Saturday, September 27, 2014

Prosecutors Gone Wild

Truth is the first casualty of bureaucracy. Review of "Licensed to Lie".

Sidney Powell is a defense lawyer and erstwhile prosecutor who got tangled up in defending one of the Enron cases, launching an unwelcome odyssey into prosecutorial malfeasance. Her book is an excoriation of the prosecutors, Justice department, courts, and justice system as a whole as it took shape under the Bush Administration and continues under Obama. She summarizes everything in a final chapter that helpfully names names in bold type.

The case was the "Barge" trial, which accused a set of Merrill Lynch functionaries of colluding with Andrew Fastow to conduct a sham transaction whereby Enron "sold" a set of electric generating plants (on barges in Nigeria) to Merrill Lynch so that Enron could book a sale, while actually guaranteeing that Enron would buy the Barges back in a matter of months. The point was to help Enron temporarily cook its books and goose income. In the whole spectrum of Eron cases, and certainly in terms of harms alleged, this one was quite minor.

The defense disputed the entire case, and maintained that the transactions were actual sales, and that no one in Merrill Lynch did anything wrong. Powell's particular client, whom she picked up at the appellate level, was James Brown. His testomony was consistent on this and related points, both in grand jury testimony and at trial ... that his understanding was that the transaction was legal, if inadvisable.

Unfortunately, the defense was not allowed to use all of Brown's testimony, or much testimony from elsewhere, because the prosecution played keep-away with the evidence in the case, intimidated relevant witnesses, and pursuaded the court to adopt bizarre legal theories, jury selection processes, and jury instructions. Prosecutions generally have a duty to give the defense any exculpatory or even relevant information, called the "Brady" materials. Since the government typically runs the investigation, the prosecution is the party with all the evidence. Defendants do not have the resources or the powers to do as much investigating. This natural assymetry is supposedly resolved by the "Brady" rule. But of course, prosecutions are sorely tempted, and have every motivation, to hide such material if they find it inconvenient to their case. As they would.

It is a fundamental issue of whether the legal system exists to find truth, or whether it exists to win prosecutions. In the Enron cases, the government was under extreme political pressure to win, and to put some scapegoats in jail. The public, and especially the public in Houston where all the trials were held, was in no mood to split legal hairs about procedure. They wanted blood. Powell's tale is remarkably engaging, even gripping, for a narrative about US appellate processes that in this case dragged on for almost a decade. Her client served one year in jail, railroaded in by prosecutorial shennanigans that are, frankly, breathtaking.

First, the legal theory of the prosecution was, in part, that Brown and colleagues, by supposedly arranging a sham transaction, had deprived Enron shareholders of "honest services". This was a novel, even non-sensical, doctrine, and was reversed on appeal. Secondly, the prosecution alleged that, by its theory of the case, Brown had lied to the investigators and juries, thus perjuring himself. Thirdly, they alleged that all the evidence attesting to the legal nature of the transacation was ass-covering, belied by separate verbal promises they alleged had been made by Fastow and others to Merrill.

The problem with all this was that their own evidence pointed in the opposite direction. Fastow's own interviews mentioned explicitly that he had offered only a best-efforts promise to re-market the barges to other companies (which was indeed done and did occur, and was legal). But those interviews were suppressed by the prosecution, which relied on non-direct evidence from secondary players whom it pressured to testify according to their theory by threats of indictment. Fastow had already agreed to turn state's evidence in return for a reduced sentence (10 years, reduced eventually to six years, which was shockingly minimal in light of his masterminding the entire Enron debacle. He also probably retains some of his ill-gotten gains.)

Indeed, eventually Powell and colleages obtained detailed transcripts and notes from the Brown prosecution where the prosecution (or prior investigators) had highlighted in yellow the precise exculpatory testimony that would have easily acquited Mr. Brown and belied the entire theory of the prosecution. It was thus made quite plain that the prosecution had committed (and continued to cover up) gross misuse of their powers, which had the effect of destroying several innocent people's careers. Even after this information came to light, the judge in the original case continued to unwaveringly support the prosecution, blatantly ignoring defense arguments of gross malpractice, and despite having been overturned on several crucial issues on appeal.

