Fleischer on Kirkendall

Vic Fleischer, who often has very worthwhile things to say, has taken his reputation down a notch in a recent post.

He accuses me of “fawning” over a Tom Kirkendall post about the Nigerian Barge case. I praised Tom’s continuing coverage of that and other Enron-related cases – coverage that has included sitting in the courtroom, examining local news coverage, and analyzing briefs and allegations over many months. This has taken not only a lot of effort, for which Tom not only receives no compensation and precious little recognition, but also suffers the slings and arrows of bucking the conventional wisdom – which is unfortunately that conduct at the borders of acceptable corporate practice should be punished by 20-plus years jail sentences, exceeding those handed to rapists and drug dealers.

To begin with, Vic says Tom “lionizes” the defendants. He does nothing of the sort – unless calling somebody “decent” is lionizing them. I agree that it may have been going too far to say that the deal was an "ordinary structured finance transaction." I think what Tom meant by that is that it was ordinary by the heady standards prevailing in Houston at the time.  Even if so, the transactions may have been wrong, and the defendants should be subject to some sanctions.  But not locking them in jail and throwing away the key.

What “reeks” here, to use Vic's subtle word, is not the transaction, but the prosecutors using the awesome power of government against basically decent men who, worst case scenario, got carried away. What reeks even more is the government's using hearsay and stretching a criminal statute to do it.  That was the focus of Tom’s post, not “lionizing” the conduct that got the defendants in hot water. 

I can see lay people confusing “wrong” with “criminal,” but law professors should understand why it’s wrong to misuse the criminal laws even if you don’t particularly like the people they’re being used against, and even, God forbid, if you think that the transactions are bad finance.

Where Vic really misses the point is where he says Kirkendall implicitly compares the Merrill defendants to Thomas More. Vic says this makes him want to "puke," a digestive reference we could have done without.

This borders on ridiculous -- it suggests Vic has not only not carefully read Tom's post, but is unfamiliar with the classic play it is drawn from (which I commend to him). Kirkendall has used the More quote in several posts.  He is not comparing anybody to More.  (I frankly doubt anybody compares to More in these times.)  He is quoting More, who in turn is criticizing courts who are willing to discard justice to do the politically expedient thing.

Vic then goes after me for wishing we would see an alternative narrative about Enron from the one we have seen so far (to put my statement in a context Vic denies it). Maybe a story favorable to Lay would be going too far, but not further than many a biopic. The point in my post is that it would be useful corrective to the undiluted propaganda we're getting for the opposite position. Kenny Boy did build a business.  It had some nifty ideas, and then it got out of hand.  He deserved to go broke for his hubris, like many a businessman before him – like Howard Hughes almost did in the movie I was discussing. But whether he deserved to be hounded into jail is a question worth asking, and a story worth telling. I also pointed out that it would never be told.

The common assumption is that Lay deserves to go to jail, and the mighty resources of the US government have been dedicated to this task, because taking Kenny’s scalp is politically important. I suppose in these days it takes a strong stomach to hope that Lay gets a fair trial.  If so I guess I have a stronger stomach than Vic does.

I don’t usually take this tone in a blog post, and basically never when I’m criticizing a fellow blogger, since I think that civility is important in our game.  I would not have taken this tone merely for uncivility directed at me, whether or not I deserved it.  But the all-out attack on Tom Kirkendall was undeserved and uncalled for, and I think deserved the strongest rebuttal I'm capable of. 

And more importantly I really deeply believe in the principle that the criminal laws have been dangerously misused here.  Indeed, speaking out on this was one of the things that originally provoked me into the blogging game. No, to answer Vic's little barb, I'm not kidding.

Update: A tree has come crashing down, taking down powerlines in the middle of the night, so here I am blogging instead of sleeping, and thinking some more about Nigerian barges.

