Oh My Fraud

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Caleb Newquist: Hello and welcome to Oh My Fraud, a true crime podcast where if someone wants you to send lawyers, guns and money, the shit has hit the fan. I'm [00:00:30] Caleb Newquist. And I'm.

Greg Kyte: Greg Kyte.

Caleb Newquist: Greg, uh special treat. Today we have a fantastic interview, uh, with a law professor. His name is Sam Buell. And we actually just came out of it, and, man, that was that was that was that was fun. All our interviews are fun, but but Sam was his own flavor of fun. Like it was. It was a great, great time.

Greg Kyte: Yeah. Great. Amazing stories. You guys are in are in for a treat.

Caleb Newquist: Yeah, [00:01:00] absolutely. Um, just a reminder for everybody listening. Uh, if you or your organization would like a fun and informative presentation on fraud or ethics. Greg and I do those.

Greg Kyte: And if you need a fun and informative webinar on fraud or ethics, we do that too. And not to toot our own horn, but our webinars do not suck. And maybe your conference needs a keynote that will wake everybody up. We do that too.

Caleb Newquist: Yes we do. So send us an email at oh, fraud [00:01:30] at earmarks. Com to get more information on pricing and availability. Okay. As I mentioned, our guest today is Sam Buell. He is the Bernard M Fishman Distinguished Professor of Law at Duke University School, not.

Greg Kyte: The Bernard M Fishman, the Bernard.

Caleb Newquist: Distinguished. I bet that's a millhouse. What do you think?

Greg Kyte: I it is now.

Caleb Newquist: I got a five. I got five bucks. It says that's Millhouse, but yes, he is at Duke University School of Law. He is also [00:02:00] a former assistant U.S. attorney for the District of Massachusetts, and also the Eastern District of New York. He was also a special attorney for the Enron Task Force. And of course, we asked him about all that stuff. Um, it we get into a lot of stuff. He's got a lot of great stories, as Greg mentioned. Um, so and it's kind of a longer it's kind of a longer conversation. So, uh, we are going to dispense with any more of the, uh, what what are we dispensing with?

Greg Kyte: Pleasantries? Pleasantries? Bullshit.

Caleb Newquist: Pleasant [00:02:30] bullshit. We are. We are going to dispense with that now and, uh, let you listen to our conversation with Sam Buell. So, Sam, um, so take us back to Providence. What's, uh, what were the early years like for you growing up there?

Sam Buell: Well, not actually in providence, but okay, uh, in a town called Middletown, which is on on the island, as we say in Rhode Island. Uh, Aquidneck Island is, uh, Rhode Island [00:03:00] is a kind of a horseshoe with an island in the middle. But that's where I grew up. And, uh, my parents were prep school teachers. So I actually grew up partly south of Boston in a town called Milton. Um, and then in Middletown, Rhode Island. And both places have well-known boarding schools that my parents worked at. And my grandfather was the head of the one at in Middletown. That's where my dad grew up. So a couple generations of the family there of secondary school teachers. [00:03:30] And then, uh, I went to, uh, prep school myself. And then I went to Brown.

Greg Kyte: Okay.

Sam Buell: College. So I did live in Providence for, uh, four years, actually, five, because I had a year off at one point. And then, uh, yeah. So then I had to figure out what to do after college, and it was like a lot of young people these days. It was a thing, even maybe more so than because politics were less professionalized to go work for a political campaign. [00:04:00] So I went off for a couple of years working for little or no money as, as a, you know, young volunteer on a couple of campaigns. And then I met a lot of people I was interested in government and policy, and that sort of led me down that path. And then I met a lot of people in that realm who were lawyers, who'd had interesting careers, where they'd done stuff in politics, but also in government, which is what I ultimately, you know, wanted to do. I had considered going into international relations in grad school and maybe the diplomacy [00:04:30] angle and that kind of thing met all these attorneys who had these cool careers in Washington and New York doing different things, and some in Boston. Um, so I decided to go to law school. Um, and I ended up at NYU in New York. I'd never lived in New York. Um, and I had a great time there. And, uh, my first summer of law school. You know, you do three years and there's two summers, so you have summer jobs that are kind [00:05:00] of recruiting or trying out things. My first summer, I went to work at the US Attorney's office in Brooklyn, which is called the Eastern District of New York. It encompasses Brooklyn, Queens, Staten Island and Long Island, uh, and Long Island, Suffolk and Nassau counties. And a really interesting place.

Greg Kyte: And, um, sure. Yeah.

Sam Buell: I loved the people there. And I loved the, uh, just the endless variety of things that happened every day in that courthouse that were amazing and surprising. And, [00:05:30] and I just kind of thought, well, I was interested in government and this is government and it looks like a really cool place to work. So. Yeah. Right. I thought about doing that even when I was still in law school. And then I got a clerkship with a federal judge in that district. Uh, so it's very common to do a year working for a judge after law school called clerking, and I, uh, got a clerkship with Jack Weinstein, who was a very well known trial judge in Brooklyn who had been appointed by Lyndon Johnson.

Greg Kyte: Oh, wow. [00:06:00]

Sam Buell: Oh, wow. He had been on the bench for decades when he went on to continue to be an active judge for decades after I clerked for him. Um, wow. He just recently passed away a couple of years ago, but he worked into his 90s. Well into his 90s. Nice. Um, and he was known for being an innovative judge, particularly in the area of mass tort litigation. So he handled the Agent Orange stuff that had to do with Vietnam and asbestos, the Johns-manville bankruptcy. Um, and a number of other cases [00:06:30] like that that were new in the legal system and the sort of mid to late 20th century. And he came up with a lot of the ideas for sort of how to handle those cases. But for me, it was a really fun year because it just happened that he had a really lively criminal docket that year. Mhm. Um, and my co clerk was there were two of us was more was more interested in the in the civil stuff. So I got to kind of really drill in on the criminal law stuff, which is what I was interested in. There were some big mob trials, um, that went on that year, uh, involving the [00:07:00] there was an internal war in the Colombo family where they were out there battling for control and murdering each other. So there were a bunch of Rico cases on both sides of that that the US Attorney's office was doing. And I got to watch all those trials, and I got to see some of the, you know, top defense practitioners in New York.

Greg Kyte: You got you probably had to start all of your bosses cars for them, that kind of stuff.

Sam Buell: I mean, you know, it's interesting because we [00:07:30] I mean, certainly as a law clerk and a judge in these cases, there was no real concern about security. I mean, my judge didn't have much in the way of security. And I think, you know, in those days, particularly, the mob was known for being pretty professional about what they did and not bothering civilians. Okay. Um, occasionally there were innocent bystanders who, you know, got shot in a deli or something like that, but you didn't really worry about the people who were being prosecuted. Okay. [00:08:00] There was one case, famously, before I joined the prosecutor's office there, but not that long before where a, um, a there was an attorney by the name of Kathy Palmer, who was an incredible lawyer, and she she became known in the, um, Asian heroin markets area as the Dragon lady because she figured out how to, um, basically roll up distributors [00:08:30] in the New York area and get evidence, worked with some DEA agents to get evidence against the manufacturers and exporters in the um Burma Myanmar Golden Triangle area. And, uh, and she indicted some of those people, although I don't know that any of them were ever successfully extradited. Um, but she prosecuted some very senior people in that kind of network. And one day, uh, a guy who thought he was [00:09:00] being a hero, uh, sent a pizza to the courthouse with a spring gun in it.

Greg Kyte: So, uh, so, like, open the box, open the box.

Sam Buell: And there was a 22 caliber, you know, uh, rigged rifle in there that was supposed to kill Kathy.

Greg Kyte: Okay, okay, now, I've listed enough pizza boxes in my life to know and like the approximate weight. And I'm assuming a rifle's going to throw that off. That's just. Yeah. I mean, I've never been in that situation. [00:09:30]

Sam Buell: He was not a genius.

Greg Kyte: No, no, not at all. Also, also, just before we get too far from this, I just want to make sure that. So you're saying you have never in your life woken up next to a severed horse head? Is that what you're trying to tell us? Okay. All right.

Sam Buell: I haven't had that experience. Okay.

Greg Kyte: Uh, that was that was one of my main questions for today.

Sam Buell: Never two. Uh, but, um. Yeah. So. So Kathy is in the in her office with a bunch of DEA agents, and I think they're prepping for court or something. It's pretty hectic. And the marshals desk downstairs calls up and says, there's [00:10:00] a pizza here for you. And. And Kathy's like, I don't remember, you know, but somebody else must have ordered it, you know? And one of the agents was was like, this doesn't sound right.

Greg Kyte: Okay.

Sam Buell: So they went downstairs, the agents went downstairs and they, you know, treated the box carefully and found out what was in it.

Greg Kyte: Yeah.

Sam Buell: Wow. And so a colleague of mine who who ended up being my boss and ultimately my boss on the Enron case and a lifelong friend, she [00:10:30] took on the case, and she was very good friends with Kathy. And they found the guy, and they tried him and they convicted. It's like, you know, you're going to try to kill my friend. You're definitely not getting away with this.

Greg Kyte: Right?

Sam Buell: Right, right. But that's like the exception. Not, you know, the rule was you didn't worry about it too much. It's a different world now. I think I would be more concerned about crazy people with guns and so forth than [00:11:00] we were back then. Yeah, yeah. And and, uh, you know, I mean, it could be anybody, right? I mean, people often say that the most dangerous place to practice law is the family court. Oh, that's where people.

Greg Kyte: Get.

Sam Buell: Get most angry and violent.

Greg Kyte: Wow. Very interesting. I would have I would have not have not guessed that.

Sam Buell: And there's probably some accountants out there who feel some hostility towards me because of my involvement in the Arthur Andersen case. Oh.

Caleb Newquist: We're gonna we're [00:11:30] gonna get to that. Yeah. Okay. So NYU done with law school, and and you do the the clerkship was that Was that while you were in school or was that the first? No.

Sam Buell: That's your first year after school? Yeah.

Caleb Newquist: First year after school. Okay. Now, did you ever do the big law thing? Was that. I did I.