This would have remained a typical defense attorney cry into the void except that another case came along during the same period featuring several of the same higher level officials in the Department of Justice- the case of Senator Ted Stevens. Similar tactics were used to develop a false theory of the case, hide exculpatory testimony, and railroad his jury to conviction (I hasten to add that I have no political sympathy with Stevens or indeed author Powell, who seems a red-as-they-come Texas Republican).

The (appellate) judge in that case did what the Brown judge did not do, which was, (in addition to reversing the case), to blow the whistle on the prosecution and call for a special prosecutor to investigate the Department of Justice's prosecution. The resulting report laid bare blatant abuse of the Brady rule and other forms of malfeasance- the same pattern that Powell was experiencing in her case. Unfortunately, this report neither took the highest levels of the Justice Department into its scope, nor had an discernable effect on any Department employee. Except for one: Nicholas Marsh, a low-level prosecutor on the Stevens case committed suicide as the investigation was underway. All the others either landed in cushy private firm jobs, or were promoted to higher levels in the government. One became a White House Counsel to Obama.

There are good political reasons to incentivize certain prosecutions. The late financial meltdown was clearly undermotivated in the prosecution department- no one went to jail for clearly illegal as well as phenomenally damaging acts and practices. Whole industries riven with illegal practices have been held harmless for their actions. There may also be a lack of legal tools to perform such prosecution and render justice. For instance, none of the fines that the Department of Justice has extracted from the various banks (investigations and findings that have remained secret, thus useless in the cause of justice) came from individuals. They come from the future earnings and innocent shareholders, not from the managers who actually performed the illegal actions and destroyed their companies and / or the economy at large, and who even in all likelihood remain in their jobs. Perhaps the legal structure to hold the responsible officers to account, not to mention claw back their ill gotten gains, does not exist (yet, though the Sarbanes-Oxley laws were supposed to have resolved some of that, yet were not deployed for the financial crisis non-prosecutions)

Whatever the case, the answer is not to run an illegal prosecution against minor actors who committed no crime, in a kangaroo court. Our country is better than that. What is equally disturbing is that this continued from one administration to the next, clearly signalling a fundamental lack of accountability in the department's bureaucracy and an unwillingness by the new administration to put its mandate into action. In so many instances, the Obama administration has kept the actors, and practices, of the old intact, prosecuting whistleblowers rather than listening to them, deporting and mistreating immigrants in droves, and keeping the military-industrial-espionage complex humming. The change has been much less than promised.

Powell's money quote: "Blind judges do not render blind justice."

  • A Holder retrospective.
  • Hope in Afghanistan, or endless dysfunction? "A thousand beggars can live under one quilt, but two kings cannot share a kingdom."
  • Not just military-industrial, but now military-industrial-espionage complex.
  • Rent extraction by finance. Is what they do useful? Or is it sheer embezzlement?
  • The government is losing all the revenue that goes instead into tax avoidance.
  • Pat Robertson: our genocide better than your genocide.
  • Right wing Christians ... reality is not a strong suit.
  • Climate, schmimate- science will deal with it, right?
  • Guns 'n apple pie- and don't let Gabby Giffords tell you different.
  • Yes, you are dying ... and truth is the answer.
  • Germany vs the Euro, cont.
  • That magical number two.
  • Pension funds got suckered into the hedge fund scam. And who pays? Not the retirees.
  • Yes, the inflation fight is not really about inflation.
  • Reality is outstripping perceptions of the new feudalism.
  • One more reason the 70's were a dreadful decade- it was when economics went awry.
  • The psychology of free will.
  • Again, just what is an economy good for?
  • "As Krugman goes on to note, the nation’s 400 richest households, who paid more than 50 percent of their income in taxes at midcentury, now fork over less than one-fifth of their income."

1 comment:

  1. re: Enron. The ironic thing (as Malcom Gladwell pointed out in a New Yorker article) was that anyone could tell from reading its annual report that it never paid any tax, because it never reported any profit!