The Quattrone lesson: Proceed with care
Ex-investment banker's conviction reversal should put the Enron judge on high alert to be extra careful when issuing his jury instructions.
By Shaheen Pasha, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) - A federal appeals court's decision to overturn former star investment banker Frank Quattrone's conviction is a reminder to judges and prosecutors alike: get it right the first time or watch your case go up in smoke.

Never has that reminder resonated more sharply than now, as the government forges its case involving the granddaddy of all corporate malfeasance debacles: Enron.

Frank Quattrone
Frank Quattrone

The stakes are high in the case against Enron founder Kenneth Lay and former chief executive Jeffrey Skilling, now into its eighth week of testimony. It was Enron's collapse that opened the door for scrutiny in other cases of corporate misconduct, including WorldCom and HealthSouth (Research), and created a politically charged atmosphere in which the government was zealous in its efforts to hold Corporate America accountable for its misdeeds.

But as the reversal of the case against the ex-CS First Boston banker proves, sometimes too much zeal can be a bad thing. And that should put Enron prosecutors, as well as presiding Judge Sim Lake, on high alert to take care about how they instruct the jury to interpret the mounds of evidence.

For the Justice Department, Quattrone's obstruction-of-justice reversal is the second major blow in less than a year. Last May, the U.S. Supreme Court nullified an obstruction-of-justice verdict against forming accounting titan Arthur Andersen, citing that the judge presiding in the case had issued erroneous jury instruction regarding Andersen's role in overseeing the accounting at Enron.

Those sentiments were echoed Monday, as a federal appeals court overturned Quattrone's conviction due to faulty jury instructions and granted him a new trial with a new presiding judge an unusual step that generally indicates that the appeals court found the original trial judge, Richard Owens, to have lost his impartiality when it came to the case.

"Juries look to the judge for guidance and leadership," said Barry Boss, former federal public defender and a member of the Cozen O'Connor law firm. "When a judge appears to favor one side over the other, it has an insidious effect on the whole proceeding."

Boss added that the media blitz surrounding the Enron scandal and the other subsequent high-profile corporate frauds made white-collar crime "the flavor of the week" and sparked overly aggressive prosecution -- an issue that the government is now forced to deal with in appeals.

He added that the reversals in the Quattrone case as well as the Supreme Court's ruling on Arthur Andersen last year will serve as another "piece of ammunition in the defense arsenal" for corporate fraud cases.

Times have changed

John Bielema, partner in enforcement defense at Powell Goldstein LLP, added that it was easier a few years ago to win a conviction because public sentiment favored punishment for any perception of corporate chicanery.

But he said the atmosphere has simmered down from its frenzied pace and, in the wake of the Quattrone reversal as well as the Supreme Court's decision on Arthur Andersen, judges and prosecutors, particularly in a high-profile case such as Enron, will be more cautious and make sure that the jury receives proper instruction in order to reach a fair judgment.

While a jury is responsible for listening to all the facts and pouring through the evidence, jury instruction by a judge is the standard by which the jury applies that evidence to determine guilt or innocence.

"This decision is a reminder to judges that even if there is significant evidence, if the jury instructions are materially flawed, there's going to be a reversal. It's a reminder that the law is still the law," Bielema said.

And legal experts said the case against Enron already has a number of issues that the defense could raise on appeal, including the quick jury selection and the fact that the trial was kept in Houston -- the epicenter of Enron's implosion -- despite repeated efforts on the part of the defense to move locations.

That should also make the government and Judge Lake extra careful to not create any more grounds for reversal.

Jacob Frenkel, a former federal prosecutor, said jury charges will be closely scrutinized in the wake of the Arthur Andersen and Quattrone reversals, and that should prompt the government and Judge Lake to word their recommendation for jury instructions carefully.

"High profile convictions are a feather in the cap for prosecutors," said Jacob Frenkel, a former federal prosecutor. "For the government to win a conviction and then, more than a year later, lose on appeal" is a blow.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.