Sam Buell: Did go for a year. So I started interviewing with the US Attorney's office while I was clerking. Okay. And, uh, they. In those days, it's probably still true. They, you know, they had a limited number of slots. So you're the timing is tricky to, [00:12:00] you know, even if they want to hire you. So they I got through the whole interview process and, um, I was given an offer, but but then told or not formally made an offer, but said, we want to make you an offer, but there's no position available right now. Um, uh, and so we don't know when there's going to be. So I, uh, but probably sometime in the next year. So I said, all right, well, um, I need a job. And my girlfriend at the time was moving to Washington to start with a patent firm there. [00:12:30] And so I said, well, I'll interview with the DC firms and then we'll see what happens. So I ended up at Covington and Burling, which is one of one of the big law firms in in Washington for a little less than a year. Um, and not for you. Something opened up.

Caleb Newquist: Big law.

Sam Buell: I already knew I wanted to be at the US Attorney's office, so I wasn't going to accept that offer when it came. And it came. Ah, okay. Less than a year, so.

Caleb Newquist: Okay. So you. So, um, so, I mean, you were locked in, like, you're you're saying this. I'm. I'm going to be a prosecutor. [00:13:00] That that happened early for you.

Sam Buell: Even more specifically than that, I wanted to be a prosecutor in the Eastern District of New York.

Caleb Newquist: Oh, wow.

Sam Buell: Okay. In Brooklyn, I mean, I.

Caleb Newquist: Wanted to you were focused. You were a focused young person. I wanted to.

Sam Buell: Work in that courthouse. It was, like, the most interesting place I had ever been in my life. I grew up in a pretty cloistered environment. I. I was a faculty brat at prep schools in New England. So, um, and so, you know, I mean, there was a world there that literally because [00:13:30] that part of New York City is the melting pot, you know, Queens, Brooklyn, Nassau county, Staten Island. Yep. Um, people from all over the world. Um, and at that time, in the early 90s, there was more crime than anybody knew what to do with. I mean, the murder rate in New York City was around 2000 murders a year at its peak. Wow. Um, last time I looked, it was in the sort of 300 something range these days.

Greg Kyte: So this.

Caleb Newquist: Is before. This is before Giuliani [00:14:00] then, right? Or is it right around the time that he first.

Sam Buell: I mean, there was a whole it went Coach Giuliani, Dinkins during sort of my time in New York. And I just don't I don't remember the the timing. Um, right.

Caleb Newquist: But it was around that time, the like you say, the peak was like that late 80s, early 90s, around around that time when when crime in New York was really I mean, I don't I mean, keep me honest here, but like, I know the [00:14:30] 70s and you I lived in New York for a short period of time. So all this history is interesting to me. But the 70s were real bad. The 80s kind of continued, and then it and finally in the 90s, things started to get better after a kind of a long period.

Sam Buell: Of at a at a certain point, I would say late 90s, but it's different, right? In the 70s, there was a lot of petty crime and, and sort of street disorder and a feeling of an economic problems. I mean, the city was almost bankrupt or was bankrupt. And but by the time you get to the early [00:15:00] 90s, it's really more a story about criminal organizations. Okay. And not not just the Mafia, right? By a long shot. Um, and they tended to be organized around ethnic communities.

Greg Kyte: Okay. So we're talking we're mostly talking MLMs. We're talking like crime organizations. Right.

Sam Buell: Sorry, I didn't get the joke.

Greg Kyte: So sorry. Multi-level multi-level.

Caleb Newquist: Marketing.

Greg Kyte: Schemes. Schemes? Yeah. Oh, that's all right there. We have all of them here in Utah, I'm sure. [00:15:30] They're. Yeah.

Sam Buell: Anyways, except, you know, I mean, these guys aren't doing fraud. They're. What they're doing is real. Yeah, but they're but they're, you know, they're but it's black markets, right? Okay. So, um, you know, we can talk about this more at a certain point, but, you know, the question of what's legal and what's not is not really on the table. Uh, the question is simply what's getting detected and caught and what isn't. It's a pure cat and [00:16:00] mouse game. Right. Uh, I know I'm breaking the law. I have this criminal organization, I'm making a lot of money, and my job is to figure out how not to get caught. The first thing is, try not to become under the microscope, as we used to say, of the feds, because once that happens, you know, you're you're, you know, things have a way of going against you. But so, yeah, a lot of criminal organizations, you know, drugs, extortion, um, in those days, you know, there were still massive illegal gambling businesses [00:16:30] that were very profitable. Theft of goods from interstate shipments, you know, and gangs would specialize. I mean, you'd have organizations that were there. Their whole thing was, you know, we rip off other drug dealers. We don't really feel the drugs. We steal them from other drug dealers, and we steal their money and their guns, and then we sell them. And you don't. Those those crimes don't tend to get reported to the police, so.

Greg Kyte: Right, right.

Sam Buell: You know, stuff like that. And also a lot of international I mean, look, the the human smuggling stuff had started already in the late [00:17:00] 80s, early 90s. There were organizations in, um, in, in New York that were heavily involved in, uh, what we used to call at that time, alien smuggling from, uh, mostly countries in Asia, principally certain regions of China and, and Southeast Asia. And this was a very profitable business. And there were some you know, there was a famous case that a couple of years before I started involving this boat called the Golden Golden Venture [00:17:30] that had come across the ocean with full of, um, you know, illegal immigrants who paid a smuggling fee to the to the gang. And the boat ran aground off Rockaway Beach, uh, in Queens. And the captain panicked and ordered all it was an overloaded boat. Right. And all ordered everybody into the water. Oh, um, most of whom could not swim.

Greg Kyte: Oh, God.

Sam Buell: Dozens of people died in that incident. [00:18:00] Uh, you know, you you had a lot of different stuff. Um, you know, a friend of mine prosecuted a case involving, uh, a guy who was a, um. I can't remember if he was Indian or Sri Lankan, but it was like this Sikh community that he had all his, like, uh, workers were from. And he owned a series of gas stations called City Gas that if you were in New York in the 80s or early 90s, you'd remember those gas stations. And [00:18:30] he had rigged all the pumps. So his his gig was he was skimming off gas station pumps to, uh, enhance his profits. But this became an extensive scheme that would have landed him in jail for a very long time. So then, in order to protect the scheme, because people were starting to waver, who knew about it? He started committing murders. So you have a guy who owns a bunch of gas stations who's, like, killing people because he doesn't want them to be witnesses. [00:19:00] You know, that ended up being a big racketeering case. So, you know, the variety of cases that came through were it was just endless.

Greg Kyte: Yeah. Yeah, yeah.

Sam Buell: So yeah, that's where I wanted to be.

Caleb Newquist: Yeah. So let me ask you this. So then so it sounds like, yeah, there's all this interesting stuff going on. You're, you're it's you're at the beginning of your career. It sounds, you know, it's very exciting. What? Like what? When did the [00:19:30] Bulger case happen? Like. Was that. Yeah. Yeah. When did. When. Before we get to the the fraud stuff. Like when did the Bulger case happen?

Sam Buell: I mean, so my wife, who I had met, I was a first year lawyer at Covington and Burling in Washington. She was a paralegal about to start law school. Um, that's where we met. And, uh, she knew, you know, we we fell in love. We were very quickly realizing that we wanted to stay together and, and and, [00:20:00] you know, ultimately get married. And she knew that I had this thing in New York. So I ended up getting the job. She did a year of law school at UVA and then transferred to NYU so we could be together for the rest of law school. But she did not want to practice law in New York, uh, as a first year associate at those big firms, you know, are tough. Yeah. And, uh. And she was also from New England. So, uh, so we [00:20:30] talked about, you know, at that point, we a couple years later were married. She's finishing law school. She's deciding where to go. Um, let's go to Boston. Uh, you know, and I'll try to get a job in the US Attorney's office in Boston so I can keep doing what I'm doing. And you can start your career in Boston, which she did. And that was during the initial tech boom of the late 90s. So she learned how to be a startup lawyer in that, you know, uh, context. It was it was great. Um, although very hard work. Um, [00:21:00] so I you can't just transfer U.S. attorneys offices. They're each their own, like, entity. So I had to apply, and, um, but I was able to get a job there, and, uh, it was in their organized crime unit. They did not hire me to work on the Bulger case, but there was some period of a couple of months delay or whatever.

Sam Buell: And then I showed up there for work and they said, well, guess what? We have this case going on and it's bogged down in court. They need another prosecutor to keep the grand jury work going. So we're going to put you on it. Um, I remember hearing [00:21:30] about Whitey Bulger. I mean, I grew up in Boston, so. But it wasn't like something that I'd really followed. And then. So then for the next 3 or 4 years, I kind of went down the rabbit hole into that case, which itself went on for something like 20 years. I mean, Fred Wyshak, who was the lead prosecutor on that case and is really kind of the hero of that story, he he, uh, you know, probably spent a total of 20 years between when he started in Boston and when he retired, thinking [00:22:00] about what he. Bulger. Yeah. And dealing with Whitey Bulger. So it was it's kind of like the bleak house of criminal cases. You know, it just, you know, the famous Dickens novel about the civil case that goes on forever. Um, it it just went on and on and on. And there were all these all these offshoots, but the part that I was involved in was pretty cool because they had already charged Bulger and his co, his his wingman, Stephen Flemmi and Flemmi had been arrested. [00:22:30] But Bulger, as everybody knows, had fled, you know, and he was a fugitive and attend FBI Ten Most Wanted for a really long time. Flemmi decided to roll the dice in the case that they initially brought against him and basically out himself as an FBI informant, which they had both been. It later came out right?

Greg Kyte: Right.

