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by Sidney Powell

Chapter 2

Chapter 2 is the actual beginning of the story behind Licensed to Lie. It is the attack on the Enron Corporation. The characters in the scenario are:

Enron Executives:
Jeffrey Skilling, CEO
Andrew Fastow, CFO
Ken Lay, Chairman
Jeff McMahon, treasurer
Ben Glisan, treasurer #2
Michael Kopper, Fastow’s protégé
Cliff Baxter, Vice Chairman, left 6 months before collapse.
Arthur Andersen LLP, Enron’s accounting firm

The Story Goes:
Enron treasurer McMahon and CEO Fastow butted heads regularly over policies and deals.  Skilling sided with Fastow. They were extremely narcissistic and fed each other’s weaknesses. Fastow created a separate private equity fund, LJM, which he and his protégé Michael Kopper, completely corrupted for their own gain. He repeated the process with an even bigger fund, LJM2. Enron formed a partnership with Merrill Lynch. McMahon, concerned about Fastow’s dual roles and possible conflict of interest, made mention to a Merrill manager. Upon hearing, Fastow removed McMahon as treasurer, replacing him with a younger, more flexible Ben Glisan.

Enron reached a stock price of $90 a share in August 2000. But a Fortune reporter, Bethany McLean, wrote an article in which she started an avalanche.  Enron lived in a glass bubble. Enron’s stock price fell from $90 to $40 in just a few months. After 9/11, the bottom fell out. The SEC requested information from Enron about its dealings with Fastow’s partnerships. Stock fell to under $20. By November 29, Enron’s bonds were downgraded to junk status at $0.61 a share. Lawyers swarmed, alleging a conspiracy to conceal Enron’s problems while insiders profited by selling stock at an inflated price.

On Dec 2, 2001, Enron declared bankruptcy. With Enron’s downfall, other Houston businesses collapsed and the public was screaming for heads to roll. The Department of Justice assembled the Enron Task Force, a joint effort with the SEC, FBI and IRS. Deputy Attorney General Larry D. Thompson handpicked prosecutors from across the country. The Task Force was separate from the DOJ and was given unlimited resources.

Leslie Caldwell, the head of task force, was the chief in the criminal division of San Francisco US Attorney’s office. She and the handpicked team of Ivy League pit bulls set to “send a message to Wall Street.” They put everyone who had anything to do with Enron under scrutiny: thousands of people, 120 banks including J.P. Morgan and Citibank.

“Business professionals who had always been highly regarded and prominent in their communities were now surrounded by federal agents.” “Their offices were searched, and their documents were subpoenaed or seized. They were hauled in front of Congress and grand juries, and they were threatened with indictment and imprisonment. Most of these business people had led stellar lives, done their jobs honestly, supported their churches and communities, and volunteered with charities. They had always believed in the American system of justice and confidently believed that the system would recognize their innocence.”

In January 2002, Arthur Andersen accountants admitted shredding documents from their Enron files.

Enron’s former Vice Chairman, Cliff Baxter, had agreed to testify to the senate committee. He had left before the Enron collapse, making $22 million selling his stock. Riding high, he had only a good future in front of him. But on January 25, his body was found with a bullet hole in his head, and a gun in the open palm of his right hand laying in his lap.

Chapter 3: The Task Force Annihilates Arthur Andersen
Cliff Baxter’s death had all the hallmarks of a “hit” with vague police reports and inconsistencies and a lot of unexplained questions. It was especially a terrifying open to anyone who thought about testifying. Baxter’s testimony would have rivaled that of John Dean’s in the Watergate scandal.

The job of the Enron Task Force was to determine if the wrongs were civil or criminal and who was legally responsible for them. Within 60 days they began their first attack—on Arthur Andersen LLP—Enron’s auditor and one of the nation’s big five accounting firms. The grand jury had charged Arthur Andersen LLP with obstruction of justice “for destroying literally tons of paper documents and other electronic information related to the Enron inquiries.” The indictment alleged “widespread criminal conduct…charging that the firm sought to undermine our justice system by destroying evidence relevant to the investigations.”

