Free Jamie Olis

Jamie Olis, the former senior director of tax planning for Dynergy, was sentenced last week in a Houston court to 24 1/3 years, as reported widely in the news and noted by Yin Blog. If he's lucky and behaves he will only have to serve 21 years. Then he can introduce himself to his daughter, now 6 months old. Mr. Olis will only be 60 years old or so when and if he gets out.

Olis' sentence is based on the fact that his financial manipulation disguised company debt, supposedly causing $500 million in stock losses. His boss, who is cooperating, has not been sentenced, but is expected to receive less than five years. No doubt the sentence will send a message to Jeff Skilling, who will face the same judge.

I wonder if an expert could help me square the sentence with one for a first offender for, e.g., rape, manslaughter, drugs.

To the extent that the sentence appears to be based on the amount of financial harm, there is no way Mr. Olis could be shown directly or indirectly to have contributed to $500 million in market loss. His actions alone surely did not cause in any meaningful sense a market inflation of that magnitude.

Apart from Olis' role in the fraud, it is extraordinarily difficult to establish that specific information had specific effects on the price of a stock traded in an efficient market, given the hurricane of information that causes market price fluctuations. One might guess, but wouldn't we want to be sure before taking somebody's life away?

And even if Olis' actions did cause such an overvaluation, he surely did not cause net harm (that is subtracting traders' gains from their losses) of anything like this magnitude. In that event, the market loss is not comparable to a theft of the same size.

I haven't studied the sentencing guidelines (effective in November, 2001, probably after the fraud was committed) that supposedly led to this result. But, as Mr. Bumble would say, if the law supposes that, the law is an ass.

Could we be talking about deterrence here? A solution to the problem of corporate fraud? I question both of these conclusions in my Market v. Regulatory Responses to Corporate Fraud, 28 Journal of Corporate Law 1 (2002) (available free in draft form here). There I discuss, among other things, the mindset of corporate defrauders that makes them extraordinarily resistant to legal threats, the confluence of both market and regulatory error that leads to large-scale fraud, and the market's great capacity for self-correction.

On the other hand, such a sentence will surely have some deterrence effects:

--Legitimate business people will be more likely to avoid conduct that has any chance of drawing regulatory scrutiny.

--White collar defendants who might have a defense will think two or five times about pressing it, having in mind the 20 or so year penalty that Olis paid for doing so.

These would not seem to be effects cherished by a society that prides itself on its entrepreneurs and on criminal defendants' right to a day in court.

Finally, it is hard not to think about Mike Milken, who drew a ten-year sentence for parking stock with Ivan Boesky, at least if one can believe Mr. Boesky's testimony. Mike Milken was, of course, largely responsible for reinventing hostile takeovers in the 1980's. Incompetent self-dealing corporate managers breathed a sign of relief when he was gone.

Comments

[William Olis]

I forwarded this article to all my school friends, to Michael Shelby, DA in charge of the prosecutors, Chicago Tribune, and Houston Chronicle. As if it would do any good.
I served two tours in army as enlisted man rank of Sergeant and Staff Sergeant in Vietnam in 1968/69 and again in 1971/72. Now they the court sentence tells me to go visit my son for the next twenty four years. My golden years. Thanks for listening Mr.William P. Olis (Bill) I am 71 yrs old now. Had my prostrate removed a year ago had cancer.

[William Olis]

I meant to say visit my son in prison for next 24 years or so. Mr William Olis ,

[Manuel Real]

Think of the shareholders who lost their money as a result of his conduct. Together, they will lose a lot more than 21 years.

[carl hunter]

people lost pensions and stock went down. this is the reason why when you do the crime, you get the time. I dont feel sorry for anyone who cheats.

[william olis]

From a historically renoiwned philosopher who realized and understood the powers of government rule. "Guide the people by government measures, and regulate them by threat of punishment and the people will try to keep out of jail, but they will have no sense of honor or shame. Guide the people by virtue and regulate them by a sense of propriety and the people will have a sense of honor and respect:.....Confucius, 551-479 B.C. !!!!

[J.F.]