Sam Buell: I mean, in order to out himself, he had to out Bulger as well. There had been rumors for years, but, you know, they he officially in court said I was working with the FBI, specifically this agent, [00:23:00] John Connolly, who ended up being corrupt and convicted, um, later. And and I'm immune from prosecution because the FBI told me I could run around Boston committing crimes in order to give them information about the, uh, la Cosa Nostra, the Nostra, the Italian mob. Yeah. Um, which, by the way, Flemmi had once had an invitation to join, and he declined. Um, but, uh, he preferred to work with Bulger. So, um, so, uh, [00:23:30] then you have this massive legal battle about this immunity claim and a judge who just went crazy with it, wanted to use it as a lever to kind of unearth the history of everything that had happened in the FBI in Boston over the last 20 years. The hearings actually went on for almost a year. These are pretrial hearings. So they so they the process, Fred's theory, which was of course, proved correct, was, look, we don't have these guys indicted for the murders yet. [00:24:00]

Sam Buell: We know they did a ton of murders. If we can get them indicted for murder, the immunity claim will be gone, because no one's going to be able to say, oh, the FBI told me I could kill people. Clearly they didn't. And and it wouldn't have been legal for them to do so anyway. So we need more witnesses. So so go in the grand jury and and and we want to be continuing to chase this guy Kevin Weekes, who was Bulger's kind of, um, I don't know, surrogate son. Basically. He was kind [00:24:30] of his lieutenant, um, younger guy. And so we built a case against Weekes involving some extortions and some other things. And, um, at, at the point at which we arrested him. So I did the grand jury work on that. We got him arrested. By the time we got him arrested, it was out that his, you know, former bosses had been informants. So he there was no love lost. And the stigma of flipping on these guys was gone.

Greg Kyte: Sure. Yeah. So, yeah, if they've been snitches this whole time, [00:25:00] then. Yeah, exactly.

Sam Buell: So he. And he was just waiting to see when we were going to get to him, and he knew what he was going to do. So, you know, within a couple of weeks of his arrest, we were debriefing him and he did know about some of the murders. And not only did he know about some of the murders, he he literally knew where the bodies were buried.

Greg Kyte: Oh.

Sam Buell: So weeks took us to some locations where we recovered in two waves. I think a total of five bodies.

Greg Kyte: Wait, so you're out there in [00:25:30] galoshes and a shovel, digging up corpses?

Sam Buell: The prosecutors don't wield the shovel, I assumed.

Greg Kyte: I assumed not because.

Sam Buell: One of the principles is you don't want to make yourself a witness to anything. So to the extent that you're going to be calling people to testify about crime scene evidence and so on, it should be you, right?

Greg Kyte: Gotcha.

Sam Buell: Um, but we were allowed to go watch.

Greg Kyte: Oh, okay.

Sam Buell: And hang out with the agents while they were doing the work.

Greg Kyte: Did you? Yeah. Oh, geez. Gross.

Sam Buell: I okay, we're talking [00:26:00] about skeletal remains that have been in the ground for ten years.

Greg Kyte: I that's. Yes. Yeah. So I need to go off camera real quick.

Sam Buell: So I learned about what's called forensic anthropology, something I'd never heard of before.

Greg Kyte: Okay.

Sam Buell: There are experts. A woman was brought in by the mass state police, who were one of the main agencies on this investigation. Mass state police, by the way, is an unusual state police. They have a very sophisticated organized crime unit and have for many years. And they do complex [00:26:30] investigations which a lot of state police units do not. Um, a lot of that was depicted in the movie The Departed, which is I.

Caleb Newquist: Remember.

Sam Buell: You know, a little bit based on Bulger. Um, the state police depicted in that. But, um, so the state police bring in this woman. She's an expert. I can't remember where she was from. She's a, you know, she basically a coroner.

Greg Kyte: Okay.

Sam Buell: From another state, but but but a specialist coroner who knows how to do, uh, recovery and examination of very old remains. And this [00:27:00] is obviously a skill that is needed in many contexts around the world. Not always criminal. Um, but. So she's in there kind of kind of with a, you know, a it's almost like an archeologist, right?

Greg Kyte: She's right.

Sam Buell: Brushes. And it's got to be very careful. You're doing it a little bit step by step. The amazing thing was the bodies were exactly where Weekes said they were going to be. Oh, wow. Um, after 20 years, I mean, you know, vegetation changes, everything changes. But I don't think you forget that, you know?

Greg Kyte: And he. Yeah, he.

Sam Buell: Kind of was like, [00:27:30] dig here.

Greg Kyte: Um.

Sam Buell: And, uh, and then what you do at that time, the DNA technology was still kind of nascent. Um, I think it's developed a lot, but we did what's called mitochondrial DNA analysis, where you take some DNA from the skeletal remains and you if it matches with a direct relative. So I think we had siblings of these victims, um, who were contacted and told, you know, we may have found your relative. [00:28:00] Um, and then you get the mitochondrial DNA match, which is a nice piece of corroboration for the testimony of the cooperating witness weeks about who it was and why they were killed and so forth.

Greg Kyte: Yeah. So in your opinion, uh, was the portrayal of Whitey Bulger by Johnny Depp in the movie Black Mass pretty? Pretty accurate?

Sam Buell: Not bad, I thought.

Greg Kyte: Really? Okay. But, you.

Sam Buell: Know, you have to understand, my perception of Bulger was based entirely on interviewing witnesses [00:28:30] who had dealt with him. Okay, guy.

Greg Kyte: Oh, okay. Yeah.

Sam Buell: I mean, he was ultimately captured long after I left the government.

Greg Kyte: Okay.

Sam Buell: Okay. I was sitting right here, actually, at this in this chair, I think in this job, when I found out that he had been apprehended in Los Angeles.

Greg Kyte: Okay.

Sam Buell: And his behavior was very strange with, with with law enforcement and the lawyers and the courts and stuff. As an old sort of like as an old man being prosecuted. So it was it was a little bit hard to tell what [00:29:00] he was really like, you know, in the 80s when he was ruling the roost, but sure. But yeah, you know, I thought the I thought it wasn't bad.

Greg Kyte: Well, okay. But you said because you worked with Fred Weiss with Jack white, right? Yeah. What was the portrayal? Because I, because my, my only preparation for this interview was watching about two thirds of black mass last night. So, uh, what was so the actor Corey Stoll played Fred Wyshak was was that. It must be weird seeing an actor to portray a friend. No, no, it.

Sam Buell: Doesn't look anything like [00:29:30] him. Doesn't. Not not not he. I don't think he was trying to be the actual Fred.

Greg Kyte: Right, right, right. And that's.

Caleb Newquist: Probably. That's the magic of Hollywood, right?

Sam Buell: That's probably what they tell them. Right? Is like, you know, so you're going to create this character. And sure, this generic kind of hard charging, no compromise prosecutor. And that's what the audience wants to see. They don't care whether it's the actual guy.

Greg Kyte: Right. Yeah. Yeah. Yeah.

Sam Buell: It's it's like the actual guy. So, um, I think.

Greg Kyte: Uh, you should have been portrayed by [00:30:00] Hugh Jackman in that movie. You're that's that's my. He wasn't in it. I think he they should have cast him. That would have been. Yeah.

Sam Buell: There wasn't really a lot in that film about the period that I worked on the case. Right. Most of it was about when the crimes were committed. Yeah. Way earlier. Um, and then and then ultimately, you know, uh, about the early prosecution, I think it ends, you know, before we get to the I mean, because ultimately what we did was we returned [00:30:30] a extensive Rico case, new indictment with 20 murders going back to the late 1960s.

Greg Kyte: So. And real quick, you said Rico case a couple times. I'm not smart enough to know what that means. What does Rico mean?

Sam Buell: Rico is stands for the Racketeer Influenced and Corrupt Organizations Act.

Greg Kyte: Okay.

Sam Buell: Uh, which was enacted by Congress in around 1970. Okay. Um, [00:31:00] as part of a sequence of legislation that happened in that era that was designed to give the federal government the tools that it needed to actually take down the Mafia.

Greg Kyte: Yeah.

Sam Buell: The very specific outgrowth of, let's say, the Bobby Kennedy era at the DOJ, when he kind of came in and said, why? Why haven't we taken on the Mafia under LBJ? And, um, and, uh, you got the Wiretap Act, which didn't used to exist, you got Rico and you got [00:31:30] some other laws that were very potent tools. And, you know, if you want, we can talk about how Rico works. It's it was the way it was written. It's not limited to organized crime. It was written for that, but in a much more general way. And it's been used in a lot of contexts now, including fraud cases.

Caleb Newquist: Well, so let me so let's, let's, let's turn toward that now. So you're, you're in Boston, you're working on this big high profile case. And like you like you say, you with your experience in the Eastern [00:32:00] District of New York, you like, you're seeing all kinds of stuff. Like how how does the Enron opportunity come along? Like, was that something.

Sam Buell: Just the way that things happen in life? I mean, yeah, okay.

Caleb Newquist: Literally tell us about that. Yeah.

Sam Buell: So I was literally walking back to my car one evening in. So so Enron files for bankruptcy and sort of like December of 2000. Um, sorry, 2001, 2001. Yeah. So, uh, so, I mean, the other thing that had happened [00:32:30] that fall was.

Caleb Newquist: 911, right? 911. Right.

Sam Buell: Two of the planes took off from Logan Airport.

Caleb Newquist: From Logan, right.

Sam Buell: Across the water from my office window.

Greg Kyte: Oof!

Sam Buell: Um, at the federal courthouse in downtown Boston. And, uh, I remember that day, as soon as we we, you know, the reporting was that two of these were Boston flights. We were in the hallway, a few of us, and I was with one of the supervisors in the office, And I said, you know, we were sort of talking and we're like. Well, we [00:33:00] need to investigate this because this started in New England. And by the way. Downtown Manhattan is a mess. So the U.S. Attorney's Office for the Southern District of New York is not really going to be doing anything today. So a couple of us ended up over at the FBI office in Boston, and then I don't think I left for 48 hours. I mean, we were doing subpoenas and search warrants, trying to figure out where these guys had spent the night and what. And at the time, we it was every reason to believe, especially the way prosecutors think. Oh, there must be coconspirators. There's people at large in New England who are involved [00:33:30] in this. We need to find where they are. And. Yeah. Um, so that was all very you know, I ended up having an involvement. Now, ultimately that didn't continue because the case, as we expected, was not going to be given to the Boston U.S. Attorney's office. Right. I mean, it was it was basically taken over by main justice at a certain point focused into the Eastern District of Virginia, where the where the Pentagon is, and the Southern District of New York.

