting dept had accounted for a Merrill’s purchase as a straight transfer of ownership to Merrill with no future strings attached. If this accounting treatment could be inpuned, then the Justice dept reasoned Enron’s financial reports would be considered erroneous and Enron’s stock price in the market would have been different and investors possibly injured. The possible damages could be quite large, but there had to be a “hard” requirement that Enron repurchase Merrill’s interest in say six months for a fixed pre-determined price to inpune Enron’s accounting treatment.

Of course, there was no mention of any repurchase in the written document, but there had been prior oral discussions about Enron making some “best efforts” exertions to find a buyer for Merrill’s interest in about six months. So the government thought all we have to do is re-characterize the prior discussions from “best efforts” discussions to a binding oral “firm commitment”.

Then the government had the additional problem of figuring out why Merrill employees could possiblly be responsible for Enron’s decision about how to account for the barge deal. After all Merrill employees have a duty to Merrill not the company that is selling an interest in its project to Merrill. Again creativity came to the rescue for the Justice Dept. What if Merrill had induced an Enron employee in this case Andrew Fastow, CFO of Enron, to act not in the best interest of Enron but in the best interest of Merrill? What if Enron had had induced a Merrill employee to act not in the best interest of Merrill but in the best interest if Enron? This has happened before; so the wire fraud statute takes account of this, but there is a requirement that “something of value” pass to the offending employee as a sign this occurred. This is otherwise known as a bribe. The government had no “something of value” to point to, but they decided they might be able to get the judge and jury to overlook this “minor” requirement.

Now the government had to pick the Merrill employees that were going to get the criminal convictions, create the headlines that would made the Justice Dept look good, and go to jail. Normally prosecutors give lower level employees immunity so they will testify against their bosses. In this case, that would not work because the whole prosecution was premised on lies. So the US prosecutors decided to shut all the Merrill bosses up by threatening them with personal prosecutions if they told the truth and warning them if they got called into a trial as witnesses they would have to lie adjusting their testimony to fit the government’s “theory” of the case.

Then the government picked out four low/mid level Merrill investment bankers who had worked on finalizing this Enron deal, after their bosses and the Merrill legal department had decided to do the deal. These four brokers, of course, went to trial trying to stay out of jail. The charges against all four were conspirsy, and wire fraud. Jim Brown was additionally charged with perjury and obstruction of justice because he had voluntarily appeared before the Enron grand jury and had testified truthfully about the oral discussion of a “best efforts” in about six months. Since “best efforts” did not square with the government’s false preference for a “firm commitment” in six months, Jim Brown had to be prosecuted for perjury and obstruction of justice as well. After all he had “lied” to a grand jury, didn’t he?

The New York based Merrill employees had retained New York lawyers to represent them in the Houston courtroom where the trial was held. These lawyers under the Brady Rule received summaries of FBI interviews with Enron and Merrill employees who had knowledge of the transaction. (The Brady Rule, which requires prosecutors to share, exists because the police are always the first one to investigate and therefore have the most first hand evidence some of which might be useful to the defense.) These lawyers raised all necessary objections, but the anti Enron furor was running at full tilt in Houston, and the judge regularly ruled against these four defendants. They were convicted and jailed quickly, despite the fact that appeals were being filed and “suspended imposition sentence” is common for white collar defendants who are appealing their conviction.

This is the point at which Powell, the author of this book, enters the story. Of course, she did not initially have the benefit of all the information set out above. Over the next few years she with other appeallate attorneys showed how the prosecutors had failed to met their burden of proof and therefore had gotten faulty convictions for conspiracy and wire fraud in the appeals courts, first in Texas and then at the US Supreme Court. With the four relieved of these faulty convictions for conspiracy and wire fraud, all that remained was the perjury and obstruction of justice conviction of Jim Brown.

To get this conviction reversed Powell had to show that Jim Brown had told the truth to the grand jury. However, the prosecutors had provided very limited summaries of their many lengthy interviews with Merrill and Enron people. Powell kept after the trial judge for court orders demanding more source documents. The new federal prosecutor, a second tier prosecutor, who had replaced the first team, said he’d try to find some source material used to create the summitries. He sent, surly by accident, a computer disk that contained images of all the source material as well as highlights showing how all mention of “best efforts” was systematically identified and excluded from the summaries provided to the defendants for their first trial.

At this point the statute of limitations had run on many knowledgeable people, who had remained silent for fear of prosecution. These people began talking about the true nature of the oral discussions between Enron and Merrill. Both the original source material from the FBI interviews and the statements of the people who were no longer under threat of prosecution, confirmed that Jim Brown had testified truthfully.

All that was needed now was for the trial court to throw out Brown’s conviction. However, by now the lawyers who had engineered the “rail road job” on Jim Brown where in very high level jobs in the White House, and at the top of the Justice Dept, and at famous law firms. The original team of prosecutors had parleyed their Enron success into legal “stardom”.

The Judicial Branch, by acknowledged the truthfulness of Brown’s testimony, would simultaneously be acknowledging the intentional sins of these prosecutors. Powell’s odyssey through the courts various bar associations occupies the second half of the book.

To make the book more interesting, the author intersperses information from the public integrity trial of US Sen Ted Stevens. This Senator also suffered because edited FBI summaries did not accurately reflect what was in the FBI source documents.

Since the author has written this book as a mystery story with the Brown and Stevens plot lines running in parallel fashion, this review should not disclose what happened in the courts and ultimately to the prosecutors in both the Stevens and Brown cases.

It is enough to say the author takes true to life information and by careful crafting makes it take on the shape of a well written mystery story. This review has perhaps given away to much of the early drama, but this review gives the reader a sense of the tragic state of America’s criminal justice system and hopefully enough is left unsaid to inspire concerned Americans to seek out this book for a good, informative read. Additionally, the book has a very thoughtful introduction by Alex Kozinski, a judge of the US Ninth Circuit Court of Appeals.

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