The Deputy Attorney General Larry Thompson said ironically “it was a crime that attacks the justice system itself by impeding discovery of the truth.”  He also said, “It would be unfortunate for our criminal justice system if any individual or any entity could say that he or she or it was too big or too important, so as it couldn’t be indicted.” But in actuality, the people in the Department of Justice causing innocent people to be convicted and innocent businesses to be destroyed, is in a position of power where just that scenario is in effect.

In this particular case, there was a question of the law about shredding documents. Andersen had stopped destroying as soon as the subpoena arrived.  But Thompson squeaked by the law by stating the position that “an official proceeding does not have to be pending in order for someone to come within the ambit of the obstruction-of-justice statute.”  That opens the door for any American to be charged with obstruction of justice by doing something unknowingly even before the questionable illegal act is brought to attention. That, my friends, is extreme government power overreach, and is the reason why we are now in a prison-making nation. Even though we are only 5% of the world’s population, we house 25% of the incarcerated.

In walks Andrew Weissmann, former prosecutor for the Eastern District of New York, responsible for the prosecution of Mafia bosses. Weissmann had developed special tactics in these prosecutions where he was convinced the end justified the means. Weissmann became the driving force behind the indictment of Arthur Anderson and began the investigations of Fastow and Glisan. Helping him was Matthew Friedrich. Within 9 weeks of the indictment, they had achieved conviction of Arthur Andersen LLP of obstruction of justice.

Arthur Andersen then came to Sidney Powell for help. She writes:

“As a former assistant US attorney of ten years…I knew how prosecutors were supposed to proceed. Doing the job right required a strong sense of honor, integrity, objectivity, and fairness. A federal prosecutor has immense, unbridled power along a broad spectrum of discretion. In the hands of the wrong people, the damage that power can cause is beyond measure. A prosecutor does play God.”

Problems she saw with the case:

PROBLEM RESULT
They had indicted the entire firm—the company itself—instead of just the individuals allegedly involved.

 

Sent message to everyone that failure to cooperate with the Task Force would be met with an indictment.  This put everyone under pressure to even throw people under the bus and violate their constitutional rights.
Rewording of the obstruction of justice statute and the alleged conduct didn’t fit. Creating “laws” through vague wordage to fit the purpose of attack, even where those laws don’t exist.
Judge favoritism toward the prosecutors. She didn’t allow the defense to introduce the hundreds of thousands of documents Andersen had retained The jury got only half of the picture—all bad.
Press reports during the trial were damning. Probable prejudice in jury
Andersen partner David Duncan pleaded guilty and testified for the government. Gives message that if he was guilty, so were the others.
Judge Harmon left out the most important element of a crime in the jury instructions per request of the task force—the intent to commit a crime.  Instead she said “you may find Andersen guilty” even if they “honestly and sincerely believed that its conduct was lawful.” The basis of our justice system is that criminal intent is required.
There had to be a close link to an “official proceeding” which there wasn’t in this case. This changed the structure of the case from civil to criminal.

The wording of the “crime” was to “knowingly…corruptly persuade another person…with intent to cause” that person to “withhold” documents from, or “alter” documents for use in an “official proceeding.” But at the time the supposed “crime” took place, there was no official proceeding. The company’s only legal duty was to comply with a duly issued subpoena—and it did so. Andersen had simply followed its own “document retention policy.”

When the argument went to the Appeals Court, they met unexpected opposition. The fundamental tenet that the law is supposed to give the citizen “fair warning” of conduct that is criminal fell on deaf ears. The judges were more sympathetic to the government.

Following this win, the task force then targeted other corporations. Merrill Lynch was next on Weissmann’s list. To avoid the death sentence dealt to Andersen, Merrill Lynch agreed to a non-persecution agreement which would later come to haunt the four executives the task force singled out for criminal indictment.

