US: Taking Enron to Task
A disabled woman lay dead in her Chicago apartment. No videotape, no gun, no fingerprints.
For days, Assistant U.S. Attorney Sean M. Berkowitz puzzled over the circumstantial evidence. He examined ballistics, phone records, stray papers. With no hard evidence to go on, he won the indictment of a doctor, who ultimately was sentenced to death for killing a patient to keep her quiet about Medicare fraud.
Berkowitz is "not afraid of taking on a difficult case," said former colleague David Hoffman, now Chicago's inspector general.
Enter Enron Corp.
Berkowitz, 38, is the third and -- presumably -- final director of the Justice Department's Enron Task Force, which is designed to get to the roots of fraud at the Houston energy trader that collapsed in 2001.
He and a small group of government lawyers will be in the spotlight in the Jan. 30 trial of Enron's former leaders. The case is the capstone in the cleanup after an era of business misconduct that left investors billions of dollars poorer. The outcome could shape the public's -- and history's -- judgment of how effective it was.
"Enron defines the age of corporate fraud," Berkowitz said.
The stakes for the defense are high, too. Enron founder Kenneth L. Lay, a man accustomed to hob-knobbing with members of the Bush family, could spend the rest of his life in prison. The same is true of Jeffrey K. Skilling, the company president who ascended to chief executive and then abruptly quit shortly before the company unraveled. Both men maintain their innocence.
And, like the case in Chicago, the Enron prosecution may rely heavily on circumstantial evidence.
Few documents have emerged directly tying Lay and Skilling to the fraud that prosecutors say was used to inflate Enron's stock price. Instead, investigators have pieced together accounts from corporate insiders to build their case. The task force has secured 16 guilty pleas, sealing deals with Enron's former finance chief, its top accountant, two investor relations officials and two heads of operating units, among others.
That strategy has come under heavy fire from the defense. Lay recently blasted the government for employing what he calls "a wave of terror" to intimidate people into striking plea deals rather than face years behind bars if they take their cases to trial and lose. A judge recently rejected allegations that prosecutors intimidated witnesses, ruling that there is "no credible evidence to support defendants' allegations."
Lawyers for Skilling and Lay say the task force was out to get their clients from the very beginning -- a fact disputed by the group's first leader.
"There was never any agenda from the outset to go out and get person X," said Leslie R. Caldwell, now in private practice in New York. "Every single lawyer on the task force is an experienced prosecutor who knows when to bring cases and when not to bring cases."
It has been four years since the Justice Department created the task force, bringing together a select group of lawyers from U.S. attorneys' offices around the nation. The unit is itself a symbol of Enron's devastating impact on Houston. Prosecutors there stepped aside in 2002 because so many of them had financial or personal ties to the company.
For all its success in dealmaking, the task force's record when it takes cases to a jury has been mixed.
The trial last year of former executives in Enron's broadband Internet unit dragged on for three months under the weight of testimony about the division's technological capabilities. The case ended in a hung jury in July. Weeks earlier, the U.S. Supreme Court unanimously tossed out the government's groundbreaking conviction of audit firm Arthur Andersen LLP because of faulty jury instructions. Both cases were prosecuted by the task force, but lawyers involved in the coming Lay trial had little involvement in investigating those defendants.
In the task force's most successful result thus far, in 2004, a Houston jury convicted five former executives of Enron and Merrill Lynch & Co. for taking part in a sham energy deal that helped Enron inflate profits. Each has been sentenced to between two and three years in prison. A sixth official, a former Enron accountant who denied knowing key facets of the deal, won acquittal.
The sprawling case against Lay and Skilling dwarfs anything the government has attempted to date. Last month's guilty plea by former Enron accounting chief Richard A. Causey will help prosecutors to slash several witnesses from their lineup. But the trial still could consume more than four months, featuring testimony about some of the company's faltering business units and the maneuvers Enron's former leaders allegedly used to prop up the company and mislead investors. The trial had been scheduled to begin yesterday, but Causey's plea pushed the start back by two weeks.
The trial's complexity was part of the lure for Kathryn H. Ruemmler, a District-based prosecutor and a deputy director of the task force. "It's an incredible challenge, an extraordinarily complex and large investigation," said Ruemmler. "It's in many ways unparalleled," with intense congressional interest and complications from massive shareholder lawsuits.
Ruemmler, 34, is no stranger to sensitive investigations. She worked in the White House, handling independent counsel issues, including those related to former Pentagon worker Linda Tripp, who famously taped colleague Monica Lewinsky.
The strain that runs through all four lead prosecutors is this: They are ambitious, unusually driven and not at all used to losing.
First in his class at New Orleans's Tulane University, Berkowitz finished among the final 100 for the coveted Rhodes scholarship, although he did not win. In his spare time, he runs marathons.
Ruemmler talked her way into her first big career move while still in law school at Georgetown University, so impressing a partner at the D.C. firm Zuckerman Spaeder LLP with her remarks on a cable television show that she landed an internship on the spot.
John C. Hueston, 41, a longtime prosecutor from Orange County, Calif., has never lost -- not even on a single charge -- in 15 federal jury trials, colleague Wayne Gross said.
The Yale Law School graduate served as a clerk for federal Judge Frank M. Johnson Jr., whose landmark rulings on integration in the South made him a hero to civil rights pioneers. The Alabama judge advised Hueston to join the U.S. Attorney's office as quickly as possible. Hueston readily complied, working his way up to command a unit of 25 government lawyers.
"He gave one of the best closing arguments I've ever seen," Cormac J. Carney, a federal judge in Santa Ana, Calif., said of Hueston's remarks in a sophisticated computer counterfeiting case. "He was very good about 'those stubborn facts.' "
For the last few years, each of the lawyers has regularly left behind home and family to commute to Houston and Washington. The wear and tear of travel has prompted turnover within the unit over the years. Berkowitz and Ruemmler took the reins at the task force this summer after the unit's disappointment in the Andersen and broadband cases.
The final member of the government trial team is Cliff Stricklin, a former Texas state judge who once served on a Dallas city council ethics panel with White House counsel and failed Supreme Court nominee Harriet Miers. The son of a Baptist minister, Stricklin, 41, is the only Texas native on the government's team. He has 26 federal jury trials as a prosecutor under his belt and 130 more trials during his time as a judge. "I've pretty much seen just about everything," said Stricklin, including a case in which parents had kept their emaciated daughter in a closet for nearly five years.
Stricklin will focus on jury selection and pacing at the upcoming Enron trial. The other three prosecutors will divide up the remaining duties, sharing opening statements and closing arguments as well as key witnesses.
The Enron trial is by no means a certain victory for prosecutors. The task force, composed of about a dozen lawyers and another 12 federal agents, will be outgunned in both manpower and financial resources. Skilling has paid his lawyers more than $20 million out of his pocket and $17 million more from insurance proceeds. Lay has shelled out millions of dollars more.
Defense lawyers already have tried to keep the government team busy reacting, filing motion after motion to distract their opponents in the weeks before the trial.
"Unlike so many cases brought by the government, this is not a sure thing," said Warren Lupel, Berkowitz's uncle, who also is a prominent Chicago lawyer. "It's a bit of a gamble."
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