I think an honest assesment of the mandatory federal sentencing guidelines that lead to such outcomes is: "Absolute justice is anything but just." Might I add that these guidelines also prohibit parole.

[pmcclusky]

the sentence is unduly harsh, but nothing can be done about it. for what he did, olis probably derseves no more than 10 years. however, if you can't do the time don't do the crime.

[sal shah]

I salute Jamie for his principles. Nothing in the time frame from top lawyers and accountants indicated that it was fraudulent to create tax dodges. Most all the other companies indulged in it. Why should he have plead guilty? so the jury found him guilty and the asinine law requires him to be put away. We should endeavour to change such draconian laws. Investors who cry about losses should go back to rule one of investing. Diversify into many stocks or buy a mutual fund like S&P 100 or take the consequence of putting all your funds in a few hot stocks. Do not let your emotions color the fact this is a case of gross injustice. Peace. Sal

[nj]

24 years is way too harsh. Other execs committing similar crimes get 1-4 years. Average jail time for murderers in Texas is 13 years, 4 years for rapists, 3 years for sexual abuse. 24 years is outrageous. He should get 1-4 years in minimum security.

[Andrew Speer]

I know Jamie. I worked with him for close to 2 years in the International Tax Department at a large accounting firm in Houston. He was easily the most affable, kind, helpful, and all around nice person in the entire tax department. He was also highly respected, and his departure for a large Oil & Gas company was met with genuine sorrow. I now find it impossible to get a single current or former member of that group to say a kind word or two in his favor. Such are the cruel realities of keeping well pampered butts covered.

I do not condone what Jamie did, but it is important to note that it was only slightly more agressive than Tax Practitioners in house, at law firms, and large accounting firms have been doing for years. While making an example of a mid level executive such as Jamie may provide a potent warning against such behavior, it is inexcusable to think that rapists, murderers, and child molesters will enter and exit the penal system on multiple occasions all around the country before Jamie, a fine, law abiding human being who made a serious mistake attempting to help his company, is even parole eligible. Current sentencing guidelines are guided by instincts only slightly more informed than those of a lynch mob. It is not too early or too late, I would hope, to show some maturity and reform those rules.

[argent00]

When will the people of the USA realize the rouge regime that we call democracy.While the USA is one of the top places to live,our legal system is a farce.Overzealous prosecutors who care not about humanity ,abound.A rapist or murderer may justify some unhumane treatment,but a white collar evreybody did it crime does nort deservethe death sentence that Jamie got.Make no mistake puting a guy away for 24 years is a death sentence and that is something he doesnt deserve.This is unfortunately another black eye in the so called justice system.Every person is entitled to a fair trial,but be prepared to pay many many years if you should happen to lose.So I ask what is fair about the trial when you are faced with the choice of getting a few years even if you are innocent or face 20 years?Most people opt for the few years rather than risk their lives.I hope that in the world where their is a higher justice the God we believe in DA Shelby will find suffering illness and tragedy throughout his despicable life.May he be cursed by the powers that be.

[J. Cantrell]

As an officer of an organization I can't say enough about what a gross miscarriage of Justice this is. Mr. Olis made a bad decision, but as a mid-level Mgr was NOT the orchestrator of this scheme, and quite frankly was placed in a very awkward position to be a "team player". The DA, the Judge, and any other official that played a part in sentencing this young man to the exteme penalty of 24 years should be absolutely ashamed of themselves, and should think of their inability to render a fair decision each and every night they go to bed with their families. Uetterly disgusting how they chose to make an example of this mid-level Mgr, when, if the had the guts, would be going after the real "puppetmasters" like Ken Lay and others.

[cg]

why should an employee of a company take the blame for the WHOLE company. he was just mid managment. he was not top managment. their are murders and rappist walking the streets after 2yr of punishment. THE WHOLE SITUATION IS NOT RIGHT NOT FAIR

[John Gellhausen]

I went to school with Jamie and kept in touch somewhat after school for a few years until I moved away. I know his character and as also serving as a corporate accountant for several years, I generally know and understand the situation that landed him where he is. He made mistakes that are symptoms of a much broader issue. This all just makes me sick in terms of where he stands today. I have kids the same age and can't imagine the situation. If anyone knows how I can help, please let me know.

