Feds Hit A Trifecta

scales of Justice AP

Attorney Andrew Cohen analyzes legal matters for CBS News and CBSNews.com.



By any measure, Thursday was a great day at the office for federal prosecutors and investigators. Former Enron chief Kenneth Lay was taken into custody on his way to the corporate trial of the century. Martha Stewart lost her last best chance for a new trial when a judge poo-poohed the damage done to her by an allegedly perjurious witness. And a jury in federal court in Manhattan returned with a fairly decisive verdict in the corporate case involving Adelphia Communications Corp.

What a difference a week makes. Last week, the Justice Department was rightly hammered by the Supreme Court on issues as diverse as terrorism and pornography. This week, the Justice Department can rightly crow that it has made great strides in its self-styled war against corporate greed. Last week, even Justice Antonin Scalia refused to come to the defense of the Bush Administration. This week, unrelenting government action forced Ken Lay to say with an apparently straight face that he, too, is a victim of Enron.

It's easy to link together themes from the Enron, Stewart and Rigas cases. All of the cases involve shocking amounts of greed. All of the cases involve stunning doses of hubris. All of the cases required tenacious investigative work and benefited from no small amount of stupidity on the part of the defendants. But there are important differences in the cases, too, differences which were as apparent Thursday as were the smiles on the faces of government lawyers.

The day started with Lay's arraignment and the carefully arranged "perp walk" that ensured that Enron's many victims would be able to see the company's founder in handcuffs. The 65-page, 132-paragraph, 41-count indictment against him, former Enron CEO Jeffrey Skilling, and former Enron accountant Richard A. Causey alleges that the men "used and caused to be used secret oral side-deals, back-dated documents, disguised debt, material omissions, and outright false statements to further" their illegal scheme to "publicly conceal" the "true state of Enron" in order to deceive investors and analysts.

The 11 charges against Lay specifically came as a bit of a surprise to experts who have followed the demise of Enron. Kurt Eichenwald, the fine New York Times correspondent who has bird-dogged the story for years, wrote Friday that "perhaps the most surprising aspect of the sweeping... indictment is what the government does not charge. There are no allegations that {Lay} knew of the fraudulent partnership dealings that hid the extent of the company's debt and contributed to its downfall." Indeed, the charges against Lay seem oddly detached from the core of the Enron story. Lay faces six charges of making false statements and four charges relating to certain banking activity involving his personal finances. The other charge is a conspiracy charge that ties Lay to his co-defendants.

After pleading "not guilty" (no one ever pleads "innocent," despite what you read in the papers), Lay then engaged in an extraordinary press conference in which he detailed the defense we ought to expect from him at trial. Lay says that he, too, was a victim of Enron, specifically Enron's former CFO Andrew Fastow, who just happens to be the government's prime witness in the case against his former colleagues. Lay's lawyer called Fastow "obviously a liar and a thief" which is precisely what the government is calling Lay.

It sets up the possibility for a truly dramatic showdown at trial, with Fastow pointing the finger at Lay, Skilling and Causey and those men pointing the finger straight back at Fastow, with the government having to essentially endorse the latter in order to convict the former. The feds, apparently, aren't afraid of this confrontation — indeed, they included Lay in their preexisting case against Skilling and Causey precisely because they want the defendants to try to lay blame in different directions. Look for Skilling or Causey or Lay or all three to ask the judge to sever the trials. And look for the case to go to trial long after the September date the defense says it will ask for.

Next came the long-anticipated ruling in the Martha Stewart case by U.S. District Judge Marian Goldman Cedarbaum. Stewart's attorneys had asked for a new trial after learning from prosecutors that a government witness in the case was himself being charged with perjury. As expected, Judge Cedarbaum rejected almost entirely the arguments offered by Stewart's lawyers. "Wholly speculative and logically flawed," the judge wrote, "simply not plausible." She ruled that even if the witness had perjured himself, his testimony was not so relevant to the case against Stewart that it would have made a difference to jurors.

The ruling virtually ensures that Stewart will be sentenced to some prison time next Friday. And it means that federal prosecutors were able to skate away virtually unharmed even though they engaged in some atrocious mismanagement during the course of the trial. Even before the feds discovered that one of their witnesses may have lied on the witness stand, remember, they failed to give the defense certain documents to which Stewart's lawyers were entitled. I'm sure that the Justice Department was never truly worried that Stewart would get a new trial. But I bet the feds were a little worried that their shoddy case management would draw the ire of the judge. It didn't.

Finally, later in the afternoon, there were the verdicts against John and Timothy Rigas, two of the four defendants in the Adelphia case. I don't know why the Adelphia case didn't draw the sort of media attention that the Tyco International case did — I guess it's because there weren't any videos of lavish parties or expensive shower curtains. But when it comes to corporate greed, to raw, naked, selfish self-aggrandizement at the expense of shareholders and the truth the Adelphia case doesn't deserve a back seat to Enron or anything else. That's why prosecutors won most of the case against the Rigas family.

I hope the feds were able to savor their very good day. Just because Kenneth Lay was indicted doesn't mean he'll be convicted. And just because Martha Stewart was convicted doesn't mean she should even have been tried. Meanwhile, on the terror law front, the Justice Department already is being forced to deal with the ramifications of those big Supreme Court rulings last week. I have a feeling it's going to get worse for the government in court before it gets better again.

By Andrew Cohen
  • Lloyd Vries

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