Small Conflicts Prove Focus of Government's Closing Argument
Recall OverReg'd post of May 4, 2006 entitled Federal Honest Services Prosecutions? Steve Peters noted that Enron trial prosecutors, whose cross examinations of former Enron execs Kenneth Lay and Jeffrey Skilling focused heavily on the men's personal investments that placed them in conflict with those of the company and its shareholders would be used against the men during the Government's closing argument. Steve specifically predicted Lay's testimony that "no one should be a slave to the rules" would be quoted back by the Government.
Steve's prediction came true. As cited in the May 16, 2006 New York Times articled entitled U.S. Levels a Final Blast at Enron Chiefs, Prosecutor Kathryn H. Ruemmler, "in the opening minutes of her presentation . . . posted on the screen for the jurors words Mr. Lay said during cross-examination: Rules are important, but they should not - you should not be a slave to rules either" - words which Lay had said in "response to questions about why he had violated Enron's code of ethics through a personal investment in a photo-sharing company that had done business with Enron."
The Enron case is now in the hands of a federal jury, which will serve as the ultimate arbiter of Mr. Lay's testimony and views on conflicts compliance. Stay Tuned.
Only a lawyer would consider the federal jury as the "final arbiter" of compliance. I suggest that that statement confuses the "Justice System" with Justice. Be that as it may, the jury has spoken and, barring success in pursuit of a remote chance at appeal or a pardon or two by a President both Skilling and Lay face most of the rest of their evil, misbegotten lives in prison. But there are legions of devils and legions of securities fraud purveyors who have served their small time at benign places like Camp Cupcake, and where ever Mrs. Fastow went, and returned to their satin sheets and their freshly laundered portfolios.
In my modestly submitted opinion we are at war with an evil foe as nefarious as Al Qaeda terrorists who find fresh pickings among those who participate in the capital markest. And we (regulators) are fighting them under the rules of engagement which govern criminal prosecution. Of course, it wasn't supposed to be that way. The SRO's were supposed to be able (and willing, ha)to act more nimbly to limit the frauds, but this has proven to have been as much an illusion as a balanced budget. Extraordinary compensation arrangements to NYSE executives have rightly called into question the earnestness with which the Exchange pursues villans and the NASD's non-feasance over the past decade or more is beyond doubt.
Thus, "self-regulation" has proved to be like self-abuse: not as good as the real thing.