In an earlier post the same day, commenting on the "ethics" of law school rankings and their relevance to teaching Enron, Vic says makes the following good point:

planning and gamesmanship are part of being a good corporate lawyer.  The hard part is figuring out where gamesmanship ends and fraud begins.  I'm not sure we even have a theory for that.  The ethics of corporate lawyering is an undertheorized field.  . . . The ethics of financial engineering is one of the modules in my Deals class, and I've discovered that there are few good readings on the topic, let alone textbooks or entire courses.

I wish he'd applied this reasoning later the same day. Isn't this ambiguity at all relevant to when it's appropriate to criminalize financial engineering, or other business practices for that matter? 

With respect to Ken Lay, I should have linked my earlier post noting Lay's very good chance for an acquittal in a fair trial, particularly given the result in the Scrushy trial. In all the biased publicity, people tend to forget that Lay, though the focus of the government's efforts, was really a marginal player in the Enron frauds.

All of this disturbingly reminds me of the history in the Milken case, recounted in my Imagining Wall Street paper just posted.  When the film Wall Street was released everybody agreed that Milken, like Lay, had it coming.  Shades of the recent Enron movies and books. The arrests in handcuffs of three arbitrageurs, Timothy Tabor, Richard Wigdon and Robert Freeman, in February, 1987, was important background for the film, and the perp walk scene was transferred from the news coverage to the big screen. 

Few were taken aback at Milken's outrageous ten-year sentence for a Williams Act paperwork violation based on oral testimony by the very questionable Ivan Boesky -- testimony similar in quality to that in the Nigerian Barge case Tom Kirkendall wrote about. Few cared that Milken was bludgeoned into a guilty plea by threats to his brother.  The sentence was the one claim to fame of the judge who later secured a short-lived attorney general nomination.

It was enough for many people that Milken got what he deserved for engineering the "decade of greed." He had been convicted by the talk shows, the newspaper editorials, Connie Bruck and the solemn pronouncements of academics. By the time the three arbs walked in 1991, their convictions reversed, casting doubt on the bona fides of Milken's conviction, we were in a new decade, Milken  was old news, and nobody wanted to think about whether they had been wrong all along.

I was appalled then, and don't want to see it happen again. 

Comments

[Victor]

Larry, my post was meant to be pointed but not uncivil. If it crossed the line, I apologize. Lock me up with the Merrill defendants. Those grey areas are tricky.

We obviously strongly disagree about what the appropriate narrative is. I do think Tom's reference to Thomas More is an implicit comparison and not just a quote. You and Tom would like to cast the prosecutors as the villains and the Merrill defendants, and perhaps even Lay, as the underdogs and true heroes of the story. I'm not ready to give you that without a fight. The transaction was not a typical or ordinary transaction, and calling it "bad finance" still understates the case. Fraud is fraud. Maybe they shouldn't go to jail over it, but it's not crazy to think maybe they should.

I do hope interested readers will go read Tom's post and the relevant briefs. I really do think it's fair to say that Tom "lionizes" them:

"After reading the briefs, one is left with the unmistakable impression that the Justice Department's prosecution of the Merrill Lynch defendants had nothing to do with truth or justice, and everything to do with demonizing four decent men for their misfortune of having been involved in a rather ordinary structured finance transaction with Enron."

[FJO]

Thanks for speaking out professor. There are many good citizens and their families that are suffering unjustly--many who are being demonized and are easy targets for prosecutors and an angry public; eager to believe prosecutors' slanted version of the story because, why would they lie? At least one very decent and very honorable man is serving the next two decades now in a medium security federal prison mostly for standing up to prosecutors and saying he is innocent. More will join him, maybe not at that high a security level or for that many years, but they and their families will also suffer unjustly at the hands of ambitious and opportunistic prosecutors. I hope we all wake up one day and remember the difference between being a bit player in a very complex business deal that is pushed down from the top versus committing a known and recognizable crime that deserves a lifetime of imprisonment in order to protect the public. Maybe then we will recognize also that individual prosecutors who allow themselves to manipulate our legal system and to manipulate and threaten frightened people in order to pursue the conviction and incarceration of an Innocent, should themselves pay that same extreme price they continue to demand from the courts.