Sam Buell: Um, and then ultimately, we got Guantanamo and [00:34:00] it became a war. So it wasn't even a, you know, case at a certain point. Um, but we thought it was a criminal case when it first started. Um, so there was that. And then so then Enron declared bankruptcy in, in, in, uh, December. And, um, I was vaguely aware of the case. I mean, it was on the front page of the Wall Street Journal, obviously in in some ways it was kind of the nine over 11 of the corporate world, like people just was so shocking. Right. I mean, the seventh largest company in the in the, in the, in the fortune 100, [00:34:30] uh, evaporates overnight. This had never happened, at least not since the depression. You know, and people were like, what is this? Um, plus, there were whispers or speculation that there might be Washington connections, that this could have some kind of corruption angle because, you know, immediately the press was reporting, oh, these guys were the biggest contributors to the Bush campaign, both when he, um, ran for governor of Texas and then. When he ran for president. And, uh, and [00:35:00] connected also to a lot of other people in Washington. You know, like John Ashcroft was the attorney general at the time. He recused himself from the case because he had taken a lot of Enron money when he was running for Senate in Missouri.

Sam Buell: So there were some political angle there that was interesting. And so I was sort of aware of that. And then I'm walking to my car, coming home from work in the parking lot one night, and I get a call from Leslie Caldwell, who had been my supervisor in New York when I was doing gang cases and learning [00:35:30] how to be a prosecutor. And she had moved on from New York at a certain point to get a change of pace, went out to San Francisco. And Bob Mueller was the U.S. attorney in San Francisco at the time, hired Leslie to run the white collar unit out there. And she had done a number of prosecutions in Silicon Valley and had really impressed Mueller. Uh, DOJ had decided Michael Chertoff, who was the assistant attorney general at the time, persuaded the Justice Department that the [00:36:00] Enron case should not be done in Houston, uh, by the Houston U.S. Attorney's office, that it was it needed a task force, uh, main justice task force. So Leslie had been recommended for the job of running that by Bob Mueller. So DOJ hired Leslie. She immediately needed to put together a team and started calling some of the people she'd worked with that she liked. So I got a call out of nowhere from Leslie Caldwell, and she goes, I just got the Enron case. Do you want to come work with me?

Caleb Newquist: Just like that. [00:36:30]

Sam Buell: And just like that. And if you want to be, if you if you want to work on this case, there's a meeting at the SEC on Monday in Washington. Be there.

Caleb Newquist: And this is like a this is the Friday before or something. Yeah.

Sam Buell: It was like the week before. Yeah. Okay. And, uh, you know, there were some politics involved, uh, obviously, but there wasn't much the Boston office could really say. I mean, you know, Main Justice had this case, and it was a massive priority. Um, [00:37:00] it also looked good for them, I guess, to some extent that one of their prosecutors was being asked to join this. And so I didn't get a lot of resistance. Um, I, I think my colleagues on the Bulger case were disappointed, you know, to lose, uh, the help. But at that point, I'd contributed a bunch to the case that had kind of pivoted, and it was going to be a really long time. And it was a really long time before that case went to trial. So [00:37:30] the idea that I could stick around Boston and see the end of the Bulger case just didn't seem realistic to me. I mean, I was already thinking about the fact that if I wanted to teach, I needed to get out of DOJ pretty soon.

Greg Kyte: So and you're like, hey, guys, I left a huge pile of pile of bones on my desk. Just sift through those. I'm gonna go deal with this, uh, thing that has much less decaying flesh involved in it.

Sam Buell: Yeah, and also Flemmi was. Flemmi was screwed. I mean, he was going to plead, uh, [00:38:00] um, you know, and the at that point, the fugitive hunt for Bulger had been going on for years already, and and it was showing no signs.

Greg Kyte: Yeah.

Sam Buell: Of any promise at all?

Greg Kyte: Right. Um, so you're like, I'm bored with this. Let's get on to something interesting. I well, I was that was that at all? No, I.

Sam Buell: Wouldn't say bored. I would say, um, you know, it just was a grind.

Greg Kyte: Okay. Yeah, yeah, yeah, I get that. And the and.

Sam Buell: The and the and the politics in [00:38:30] the case were tough. I mean, there was a lot of interagency fighting in that case because of the, the problem of the FBI having been involved in some corruption. And there were separate teams working on different parts of the case. I mean, the Boston office was recused from the prosecution of the FBI agents. There had been relationships over time, so they brought in an outside prosecutor to do that. And then I think it was also just feeling like, well, I mean, I remember talking to my wife and, you know, we just had [00:39:00] our first child. And so, you know, things weren't easy at home, um, in terms of the workload. And we're both working as lawyers. And I said, this is crazy. And, you know, I can't do this. We recently bought our first home. And and she goes, no, you got to do it. It's going to it's the one shot to do something, you know.

Caleb Newquist: So she knew.

Sam Buell: Yeah.

Caleb Newquist: She knew.

Sam Buell: Plus she knew Leslie very well. And she knew that. Okay. You know, working for Leslie was great. So.

Caleb Newquist: Okay. So if I may level set just for a second here. Yeah. [00:39:30] You get the call. Uh, your wife is on board. You have a young child, a new house, and you're like, all right, pack it all up. We're going. Did you go back to New York or did you go to D.C.? Where did where was your next part of the task force?

Sam Buell: You know, DOJ cases that are run out of main justice often involve a lot of travel, and they're sort of used to the idea that they file cases all around the country and their lawyers have to travel. So I just [00:40:00] traveled instead of.

Caleb Newquist: Stayed in Boston.

Sam Buell: So instead of traveling from Washington, I traveled from Boston. Okay. Gotcha. It became kind of a triangle because we basically had offices in Washington and Houston, and we would move between Washington and Houston. Most of the work was witness interviews.

Caleb Newquist: Okay.

Sam Buell: Hundreds of interviews and multiple interviews of, you know, witnesses. So we were we were basically in DC, in Houston, you know, maybe like [00:40:30] alternate weeks, roughly. Um, and then, you know, DOJ decided that to the extent that any cases were going to be filed, they needed to be filed in Houston. I mean, you could have actually venued the Venued the cases in D.C. because the SEC is in D.C., and the fraud was all ultimately connected to the financial statements they were filing with the SEC in Washington. So it would have been proper to indict in Washington, but it would have looked very bad politically for DOJ to be hauling all these executives [00:41:00] out of Houston and prosecuting them in front of a District of Columbia juries. Right. Um, and there was also a sense that, I mean, Enron had a massive impact on the Houston community.

Caleb Newquist: Right.

Sam Buell: Um, almost everybody in Houston knew somebody who worked for the company or was connected in some way. Um, the bankruptcy was devastating. So there was a feeling that the Houstonians should be the ones who are hearing this case. Yeah, that makes sense.

Caleb Newquist: So let me ask you. So let me ask you this. So at [00:41:30] up to this point, was a counting on your radar at all? No.

Sam Buell: No. I mean, that was the thing.

Caleb Newquist: So like.

Sam Buell: It was like you, you know, I needed a high speed education, right? You know, and and it's super high speed. We all did, you know. And I learned a ton. I mean, I didn't even know. I didn't even know what Libor was. Like, people would say, well, LIBOR plus basis points and it'd be like, what is live?

Caleb Newquist: Yeah. It's another language. [00:42:00] Yeah, right. You went from the language. You went from kind of the jargon and language and kind of culture of criminal law to the, to a complete baptism by fire in corporate accounting and finance. Just minutia.

Sam Buell: Yeah. Except I want to say that we had a lot of experts to help us.

Caleb Newquist: Okay, good. Makes sense.

Sam Buell: That's kind of the SEC DOJ, right? Okay. One thing that happens in these cases because the SEC [00:42:30] has expert staff, right?

Caleb Newquist: That's right.

Sam Buell: Yes. And, uh, and it's also kind of a thing in law generally, you know, and this is true in big law as well, that litigators, as we're called, are supposed to be generalists. And, you know, of course, there are exceptions to that. I mean, you can't be a patent litigator without being an expert about, you know, certain things, but. Right. But business cases, it's common [00:43:00] on both the defense and prosecution side for lawyers to come in. And basically as because you're thinking ultimately that your role in this is first to figure out what happened. But if there's going to be trials, you're going to be the trial lawyer. You have to figure out a way to translate all of this stuff for a judge and a jury.

Caleb Newquist: Yep.

Sam Buell: So you don't really want to be someone who's too in the weeds of the technical stuff, because you're not going to be understandable. You know, you want to be kind [00:43:30] of the interpreter. So you're you're going in there and you're kind of like talking to a lot of people who are experts, including, by the way, lots of the witnesses. I mean, a lot of the witnesses were CPAs. They were explaining stuff to us. And you're like, explain it to me like I'm your mother.

Caleb Newquist: Yep.

Sam Buell: You know. And ultimately, the problem at bottom is just to follow the money problem.

Caleb Newquist: Right.

Sam Buell: Right. Yeah.

Caleb Newquist: Ever since Watergate. Right.

Sam Buell: And that's one thing that the judge I clerked for was so good at training us in. [00:44:00] I mean, he was also a generalist who could make himself an expert on almost anything that came before him. And he always taught us how to follow the money, you know. Um, and so we're like, okay, you know, there's a bunch of technical terminology here that we have to understand what it means, and that takes a while. There's a language you have to learn how to speak. But ultimately you're just. And this is the same thing I try to teach my students. I mean, ultimately, in these cases, you're you're following the money, and [00:44:30] you have to remind yourself that the people that people that you're dealing with, um, they speak a different language, but that doesn't mean they're smarter than you or that they, uh, you know, are just capable of understanding things that you're not capable of understanding. Right? No, you know, it doesn't. It doesn't work that way. I tell my students, look, you guys are in law school for three years. As graduate students, you're at a top school. You're you're very smart people who work [00:45:00] very hard to learn stuff. Like you just have to when you get out into practice, apply that same mentality. The people that you're going to be talking to are going to be talking to you about things that sound really mathy and technical and oh, that's but, you know, many of them didn't even go to graduate school. If they did, most of them MBA, they've got a couple years of grad school. It's not like they have some, you know, it's not like they're rocket scientists, you know? Um, so but that's kind of the attitude [00:45:30] that we had. And it just took a long time, you know?