The task force added Kathryn Ruemmler from the DOJ DC office and John Hemann from the San Francisco US attorney’s office (compatriot to Leslie Caldwell).

Enron executives Richard Causey (Chief Accounting Officer), Skilling and Lay were indicted. Fastow pleaded guilty and began cooperating with the task force. Then suddenly Leslie Caldwell resigned and Weissmann, “the madman” became the director of the task force.

In June, 2004, the 5th Circuit Court of Appeals approved this means of criminalizing innocent citizens by affirming the conviction of Arthur Andersen LLP. Judge Higginbotham wrote:

“This case is all about a group of partners at Andersen who knew that the law was coming and did what they could…to hinder the law”

With that decision, the Fifth Circuit affirmed the jury instruction that eliminated criminal intent.  

Sidney Powell received a call in the late fall, 2004, asking her to come on board the defense team for a Merrill Lynch executive, Jim Brown, who had been convicted in Houston for conspiracy, wire fraud, perjury, and obstruction of justice for a business transaction involving Enron called the “Nigerian Barge case” and help with the Supreme Court appeal.

In 2002 Mr. Brown had voluntarily testified in front of the SEC, the Enron Grand Jury, and the bankruptcy examiner. He was sure that if he just told the truth everything would be fine. That is the pie-in-the-sky that all of us in America believe, until we become government targets. Then and only then do we learn the truth.  Instead of everything being fine, Mr. Brown was indicted and fired.

The charges in the indictment of Jim Brown and his codefendants were absurd.  He had been convicted of wire fraud for depriving Enron of the “intangible right” of the “honest services” of Andrew Fastow and falsifying Enron’s books and records—allegedly by Jim’s tangential involvement in a business transaction between Enron and Merrill. In actuality, Brown had told Merrill not to participate in the deal. He had not taken any money or any property from Enron or anyone else in the deal as must be proved in a typical wire fraud case. There were no bribes or kickbacks. The amorphous concept of “honest services” that Congress had added years earlier to broaden the crimes of mail and wire fraud was meant to apply only to employees and people who corrupted them by bribes, kickbacks, or self-dealing in betrayal of their employer. There was none of that in this case.

The trial itself was a farce. In spite of all the appropriate motions by defense, the task force ran the courtroom with the judge ruling for the government on nearly every important issue. The defense had received virtually no discovery and the government denied having any Brady material. No witnesses would talk with the defense because the task force had either indicted them, named them as unindicted coconspirators, or threatened to indict them. But still, chances for a reversal of a jury conviction were very slim. Judges are loath to overturn any criminal conviction, and this was a high-profile, Enron-related case.

In her own words, Ms. Powell didn’t represent a criminal defendant unless she was convinced that he or she was innocent. Through her experience as a US attorney, she believed that “it was rare for someone to be innocent of federal criminal charges. Neither I nor any of the many US attorneys or assistant US attorneys with whom I had worked would put someone through the life-changing ordeal and anxiety of criminal charges unless we were sure they were guilty and the evidence was strong. There were more than enough cases with clear evidence of guilt of clear crimes to prosecute without looking for problems on or beyond the fringes.”

That is no longer the case in the Department of Justice.

Discussion

Points to note from this are:

  1. The expansion of “obstruction of justice” to include innocent actions that took place prior to the crime actually being named.
  2. DOJ personnel are in a position of power—Godlike—where they can’t be indicted for what they do.
  3. The power of the DOJ is being abused by those in power.
  4. Belief by the DOJ personnel that “the end justifies the means”. “The end” becomes simply to convict whomever they target, regardless of whether a crime has actually been committed.
  5. “Laws” are being created by prosecutors through vague wordage to fit the purpose of attack, even where those laws don’t exist.
  6. The basis of our justice system is that criminal intent is required. That requirement has now been taken out of the court system by their own action, and not through legislation where law is supposed to be decided.
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