[John Tobin]

Like John Gelhausen above, I went to school with Jamie. He pledged under me and became a fraternity brother. He does not have a bad bone in his body. I don't know what happened exactly but the sentence seems insane. I wish Jamie the best and hope this can be resolved somehow. Jamie needs to be released to be with his wife and child. He is not a threat to society and should be a productive tax paying citizen, not a burden on the state.

[Marc Hodak]

When I first heard about Jamie Olis's sentence, it made me ill. Parts of my family escaped from Nazism or Communism, and the overriding source of disgust for both systems was the sense of helplessness one feels in the face arbitrary state power. I think the case of Jamie Olis elicits similar disgust for a similar reason. The idea that any of us, having made a mistake under ambiguous laws, could be faced down by a snarling, pious agent of the state to confess to a "crime" or risk imprisonment for a third of our lives gets people, at least in my family, to ask, "Is this America?"

[Marc Hodak]

Well, I see that two days after the Gellhausen post, Olis won his resentencing hearing under apparently favorable terms from Judge Jones. While a good case can be made for sentencing Olis for time served, it seems Judge Lake is bent on something more substantial, and is in no rush to hold the hearing, besides being quite busy with Skilling and Lay. Maybe faith in the system is not entirely misplaced, but the whole process still resembles a careening vehicle barely under control. Who needs that?

[John Gellhausen]

I truly hope the sentencing of Lay and Skilling, whatever it might be, brings Jamie's sentence into perspective for Judge Lake and others. The message has been sent, heard and (nearly) completed for Enron. The "example" of Jamie can hopefully resurface and corrected.

My prayers for Jamie and the Olis family.

How did/is Olis faring in a medium security state prison? Has he been moved to a Club Fed yet? I haven't heard a word...

[FJO]

Jamie Olis is an honest man of great integrity. His biggest flaw was trusting that others had the same basic decency and respect for the law. This complex transaction that prosecutors are harping about was not a one-man transaction- it was accounting, tax, legal, finance, and top business experts all responsible for their respective pieces. The substantive part of the transaction that was reversed was not the tax aspect that Olis was responsible for and similar transactions were being done by many companies in the same industry- Olis lost the lottery in that he was singled out and everyone who knew the truth ran for cover.

Crazy thing in this system is that Olis is suffering the severest punishment they could dish out because he refused to say he was guilty of a crime and deal for leniency by pointing fingers at others to reduce his penalty. Say you are guilty, and you are free as a bird, say you are innocent and.. well.. the prosecution will just have to knock some sense into you. People like Olis make their job harder- requiring actual proof rather than just bargained-for testimony given under duress- and they can't have that. Now to justify that horrible punishment, prosecutors are calling a mid-level executive the leader of the vast conspiracy that involved $500/hour experts and Chief executives officers. They are even claiming he pulled the strings in orchestrating what stockholders were being told which is ridiculous.

He is still the decent and honorable person that some of you remember. His terrible mistake was believing in this judicial system and the integrity of others around him. BY the way, still no club Fed for Olis, he has been in medium and high security prisons although the bureau of prisons is breaking thier own rules to keep him there. Coincidence? No Way. Olis will finally be re-sentenced in a few days. He will likely serve more time even though he shouldn't because they will want everyone to know that standing up against this establishment is punished severely. I hope there is some sanity and humanity in that courthouse but I won't be holding my breath.

[Jonathan Todhunter]

It is amazing that there is no sense of proportion or decency in the legal system. 13 years for murder and we find a judge CAPABLE of sending down 24 years for this, and nothing to those that carp. It is simply madness. The madness that brought about Auschwitz, and we tout the 'rule of law' to the rest of the world. The legal system and its hungry abitious prosecutors with their currency of misery unbridled by sycophantic judges with no sense of congruence is a disgrace and shame to all of us.

I think Lake is a racist and his sentence of Mr. Olis shows.