Greg Kyte: Okay, so. So, uh, Sam, just to make sure I'm understanding, uh, at least part of what you're saying correctly, because this and this would make a lot of sense to me. Uh, the the litigators, you said litigators need to be generalists, and and part of that is you you need to if you're able to learn a concept that's foreign to you and present that in court, that's also going to give you an advantage [00:46:00] of helping to educate the jury, who likely has not been to grad school, like like the whole idea of taking these because because Enron ridiculously complex. I have I've read all the books, I watched all the documentaries. If you ask me how they did it, I'd be like, I still don't totally get it and.

Sam Buell: Don't get it either. Yeah, that was the thing. It was, you know, it.

Greg Kyte: Was.

Sam Buell: It was this kind of, um, you know, the House of cards analogy has [00:46:30] been used, but I think, you know, it was more like what? I don't know if you know the term a Rube Goldberg device.

Greg Kyte: Yeah, yeah, yeah.

Sam Buell: It's kind of this thing that was just sort of cantilevered off of itself constantly. And, and they were running in so many different directions that it was very hard for. And one of the things that people need to understand about the Enron case, it's a common misperception and one that would be natural to have people think that the criminal case was kind of like these guys got indicted for, [00:47:00] you know, destroying this company. No, the criminal case was a a collection of pieces of the business and incidents over time where they stepped over the lines and they told lies and they misled people. That doesn't mean that the whole company was a fraud. I mean, this isn't Bernard Madoff.

Greg Kyte: You know? Right? Right.

Sam Buell: It's not a Ponzi scheme. It's not like there was [00:47:30] no there, there. I mean, they started as a pipeline company. Um, and they still had a whole bunch of hard assets. I mean, the problem was that, you know, there were issues with Mark to market accounting and how they were booking the hard assets. But they had a bunch of hard assets. There was a lot of residual value in the company. But, you know, they got obsessed with what was an a general obsession at that time in the late 90s, early 2000. And, you know, has continued basically since. But [00:48:00] they got obsessed with the business was the stock price. Yeah.

Greg Kyte: Yes.

Sam Buell: And, and and the you know, the tail was wagging the dog. Everything was designed to, uh, not not have the, you know, the stock price not be a reflection of fundamental value, but a reflection of excitement about all the things they were going to do and we're doing. And and so then you get all the puffery and the and the and then the and then when it, you know, when the when the when the the the the the [00:48:30] accounting for all this stuff starts to get really strained. You know, that's where you get the temptation of we got to keep the story going. Yeah. So you get false statements. You get accounting maneuvers that are over the line. And that was only part of the whole story of the corporation.

Greg Kyte: Right?

Caleb Newquist: Yeah.

Sam Buell: It's not a crime to run a company into bankruptcy, which of course, to some extent was Jeff Skilling's defense.

Greg Kyte: But it's not a crime to run [00:49:00] a company into bankruptcy. It's just being horrible. I'm not a I'm not a criminal. I'm just horrible at what I do. Yeah.

Sam Buell: No no no no no no no. I mean that guy that guy is never admitted, you know, I mean, he's expressed a lot of regret. I don't think he's admitted, you know, fault. I mean, his his his story was, uh, bad luck. It was a run on the on the bank.

Caleb Newquist: Yeah, right.

Sam Buell: So, you know, all all our counterparties started calling in their chits at once. And [00:49:30] what were we supposed to do? Well, you know, that's a non sequitur. I mean, you know, there are a lot of reasons that banks. You might get a run on a bank. And one of them is people think they're fraud.

Greg Kyte: Yeah. Yeah.

Caleb Newquist: Yeah. Right. So, so you've mentioned a few things. That brings up a question for me that I think goes to not just Enron, but in a lot of different cases that we we do on the podcast. And I'm sure a lot of different cases that you've seen in your career, which is how often does [00:50:00] fraud occur when people are just caught up in the moment and the excitement, like in the case of Enron, excitement and hype and, and, and, and people just getting in over their head and making some really bad decisions based on that hype and excitement. Is that is that the most common thing that you've seen over the course of your career? Is that is that what happens to people?

Sam Buell: Absolutely. I mean, I think that, you know, you could say that that [00:50:30] that, you know, there's a version of the Madoff case where that even, you know, I think of Madoff as the sort of exception. Right? Like I don't even really teach it to my students because there's nothing legally that interesting about it. I mean, it's just a guy who, you know, stole a bunch of money. Yeah. Right. Um, but, you know, if you and I haven't really, like, steeped myself in the Madoff case, but I, you know, my understanding is that there there was a legitimate investment fund at some point, you know, and the question [00:51:00] is, when did it when did he start making stuff up? Because he wanted to keep the story going. But but, you know, it wasn't like he sat there on day one and said, how can I do a Ponzi scheme?

Greg Kyte: Right, right.

Sam Buell: Yeah. Now there are those cases for sure. Uh, but they don't tend to happen in the large, legitimate, kind of reputable corporate space. And we have lots of fraud cases in that space. And almost all of them are exactly what you're talking about, Caleb, which is, uh, [00:51:30] you know, uh, inability or unwillingness to deal with bad news and to come clean about business problems. And then there's this creep effect, right? I mean, once you tell the first lie, once you mess with the first number, it's like, you know, you read about what happened in Worldcom. You know, I mean, initially, ultimately that case was, [00:52:00] you know, $1 billion book cooking, right? Where they basically took $1 billion of what should have been treated as an expense, and they capitalized it.

Caleb Newquist: Right.

Sam Buell: Um, but before they got to that point, there were all these little tricks that they were doing, you know, kind of counting trash and, you know, any one of which might have been sort of an arguable thing or [00:52:30] maybe a Civil SEC enforcement, but not a people should go to prison. But but by the time they did that for a little while, you know, and Ebbers was sitting there going, we just can't have a bad quarter.

Caleb Newquist: Right?

Sam Buell: Um, because I've got to keep the stock price going up. And by the way, his whole personal financial portfolio was leveraged off of his, um, his options. So he was going to be personally in a lot of. And the same thing was true of Ken Lay at Enron. Uh, [00:53:00] because the financial advisors, I don't know if they still do this, but they were all telling these guys at that time, you know, this was when stock option compensation first, you know, really took off in massive quantities. And they were telling guys, you you need to diversify. Well, but I can't sell all that because all you you have all your, your your your shares in this one company you need to diversify. Well, but I can't start dumping my shares or people are going to think I don't believe in the company. Okay, borrow off them. Oh, um. So the banks will take [00:53:30] them, um, as collateral.

Caleb Newquist: As collateral? Yeah.

Sam Buell: So, uh, get bank loans and and then, by the way, don't just put the bank loans back into the market. You need to diversify beyond the market. So Ebbers and Lay were being told to buy things like yachts and horses and cars and real estate and all this stuff. Not very liquid stuff. Right. So. So now the stock price starts coming down because there are initial problems. There's margin calls [00:54:00] coming from the personal bankers, and they can't be satisfied with selling other assets because you've put all your money or a lot of your money into illiquid things. So, you know, that becomes a very strong personal motive to try to keep that stock price up. Absolutely. These companies are being lauded as, you know, great success stories. And no CEO wants to say, you know, actually, we're not succeeding. Um, so there's that incremental effect. And then you have [00:54:30] the organizational psychology part, right, which is the groupthink. So, you know, you're you have these motives, and then you're around a bunch of people who are kind of reinforcing what you're thinking or saying or suggesting that it might be okay when it's not, or they're afraid to say it's not okay because they don't want to lose their status within the organization. I mean, here's a fact about Enron that, you know, uh, [00:55:00] many people do not think about. So Sharon Watkins, who was the in-house person in the CFO Shop, who had been an Anderson accountant and was a CPA, who wrote the famous email to Ken Lay saying we may implode in a wave of accounting scandals. And she later ended up on the cover of time magazine as a person of the year. Yeah. And has been described as kind [00:55:30] of the poster child for whistleblowing. Sherron Watkins was not a whistleblower. She was trying to tell. I mean, she was acting, you know, out of good motives. But she didn't go get a lawyer and go to the SEC.

Caleb Newquist: Right.

Sam Buell: Or DOJ or, you know, she basically told the chairman of the company that the CFO, Andrew Fastow, was [00:56:00] risking the demise of the company. And, you know, it would be fair to say that she hoped that he would be fired. You know, that's not actually being a whistleblower. Really?

Greg Kyte: Yeah. It's maybe standing up to your boss, which is still, still courageous. But yeah, I hear what you're saying. It's not technically whistleblowing because you're still trying to resolve it in-house, I guess.

Sam Buell: Yeah. And there's power struggles going on and. Yeah. So, so, um, [00:56:30] so, you know, the, the group psychology part of these things is, is really powerful too.

Greg Kyte: Um, yeah, for sure.

Sam Buell: And I'm sure that's something that you folks have seen in a lot of the cases that you've talked about.

Greg Kyte: One of the most fascinating things that we look at is all of the the psychological aspect of all the frauds, where it's not just it's not just money running around, it's it's the weird, the weird places people back themselves into and groups back themselves into where they can't, you know, where they're making very, very irrational [00:57:00] choices. Uh, but but like you said, based on their wanting to maintain a reputation or like a CEO not wanting to admit that their company is failing horribly, that sort of stuff. So it's all.

Sam Buell: It's especially hard for the young people, you know? I mean, if you're just a little bit out of school and you don't really have a lot of experience in the corporate space, you've got nothing to compare anything to in terms of what you're seeing. So how are you supposed to know when it's like, whoa, wait a minute now? You know, there are exceptional [00:57:30] humans who just have a gut instinct and intuition or an unusual maturity who can see something and say, this ain't right. I mean, you know, Tyler Schultz in the in the Theranos case, you know, might be an example of that. Uh, I don't feel okay with this, but that's very unusual. Right, right. Um, because how, you know, you're you're a young person, you're like, well, these older people must know what they're doing. Yeah. You know, and I'm supposed to learn [00:58:00] from them. So, you know, it doesn't. It seems a little weird, but I. What do I know? You know. Um, so. Yeah.

Caleb Newquist: I want to ask you one more thing related to the Enron case before we kind of move on to some other stuff, but, um, what was your involvement with the Arthur Andersen prosecution?

