FBI Director Christopher A. Wray was an assistant attorney general in 2004 when he heaped praise on an ambitious Mafia-tested prosecutor while promoting him to the top of the Justice Department’s high-profile Enron task force.
Andersen was finished as a company; four Merrill executives went to prison.
Today, Mr. Weissmann stands as special counsel Robert Mueller’s top gun in a squadron of nearly 20 prosecutors and scores of FBI agents delving into Trump-Russia. Mr. Weissmann is leading the probe into the biggest target to date, Paul Manafort, President Trump’s onetime campaign manager.
He rode into Texas from New York City in 2002 fresh from putting a number of Mafiosos in prison.
By the time he left in 2005, he had rung up some impressive numbers, such as 22 guilty pleas and millions of dollars in restitution. But he also suffered historic courtroom losses. And how he won and how he lost is still the subject of bitter comments from his adversaries in Houston.
“Do not misunderstand my disdain for him with ineffectiveness or something not to be concerned with,” said Dan Cogdell, who represented three Enron defendants. “He’s a formable prosecutor. If I’m Donald Trump and I know the backstory of Andrew Weissmann, it’s going to concern me. There is no question about it.”
The backstory: Defense attorneys say Mr. Weissmann bent or broke the rules. As proof, they point to appeals court decisions, exhibits and witness statements.
They say he intimidated witnesses by threatening indictments, created crimes that did not exist and, in one case, withheld evidence that could have aided the accused. At one hearing, an incredulous district court judge looked down at an Enron defendant and told him he was pleading guilty to a wire fraud crime that did not exist.
Said Mr. Cogdell, a colorful courtroom performer dubbed a “gunslinger” by the local press, “He’s the most aggressive prosecutor I’ve ever been up against. He is, if not win at all cost, he’s win at almost any cost.”
Those convictions for which Mr. Wray offered praise in 2004?
Mr. Weissmann’s cases against Andersen and Merrill Lynch lay in shambles just a few years later.
The Supreme Court, in a 9-0 vote in 2005, overturned the Andersen conviction. A year later, the 5th U.S. Circuit Court of Appeals erased all the fraud convictions against four Merrill Lynch managers. The jury had acquitted another defendant.
“People went off to prison for a completely phantom of a case,” said Mr. Kirkendall.
The task force, which ultimately would catapult prosecutors to lucrative careers, wanted to win as many convictions as possible. They were prosecuting players in one of the nation’s biggest corporate scandals. Enron bosses falsified balance sheets, inflated earnings and traded stocks with insider knowledge. By 2001, the behemoth went bankrupt. Its stock was worthless.
The Justice Department task force mobilized in 2002 and quickly won convictions. But there were dark sides.
That’s where Sidney Powell enters the picture. The Dallas lawyer took the appeal of a Merrill Lynch figure. She obtained from Justice a batch of task force documents in 2010 that should have been disclosed to trial attorneys years earlier.
The documents began to flow in the aftermath of the Sen. Ted Stevens debacle. Justice prosecutors not connected to the Enron task force deliberately withheld evidence favorable to Stevens. A judge threw out his conviction.
Ms. Powell wrote a 2014 book about the scandals, “Licensed to Lie: Exposing Corruption in the Department of Justice.”
“All of the cases Weissmann pushed to trial were reversed in whole or in part due to some form of his overreaching and abuses,” Ms. Powell told The Washington Times. “The most polite thing the Houston bar said about Weissmann was that he was a madman.”
The special counsel’s office declined to comment to The Times about Mr. Weissmann’s track record.
However, the Justice Department in 2012 and 2013 defended him against ethics complaints and concluded he did not violate the rules.
Given Mr. Weissmann’s long association with Mr. Mueller, who has given him a prominent management role in one of the most important investigations in U.S. history, The Times took a look back at Mr. Weissmann‘s’ 2002-05 Enron task force tenure.
His hardball tactics seem intact today. Within weeks of his arrival in June, the FBI executed a no-knock, predawn raid on Mr. Manafort’s condo. Agents stayed for hours after waking up the target and his wife.
With over 20,000 employees, Andersen stood as one of the country’s most prominent corporate auditors. The Securities and Exchange Commission began investigating Enron, an Andersen client. Auditors started destroying documents.
Mr. Weissmann took the lead in prosecuting Andersen for obstruction of justice in 2002. Andersen’s defense: It followed company policy on when to destroy confidential material.
Convicted at trial, a fatally damaged Andersen appealed. The Supreme Court eventually took the case.
In 2005, the nation’s highest court overturned the conviction in a 9-0 opinion, a devastating judgment that shattered Mr. Weissmann’s showcase.
Chief Justice William H. Rehnquist wrote the opinion, solo — a message of how seriously the high court took the breach.
In essence, Rehnquist said the prosecutor sold the presiding judge on jury instructions that assured conviction.
“Indeed, it is striking how little culpability the instructions required,” Mr. Rehnquist wrote. “For example, the jury was told that, even if [Andersen] honestly and sincerely believed that its conduct was lawful, you may find [Andersen] guilty. The instructions also diluted the meaning of ‘corruptly’ so that it covered innocent conduct.”