Sam Buell: So. So this is, uh, you know, probably the most controversial case I was involved in as a prosecutor. And, um, [00:58:30] so what what happened was, uh, we got started on the case, and, and we were told by the supervisors, you know, it was being run out of main justice. Um, we need to look at this obstruction of justice thing with Arthur Andersen first. Um, because it's less complicated than the accounting, which is going to take more time to to figure out. And Andersen was putting a lot of pressure on the DOJ through their attorneys to get a resolution [00:59:00] fast because it had come out and there were congressional hearings that there had been document destruction. Yeah, which was a shocking thing. I mean, you know, not notwithstanding the the sort of innocent gloss that they, you know, later managed to put on it. Um, to have a big five accounting firm that was already in trouble with the SEC representing one of the largest companies in the world, which was their number one client revenue wise. Suddenly have [00:59:30] the the relationship partner and a somebody in the in-house counsel's office, uh, at headquarters telling all the junior people in Houston to, to to shred everything other than the official working papers and especially the other stuff, because it's the emails and the handwritten notes and stuff that tell you what people are really thinking. Get rid of all that stuff, because the SEC is looking at Enron and we are going to be looked at too. [01:00:00]

Sam Buell: But there was a belief that, you know, until they had officially been served with a subpoena that it would somehow find to get rid of evidence. I mean, you know, at least from the S.E.C. standpoint, these are regulated entities, these accounting firms, they're supposed to have they have professional obligations. They can be disbarred. I mean, you know, this is not the kind of behavior that anybody expected from a big five firm. So when that came out, it was shocking. And it was leading to client flight [01:00:30] and partner flight. So they were trying to hold the firm together. And it's not a corporation. It's a professional services partnership. And all it has is its human capital. So when the clients start running and the partners start running, you're done. Yeah. So they put a lot of pressure on DOJ. We need an answer. We're cooperating. You can interview all our people here, all the documents. We need an answer. Um, so we did a all hands on deck 6 to 8 week investigation where we put together [01:01:00] the sequence of everything that had happened in that fall when Enron got in trouble and Anderson started worrying about their own situation, and we came to the conclusion that we was not going to be a declination. We could not just walk away from this.

Sam Buell: Now I say we I mean, I was one of the, you know, line level prosecutors on it. Um, so me and another guy were kind of the, you know, trial lawyer level guys, and we had a third person come in when it ultimately went to trial. Um, but this was all [01:01:30] going up the chain through the head of the Enron task force, up to the assistant attorney general and the deputy attorney general. And there were ultimately meetings in Washington, which I attended, but were were, you know, discussions between the law firms representing Anderson and the senior leadership in DOJ. And the conclusion from looking at the investigation, the facts, and from the prior run ins that Anderson had with had with the SEC, including they were [01:02:00] still under the terms of a settlement involving bad accounting at Waste Management. Um, which was another client. Uh, they, uh, the conclusion from DOJ was we can't just decline this. There's got to be some kind of criminal resolution. This has to go to the next level. You've already had, um, SEC sanctions. Um, and this is a much worse situation. And obstruction is a really bad problem. Um, especially when we depend on the voluntary [01:02:30] cooperation of these organizations, for the most part with regulators. I mean, that's supposed to be the way it works, not cat and mouse. You know, I'm trying to get rid of the evidence.

Greg Kyte: Right.

Sam Buell: Um, so we offered them a deferred prosecution agreement, right. Actually, a non-prosecution agreement. I mean, we but but, you know, we won't prosecute, but you have to settle with us and admit to the wrongdoing and be sanctioned for it. And the answer was, well, we'll settle, but it has to be like an SEC settlement where we don't admit anything. [01:03:00] Because if we admit to obstruction, the plaintiff's attorneys are going to use that against us in the private securities litigation, and it's going to be a disaster for us. And it's also it would be bad for our client. I mean, what client is going to say, I want to continue to be audited by a company that just admitted that it obstructed.

Greg Kyte: Right. Right. Right.

Sam Buell: So no. Well, now, what are you going to do? I mean, we weren't bluffing, but, you know, so. Okay. We're going to have to return [01:03:30] an indictment. I think they believed we weren't really going to do it or something.

Greg Kyte: Mhm.

Sam Buell: Um, and and so we returned the indictment and then they went all out in a PR campaign, I mean, full page ads in the Wall Street Journal about how the Justice Department is trying to put 10,000 people out of work. Um, you know, blah, blah, blah. They hired John Wooden to say that we were, you know, doing bad things and all this stuff.

Caleb Newquist: Um, wait. John wooden, the John wooden. Yeah, yeah.

Sam Buell: You could hire John Wooden, [01:04:00] who was still alive at that point, to say that you were good. I mean.

Greg Kyte: Coach, great.

Caleb Newquist: Coach, great coach, but extremely elderly at that time, very elderly, but.

Sam Buell: I guess, you know, well identified as having a good ethical compass or something, right?

Greg Kyte: Oh, yeah. I was like, I don't think he knows too much about accounting, but yeah. Okay.

Caleb Newquist: Hell of a basketball coach. Hell of a basketball coach.

Sam Buell: So, you know, and then they said it was us putting them out of business. Yeah, right. What a lot of that was for the consumption of their employees. [01:04:30] Honestly? Sure. Who were the ones who. And I do feel very sorry for the employees. I mean, the employees were, were, were being basically abandoned by the partners.

Greg Kyte: Yeah, but but they were I had a I had a I had an accounting professor who worked at Arthur Andersen when all of that went down and he said, one day I, I showed up for work and they handed me a PwC polo shirt. And that was.

Caleb Newquist: That was the way. Yes. Come on.

Greg Kyte: That's that. He said it was a. Nothing for them because all of those, all of those clients [01:05:00] still needed to have all of their accounting done. And so all of the Arthur Andersen business was just handed off to other big four accounting firms. And so whole offices just it wasn't Arthur Andersen office. Now it's a PwC office. It was a Arthur Andersen office and now it's a KPMG office. That kind of that's that's how it worked. He said he was not adversely affected at all by the Arthur Andersen situation, which which blew my mind. And also I was like, [01:05:30] do you still have those polo shirts? And would they fit me and how much would you sell them to me for?

Sam Buell: Right, right. So so, you know, then we we tried to settle again after the indictment, um, and offered them a deferred prosecution, which is a similar kind of resolution where, you know, the indictment is held in abeyance. There's a settlement, you know, if you behave for a certain amount of time, then the case is dismissed. Again. It was it was a deal breaker for DOJ for them to settle without admitting wrongdoing. I mean, DOJ doesn't even do that with individuals, [01:06:00] right? You know, that whole no contest plea thing? You can't really do that in federal court. You can't say, I'm going to accept a conviction, but I'm not saying I did it. They were like, that's a deal breaker for us because it will put us out of business. Well, at that point they were spiraling the drain anyway. Sure. So I think they decided whoever they was. And that was the other thing. It was like who was making the decision because there was a management committee and that, you know, was changing. Um, okay. Well, we're going to we're going to try this and, [01:06:30] uh, you know, so then we had this trial in Houston, which was fascinating. I mean, you know, rarely does a corporate defendant go to trial.

Caleb Newquist: So, yeah, it's kind of unheard of.

Sam Buell: You had a criminal trial, and the only people sitting at the defense table were the lawyers. Lots of them.

Caleb Newquist: Right? Yeah.

Greg Kyte: Right. Right.

Sam Buell: And, uh.

Greg Kyte: Like like like lawyers and just an operating agreement for the entity was that. Yeah. Just had its own chair. So. Yeah.

Sam Buell: So? So [01:07:00] almost all the witnesses were hostile to us because they told all the employees that we were ruining their lives for no reason, and so forth. And what was interesting was, and we didn't really realize what was going on at the time. We did have one cooperating witness who was David Duncan, who was the relationship partner in Houston, who had basically given the instructions to the employees to get rid of emails and shred documents. Yeah. Um, he the evidence against him was overwhelming. So I think [01:07:30] his his lawyer must have advised him that he was likely to be convicted. He pled guilty and agreed to testify. His testimony was very precise on one point. Why? What were What were you thinking when you organized those meetings? And you told all the junior people to get rid of the documents? I was thinking about the fact that we were going to have an issue with the SEC, and that if [01:08:00] less evidence was around, that would be better for us. Okay. We thought that was exactly what you needed to have been thinking to be guilty. Right. And under the rules of corporate criminal liability, if the partner is guilty and is doing it within the scope of employment, the firm is guilty. Right. So that should have been case closed right there. Yeah. Now, the cross examination was in part. Mr. Duncan, you [01:08:30] wanted to keep the evidence away from the SEC, because that would make Anderson in a better position legally. Right? Yes. Did you think that there was anything wrong with that? No. How could you think that? There that? There was nothing wrong with that? Because I thought the rule was that until you were served with a subpoena, there was nothing wrong with destroying documents. Even if you thought you were basically already under investigation. Uh, [01:09:00] okay. We were like, fine, that's not the law. He's basically admitted, you know, that the law is you're obstructing when your purpose is to keep it from the government. Right. Because, you know you're worried about your legal problem.

Greg Kyte: Yeah.

Sam Buell: Right. Uh, you know, it's like flushing the drugs down the toilet when you hear the police coming.

Caleb Newquist: Right. Right.

Sam Buell: So, um. So. Okay. We didn't think that was a big deal. Now, the jury was very strange. There was a weird foreman who dragged out [01:09:30] the deliberations for ages, and it was like a crazy jury deliberation, but ultimately, they could convict. Right. And we think that's going to be that. Well, the case ends up overturned in the US Supreme Court ultimately, on this very fine distinction between trying to keep the documents away from the SEC and knowing that it's wrong to be doing that. The jury instructions did not tell the jury, because actually it was [01:10:00] not consistent with all the lower court case law as we had read it, the jury instructions did not tell the jury that they had to find this idea of consciousness of wrongdoing, that the person had to be thinking like, I know this is illegal, right? And so the judge gave an instruction saying, you know, if the purpose is to keep the the documents out of the investigation, that's the mental state. You don't have to know you're breaking the law. And that's what the Supreme Court ended up reversing on. They reversed and said no, in order to be guilty of obstruction. [01:10:30] In that context, you have to be thinking that you know what you're doing is legally wrongful. Wow. And the weird thing about it was Congress in part in reaction to Enron. By the time this case was decided by the Supreme Court, the whole Sarbanes-Oxley legislation had gone through. Right. And it included new obstruction statutes that clarified these issues and made them much easier for federal prosecutors. So there would have been no reason for a prosecutor in the future to [01:11:00] ever use that statute again, that the Supreme Court was interpreting in the Anderson decision. And Anderson was already out of business at that time. So it was always a little bit puzzling to us, like, why did the Supreme Court take this case?

Caleb Newquist: Right.

Sam Buell: It takes a tiny fraction of the cases that it's it's asked to take. Why did it take this case? And, uh, I still don't really know. I mean, I do think that there was a big wave of white [01:11:30] collar prosecutions at that point going on all across the country. I mean, now, you had Ebbers, you had Adelphia, you had, um, the stuff that Eliot Spitzer was doing. You had.

Caleb Newquist: The HealthSouth.

Sam Buell: Tyco case in the state court in. Yes. Healthsouth, which was an incredible story. Um, and all these cases and I think that the, the court might have think, well, we need to put a shot across the bow of DOJ about, you know, there's not going to be unlimited. Just because people are angry about [01:12:00] fraud doesn't mean we're gonna let you get away with whatever cases you want to bring. And maybe this was just a way of putting a shot across the bow, but of course, you know, then it gets reframed as Arthur, it was found that Arthur Andersen never committed a crime, which is not true. What was found was that there was a flaw in the jury instructions. The question is. And then the government decided to dismiss. At that point, they could have retried the case. Wow. And and and with an instruction telling [01:12:30] the jury that they have to find consciousness of wrongdoing. And if I was retrying that case, what I would have argued to the jury is if they didn't think there was anything wrong with what they were doing, why did they keep telling all the employees? Just follow the document retention policy? That's all we're asking you to do.

Greg Kyte: Right, right.

Sam Buell: If you thought it was fine, why wouldn't you just said, look, we're probably going to get a subpoena soon, so shred as much as you can until the subpoena gets here.

Greg Kyte: Because. Right. [01:13:00] Right, right.

Sam Buell: World is we're allowed to get rid of as much evidence as we want until they subpoena. So go for it. But no, they kept framing it as. Look, all we're saying is follow the document retention policy, which had never been followed. I mean, all the junior accountants in the office in Houston were like, yeah, that stacks of paper were everywhere. Right.

Greg Kyte: Um. Right. Shredding is something you do when you have a day with nothing else to. That's the that's the the last priority is sitting in front of a shredder.

Sam Buell: And they've [01:13:30] never been told prior that they should worry about that at all. Right. A lot of them were like, what? Document retention.

Caleb Newquist: Policy. Right.

Sam Buell: Here's a copy of it. Yeah, it says only the workpapers should be retained. Everything else should.

Greg Kyte: Be. Yeah. That's funny.

Sam Buell: I love that. So that's a whole, you know, that's and.

Caleb Newquist: It's it's controversial to this day. To this. Yeah. And I mean, and you kind of answered one of my follow up questions, which was going to be is, is, yeah, the controversy around not only the, um, well, [01:14:00] yeah. You I think you did a pretty decent job of like explaining both sides of it, which is. Well, look, from a prosecutor's standpoint, this is what we were seeing and this is how we prosecuted the case. But then also, you know, the people, the PR campaign that Anderson went on in terms of like, like all these people are going to lose their jobs and like Greg even has his own anecdote where the guy's like, no, he turned out fine. He went to PwC, you know, like so it's all very and I think the other thing that's interesting about this is when you talk to people like yourself, but maybe [01:14:30] on the other side, like former Anderson partners I've talked to over the years. They still get a little hot about it. Like, oh, sure, it's just it is that sting has not gone away. Yeah.

Sam Buell: I mean, it was weird. It was like the, the the way the corporate criminal liability works is, is and there's a lot to criticize about this rule. Right. In the US. That's a very broad rule. I mean, a single corporate agent committing a crime within the scope of the employment with intent to benefit the company can make the company liable regardless of [01:15:00] how many other employees there are, and regardless whether any of them had any involvement. Right now, DOJ doesn't just do every case. It can. I mean, there are a bunch of factors you're supposed to look at, but one of them is the history of the company, whether it's been in trouble already, but also the involvement of senior personnel. And there were pretty senior personnel involved in this, right? I mean, the relationship partner for the most lucrative client in the firm. Um, you know, another senior partner in Houston, an [01:15:30] in-house lawyer in In Chicago. You know, this wasn't I mean, this was an idea, not that some junior person had. Right. But that this committee that was thrown together is kind of the Enron crisis response team set by by the firm said said we should do so. We thought there were serious reasons to say that the firm ought to be responsible. Oddly, you know, the way it was interpreted by everybody, including [01:16:00] the employees, was that somehow they were being accused of something, even that even the employees who had nothing, you know, no involvement in it. And, you know, and that that wasn't that wasn't the case. So I think that's where some of the kind of sting comes from. And it was so unusual to actually have a corporate defendant go to trial who really understood how to think about that.

Sam Buell: Um, and, you know, the irony of the Anderson case is that it explains a Explains a lot [01:16:30] about why the settlement market in corporate criminal prosecutions has boomed over the last 20 years, to the point where almost every single one of these cases settles and they often settle without indictments. And because there's this, this oh, you know, it goes too far when you prosecute the company. Look what happened to Anderson. Um, and, and, and and I would say the public in general is now angry about that. [01:17:00] They feel that, uh, companies are being led to get away with things now because of these deferred and nonprosecution settlements and that, um, and even the plea agreements sometimes, I mean, now we have guilty pleas. Sometimes, like BP pled guilty for the Gulf spill and but like, Boeing got a deferred prosecution agreement and hundreds of people died. And so, you know, people are angry about that. One of the things that's driving that, uh, Settlement market is the argument [01:17:30] that defense lawyers make to DOJ regularly now, which is like, you don't want to have another Arthur Andersen. You know, you can put a whole bunch of people out of business. Oh, you know, Boeing is, you know, they're a national brand. I mean, we can't, you know, do something to Boeing that would jeopardize them. Um, General Motors, same thing they had a problem with, um, you know, the Saturn ion and the ignition switch, and that involved deaths. And they got a deferred prosecution agreement. And a lot of people were really angry about that. But, you know, the argument was being [01:18:00] made to the Obama administration. Hey, you can't slam GM. You know, you want to win Michigan.

Greg Kyte: That's right, that's right. Yeah. There's nothing.

Caleb Newquist: More American than General Motors.

Greg Kyte: Politics.

Caleb Newquist: Right? Yeah.

Greg Kyte: Um, yeah, yeah. So, um.

Caleb Newquist: This is this has been happening over and.

Sam Buell: Over again.

Caleb Newquist: Yeah, this has been great. Um, I want to be mindful of the time. Um, Greg, do you have any final questions that you want to ask, Sam?

Greg Kyte: Just one. Um, so for as long as you lived in, in, uh, [01:18:30] Rhode Island and Boston, I've got to assume that you have a favorite swear word that you'd like to say in a Boston accent. And would you please do that this time just for the sound bite?

Sam Buell: I can't do the accent. That's what's so funny. I mean, I grew up in a house where the accent wasn't spoken, and.

Greg Kyte: Okay.

Sam Buell: Uh, and so I can't really do the accent.

Greg Kyte: Uh, well.

Sam Buell: Yeah, but, I mean.

Greg Kyte: The New England.

Sam Buell: One would be to say that the guy's a douchebag.

Greg Kyte: Okay, good. I [01:19:00] love it.

Caleb Newquist: Perfect.

Greg Kyte: Listen, you set my expectations so low, and then you came home with douchebag in perfect form. That's that. That is. So we will air this episode. Can I just.

Sam Buell: Can I just say one other thing.

Greg Kyte: Which is.

Sam Buell: Yeah, you know, this tends to happen when I talk to people, especially in the media space. But I've been a professor for 20 years, right? I was only a prosecutor for ten, and I only worked on Enron for like two of those. But, you know, whatever you get, you know, [01:19:30] um, it's it's dry and it's somewhat arcane stuff. But my academic work for 20 years has been about corporate criminal liability, which is what we were just talking about and the dilemmas around that, but even more so about the concept of fraud and how you tell the difference between what's a crime and what's not, which is what fascinated me about the Enron case relative to doing murders. Right, was not [01:20:00] a question of who did it and how are you going to catch them. It's also a question of is it a crime at all? Right, right. That's what I find really interesting about fraud. And I've written I have written a book for general readers called Capital Offenses was punished by punished, published.

Greg Kyte: By a.

Sam Buell: Freudian slip. It was published by W.W. Norton in Norton in 2016. So my book is called Capital Offenses and it's, uh.

Greg Kyte: Um, I'll.

Sam Buell: Show [01:20:30] it on camera here so you can get that off Amazon and, uh, business, Crime and Punishment in America's corporate age. And it attempts to explain for the, you know, interested lay reader, why these cases aren't as simple as everybody thinks and why we can't just lock all these guys up.

Greg Kyte: Yeah. Awesome.

Caleb Newquist: Sam, this has been great. Um, and your stories are fantastic, but I do. I you rightly point out that you spent the last two [01:21:00] decades not being a prosecutor. So. And like, and I think the the the point that you bring up about corporate criminality is, is, is a super interesting one. And so like, is that I just I want to I want to, I want to get into that a little bit. But like what's kind of the big misunderstanding that you try to address, not only in your writings, but just like with your students, like how do you how do you what is there a [01:21:30] simple way to explain this? Like how do how do we know when a, you know, uh, you know, Mitt Romney famously said, corporations are people. It's like, well, they can't be. And the famous retort is like, well, there are people when Texas executes one. Right. So that's, you know, that's yeah.

Sam Buell: Yeah.

Caleb Newquist: That, that that's something that people point out. So like what's what's in. Yeah. And I, I know it's complex but like what's a simple way to, to help people understand like [01:22:00] why certain cases are pursued or, or certain frauds are, are are clear. And sometimes when prosecutions don't happen I think like you say, that's that's what that's what upsets a lot of people when there's kind of a, there's kind of a perception that there's wrongdoing and then that then that there's no accountability on the on the justice side.