Mr. Rehnquist wrote that the government (Mr. Weissmann) insisted, over defense objections, that the word “dishonestly” be excluded from the instructions and that the word “impede” be added.
The chief justice went to the dictionary, read the meaning of “impede” and concluded it was “such innocent conduct” for someone to “impede” the government.
Said Ms. Powell, “Weissmann indicted them for conduct that was not criminal, and he took criminal intent out of the jury instructions that he then persuaded the judge to give.”
With a lack of sustaining clients, a mortally wounded Andersen put out a statement.
“We are very pleased with the Supreme Court’s decision, which acknowledges the fundamental injustice that has been done to Arthur Andersen and its former personnel and retirees,” it said.
In the end, the George W. Bush Justice Department put out of business a thriving accounting firm whose actions could have been handled in other ways short of felony charges.
It became known as the Nigerian barge case. Mr. Weissmann induced indictments in 2003 against four Merrill Lynch executives, an Enron vice president and an Enron accountant. He contended that Merrill and Enron entered into a sham transaction in 1999. The banker would buy three Enron barge-mounted power generators for $7 million purely to boost the Houston company’s balance sheet — and then Enron would buy them back at a profit.
They were charged under a federal statute that normally requires proof that someone paid a bribe or received kickbacks that sullied the business practices of “honest services.” There were no bribes or kickbacks.
Five were convicted. The accountant — represented by Mr. Cogdell — heard the jury say, “Not guilty.”
Four of them appealed while serving time in prison. In 2006, the 5th Circuit reversed all the fraud charges, leaving just a perjury conviction against one executive, whom Ms. Powell came to represent on appeal.
Again, the problem for Mr. Weissmann was his definition of a crime that greatly relaxed the standard for convictions.
“We reverse the conspiracy and wire-fraud convictions of each of the defendants on the legal ground that the government’s [Weissmann task force] theory of fraud relating to the deprivation of honest services is flawed,” the appeals court said.
The opinion said the scheme may have been unethical but did not violate federal fraud laws. The court said that not all corporate fiduciary lapses are tantamount to crimes.
“The task force took advantage of that and convicted these men,” he said. “What it caused them and their families, you can just imagine.”
The government did not retry the five on fraud charges.
What the Merrill defense attorneys did not know during trial was this: There were favorable witness statements that the prosecution withheld.
In 2010, Justice began releasing confidential Enron task force documents. They showed that Mr. Weissmann’s team provided misleading summaries at trial of raw witness statements to the FBI and to the grand jury.
The disconnect became an issue in the appeal of Ms. Powell’s client, Merrill executive James A. Brown, in the Nigerian barge case. Although his fraud conviction went away, his perjury guilt stuck.
Ms. Powell was particularly struck by this: The government’s summary said a witness, Enron’s Jeffrey McMahon, “does not recall” a barge buyback agreement. In in his actual interview, he said there was no deal. The prosecution badly distorted what he had said, depriving trial attorneys of information that could persuade a jury to acquit. Mr. McMahon was under threat of indictment and did not testify.
The 5th Circuit agreed — to a point.
“Favorable information was plainly suppressed from McMahon’s notes,” the court wrote.
“The McMahon notes contain numerous passages that unequivocally state that it was McMahon’s understanding that there was only a ‘best efforts’ agreement and no ‘promise,’ whereas the government’s disclosure letter says only that McMahon ‘does not recall’ a guaranteed buyback.”
Even worse, Ms. Powell said, the documents showed that Weissmann’s team yellow-highlighted favorable information that it deliberately withheld from its proffered summaries.
Yet, to Ms. Powell’s great disappointment, the appeals court did not throw out the perjury conviction. It said the prosecution “flaw” was not material.
William Hodes, an analyst on legal ethics who assisted in the appeal, found the ruling “crazy.” The judges acknowledged that the prosecutors misled the defense, yet they somehow could predict it would have made no difference at trial.
“The summaries were false,” Mr. Hodes told The Times. “They said things that the witnesses did not say. They themselves yellow-highlighted what they left out of the summaries. It’s astonishing. We should have gotten a new trial.”
When the task force brought indictments in July 2004 against the big cheese in the Enron saga — Kenneth L. Lay, Jeffrey Skilling and Richard Cause — defense attorneys ultimately learned that Mr. Weissmann had done something even more far-reaching. In a sealed court document, he named 114 unindicted co-conspirators, the Houston Chronicle reported.
Defense attorney Kirkendall did some research. He found that it was by far the largest number of such targeted people in the history of federally prosecuted white-collar crime.
The significants: Defendants at trial hoped that some Enron executives would testify on their behalf. But those hopes collapsed on the list of 114.
“Chilling effect, my ass,” said attorney Cogdell. “It was Ice Station Zebra. No one in their right mind would do anything that would upset the task force, specifically Weissmann.”
“It was common knowledge in the Houston community,” he told The Times. “If you had a client who was cooperating with defendants in an Enron criminal prosecution, you’d better be careful because they would become a target.”
The Merrill Lynch defendants wanted Mr. McMahon to testify. But he planned to take the Fifth Amendment if called because Mr. Weissmann had made it clear on three occasions that he could be indicted.
“We had him ready to post bail and go through the arraignment process because of pressure being applied by the government not to testify for any of the defendants,” he said.
Mr. McMahon never testified. He was never indicted.
The incredulous judge
Christopher Calger, then a 39-year-old former Enron vice president, pleaded guilty in a Houston courtroom to fraud. The FBI issued a national press release saying Mr. Calger admitted to making a deal with two businesses that inflated Enron’s earnings. Mr. Calger agreed to become a prosecution witness.
But the announcement did not tell the full story of the hearing that day.
District Court Judge Lynn N. Hughes read the evidence and expressed incredulity that Mr. Calger was pleading guilty.
According to a court transcript, Judge Hughes grilled Linda Lacewell, one of Mr. Weissmann’s prosecutors. He asked her repeatedly to explain what the actual crime was. He said Enron lost no money, there were no bribes and the basic mechanism for the sale of some electric turbines was legal.
Ms. Lacewell said Enron should never have put proceeds on its balance sheets, echoing the 2003 prosecution of Merrill Lynch people in the Nigerian barge transaction.
The judge: “You don’t know the difference between their capital and their current income transaction?”
And he said, “But we do know that this transaction could not have been a tax avoidance scheme, right?”
Ms. Lacewell: “That’s right.”
She then said the plea was to wire fraud, not taxes. To that, Judge Hughes said the task force was trying to criminalize a private transaction to which all parties agreed.
“So you want to convert every default by a corporate officer into a wire fraud case,” he said.
When she explained the deal, the judge replied bluntly, “That’s not wire fraud.”
When she asserted that it was, Judge Hughes lashed out at the task force.
“According to your employer, everything is wire fraud,” he said. “It’s a far cry from what the statute was intended to do when it was adopted.”
But Mr. Calger persisted. He wanted to plead guilty, to which the judge said, “There’s no factual basis for your plea.”
The judge did not know then, but his spot courtroom lecture proved prescient. A year later, the 5th U.S. Circuit Court of Appeals came to the same conclusion and ruled in the Merrill case that there was no wire fraud.
Attorney Kirkendall said the financial strain of legal bills for years while fighting a powerful government task force played a role in Mr. Calger’s decision to plea.
“The Enron task force’s public relations campaign was far better than its actual prosecutions,” he said.
The task force rattled other potential defense witnesses. But at least one bucked the juggernaut and took the stand as a defense witness in the so-called Enron Broadband Services case.
Mr. Weissmann in 2003 brought charges against executives for ballyhooing the development of internet products to drive up the share price and make an insider stock killing.
At a 2005 trial, engineer Lawrence Ciscon took the stand for the defense. Mr. Ciscon, who had been vice president for software at EBS, said he met with the FBI two times. They never informed him that he was a target. Then he obtained an attorney. The next thing he knew, the task force had labeled him as an unindicted co-conspirator.
As the trial approached and he worked with the defense, prosecutors reminded his attorney of that status.
“They’ve called my lawyer to remind me,” he testified, according to a transcript reviewed by The Times.
He viewed the calls, he said, “as a threat that I could be prosecuted.”
The threats, he said, “made me hesitant” to appear in court. Asked by the defense why he decided to show up in court, he answered, “I have nothing to hide.”
“Regardless of the outcome of this trial, the Enron task force’s ugly tactic of effectively suppressing important testimony of witnesses favorable to Enron defendants has now been fully exposed,” Mr. Kirkendall blogged at the time.
The task force never charged Mr. Ciscon, who went on to a successful technology career.
But final conviction count is short that number given that appeals courts eviscerated two major cases — Merrill Lynch and Arthur Andersen — while juries acquitted two people and partially acquitted others and two were allowed to withdraw guilty pleas.
In all, 22 pleaded guilty and four trial convictions stuck, according to a Houston Chronicle list.
Afterward, some task force prosecutors rose to significant government posts.
Mr. Weissmann joined Mr. Mueller at the FBI and then arrived at a powerhouse New York law firm as a white-collar-crime defense specialist. He returned to the FBI as Mr. Mueller’s general counsel and, later, was appointed by the Obama administration as chief of Justice’s fraud unit in Washington.
FBI Director Christopher Wray, the Justice Department assistant attorney general who named him task force chief a decade ago, is now supplying Mr. Weissmann with the FBI manpower he needs to pursue Trump-Russia.
Kathryn Ruemmler prosecuted both the Merrill defendants and Lay-Skilling. Years later, she emerged in the prestigious post of White House counsel to President Obama.
Lisa Monaco, another task force prosecutor, stayed at Justice, was Mr. Mueller’s chief of staff and then went to the Obama White House as the president’s top counterterrorism adviser. She joined CNN as an analyst this year.
Whether Mr. Weissmann’s brand — intimidating low-level Mafiosos and corporate figures to force them to snitch — will work in Washington against political operatives will be answered in the coming months.
Copyright © 2020 The Washington Times, LLC.