Sam Buell: So so I think there's two levels to that. I mean, one is the organizational level and the other is the individual level, right. So the organizational level, the [01:22:30] dilemma is that you can't put a corporation in prison. So you can only punish it with basically financial sanctions, which the civil system also can do. Right. So the question is when you put and you can't put people in prison because a corporation is guilty of a crime, right? It doesn't work the other way around. Right. So you have to find people individually, criminally responsible for very good reasons. [01:23:00] Right? I mean, that's a basic constitutional due process concept, right? You can't be put in prison without being tried yourself for a crime. So when companies are aren't being punished, they're not. It's not a punishment of individuals or a non punishment Non-punishment of individuals. And then the issue with when companies are punished about the company is if all we're doing is imposing financial sanctions. What's the point of the criminal process at all? Now, I've argued that there is a point and that it's a very, [01:23:30] um, somewhat intangible idea, but it's a kind of expressive effect that the criminal system has when it says that a company is has committed a crime, and that there are procedures and processes in the criminal system for doing that, that impose a very high burden on the government and involve very serious underlying violations.

Sam Buell: And so there's a value in going through that process and saying, Reputationally, at least this is a company [01:24:00] that did something very wrong and it hurt people. And I understand why people want more of that process. And I think there should be I wish there were more cases that went to trial. I regret if it's the case that that they don't, in part because they, under Arthur Andersen, did go to trial. Right? So there's that level of sort of separating the organization from the individual. Um, both legally and kind of as an idea. Then at the individual level, the question is, what's [01:24:30] what's the line between crime and no crime? And sometimes it's very simple, right? I mean, there's no issue in the Bernard Madoff case. The guy's basically an elaborate thief.

Caleb Newquist: Right?

Sam Buell: But there are many cases where the issue is much more nuanced. And it has to do with the question of mental state, mainly. So, you know, an individual can only be liable if they act with an intent to defraud. If the government is prosecuting for fraud, which is [01:25:00] most often what's involved in these cases, sometimes we have, you know, bribery. We might have other things, but fraud is the main thing. So you have to act with the intent to defraud. What what does that mean? Well, it's a little a little bit circular, right? Because we need to know what fraud means to ask whether someone has the intent to do it right. What is fraud? Well, a lot of people would just say, well, fraud is deceit. Um, okay. What's deceit? Uh, deceit is getting somebody to believe [01:25:30] something that's not true.

Caleb Newquist: Right? Okay.

Sam Buell: So how often in ordinary market contexts is it the case that party A is trying to get party B to believe something that's not true all the time?

Caleb Newquist: All the time, right.

Sam Buell: At some level, that's every negotiation, right?

Caleb Newquist: It's virtually every sales conversation that's going.

Sam Buell: On pitch, every advertisement. Right. Yeah. So [01:26:00] so really what we say when what we mean, I think and I've argued this in my work and try to explain it to the students this way, is when we say someone has the intent to defraud, what we really mean is that they have the intent to engage in a kind of deceit that is wrongful in the context. And and they know it. And that depends on the market. Right. Like what you can say in the doctor's office if you're the doctor versus what you can say on the trading floor, [01:26:30] if you're a derivatives trader or, you know, two completely different worlds. And it has to do with the question of what are the norms in that particular market. Specifically, what is the the let's say the consumer or the counterparty expect, right. So you think about the difference between like poker and golf, right. So in poker, it's part of the game that everyone around the table is trying to deceive each other.

Caleb Newquist: Right? [01:27:00] Right.

Sam Buell: And, uh, you know, you don't have to talk in poker, so maybe it's not the best example, but you you can lie. Yep. Um, you know, in the sport of golf, you know, you you're supposed to apply the rules very strictly to yourself. And if a player is found violating a rule and not self-reporting, there's a shame. And a, you know, it's like, you know, and you'd be doubly sanctioned for that. Right, right. Um, [01:27:30] so and we can go down the line with all these examples, you can do it with games, you can do it with sports, then you can do it with particular markets. Um, so, you know, one series of cases I teach is a series of cases that happened right after the financial crisis where, um, guys were selling distressed mortgage backed securities. Right. Trying to recover salvage value after the market crashed, and nobody could figure out price at that point, right. So the price was a function of basically these face to face [01:28:00] negotiations. And this guy was lying to counterparties about like what he had paid for the product to try to kind of jawbone them into giving him giving him a better price. Well, I'm not going to make it. You know, I'm not going to make enough on this deal unless you go to this price, because this is what I paid for it and so on.

Sam Buell: And those were lies. Yep. Um, and recorded calls. The government prosecuted him. And that prosecution ended up being reversed on the grounds that he'd been not allowed a fair chance by the trial judge to get before the jury that basically everybody [01:28:30] in the industry was doing this, and everybody knew everyone was doing it. So it wasn't really the kind of wrongful deception that should count as fraud. Um, and that problem comes up all the time in fraud prosecutions. Uh, and so that that question of where do you draw the line and how people know where it is, is very interesting to me. And it requires I mean, it sort of goes back to what we were talking about with having to sort of educate myself about Enron's accounting. It's [01:29:00] like every one of these cases requires a certain amount of digging and learning and educating about the particular industry, you know, and and that's what the trials end up being about, right? I mean, this was Elizabeth Holmes's argument in the Theranos case. Yeah. Oh, in this market, it's fake it till you make it. And everybody knows that. So there was no fraud here.

Caleb Newquist: We recently people a lot of people, um, acknowledge kind of the the 20th anniversary of Sarbanes-Oxley. [01:29:30] Are there what are the things that Sarbanes-Oxley kind of what is the good that it did and what has turned out? What are some of the unintended consequences as a result of that? So kind of the good and the bad of Sarbanes-Oxley, you know, more than 20 years since its passage?

Sam Buell: I mean, that's too big of a question, obviously, to answer in a brief, you know, but just to just.

Caleb Newquist: Yeah, one, one example of that.

Sam Buell: So, so, you know, it didn't do a whole lot. Contrary to what a lot of people think on the criminal front, I mean, [01:30:00] it cleaned up the obstruction statutes a little bit. But this whole thing of adding the fact that you could go to jail for certifying a false financial report, um, you still have to be proven to know that it's false. And that was already securities fraud to knowingly file a false financial statement. So I don't you know, there's a little bit of kind of scare the CFO and scare the CEO there that I think has probably changed the culture a little bit around supervision internally, but it doesn't really give the prosecutors a [01:30:30] new tool, you know, that they didn't already have. Even though pitched that way. Um, I do think, you know, the the stepped up regulation of the accounting profession was probably the bigger thing, right? The create the PCAOB. Um, but, you know, every time you create a new entity, you also, you know, regular regulatory entity you end up with potentially with problems from that. And the PCAOB has certainly had some serious problems. Yep. Um, the consolidation [01:31:00] in the industry is not something anybody would necessarily want. And, you know, it's unfortunate that that was part of the effects of, you know, the prosecutions. And there was nothing Sarbanes-Oxley could really do about that. I mean, one thing about Sarbanes-Oxley, if you want to say a failure and I don't know if it's right to call it that, it's just, you know, it didn't really get into the issues that ultimately led to the financial crisis, which you can kind of trace from the Enron period a little bit, um, which really [01:31:30] go more to the regulation of what kind of products are allowed to be sold and who's allowed to sell them.

Sam Buell: Right. Whereas Sarbanes-Oxley was more of just kind of like, let's amp up the rules around disclosure and accounting that that already existed. It never took up the question of, you know, what, what kind of products are being traded, by whom here, and what is the danger of that? You know, the sort of shadow banking problem? Yeah. Um, and, you know, [01:32:00] you could see that Enron was a kind of little bit of like a canary in the coal mine with regard to what happened during the financial crisis. Because Enron, even though it was an energy company, was basically trying to run itself like an investment bank, and it was trading a lot of products that were not regulated by the banking system in ways that ended up being much riskier than people realized. And you could say that that, [01:32:30] you know, the whole mortgage backed securities saga and the financial crisis were kind of a larger version of all of that. And there wasn't anything in the legislation after Enron that was that helped anybody, uh, protect against the risks that were associated with that, the systemic risk problems. Now, whether Dodd-Frank did that either is I'm not saying one way or the other, but at least that was the conversation around Dodd-Frank Frank was what needed to be done about that, and that conversation [01:33:00] did not occur in the wake of Enron. Ironically, it may have been in part because the story that got told was, oh, uh, bad actors. Right. Uh, and and they got prosecuted. And now that's going to deter more bad actors. Well it didn't.

Caleb Newquist: Right. Well, and so I guess kind of my final question is this is probably too broad of a question to end on. But like like what's what's a big thing that you see as just [01:33:30] continuing to be or what's, what's a problem that has yet to be addressed in kind of corporate, uh, kind of the corporate world and kind of the just fraud and criminality that continues that we continue to see, whether it's FTX or Theranos. Like, what is there? Is there is there something that's broadly applicable that we need to address ineffective regulation?

Sam Buell: Yeah. And I don't mean more regulation, I just mean ineffective regulation and really more. It isn't [01:34:00] so much on the rule writing side of things. It's on the enforcement side. I mean, every single one of these cases almost is, is you can see right directly the story they were taking advantage of ineffective regulators. And and that was true of Enron too, by the way. I mean, they were the ones who, you know, the famous story about how they popped the champagne bottles when they got the SEC to approve Mark to market, accounting for a bunch of assets that really weren't, you know, good candidates for that kind of treatment. [01:34:30] Um, or at least it it gave them so much control over their own books and, um, but, you know, the FAA in the Boeing case. Yep. I mean, the guy actually wrote an email saying that after meeting with the regulators that it was like sitting with dogs who were watching TV. Um, because they just accepted whatever the company was saying and that that that airplane should have required way more pilot training. And they didn't want to do that because it was too expensive. [01:35:00] And they got that past the FAA. The Volkswagen case, I mean, this sort of pathetic system for emissions testing that they figured out the easiest possible way to hack, you know, you go down the line, it's these are all problems that could have been prevented by more thoughtful regulation and enforcers with the credibility in the industry, that that the industry really needed to worry about civil enforcement. And then you don't get the crimes and you don't ever have to get the prosecutors [01:35:30] involved, which is right. Everybody wants. Right. Um, but, you know, we have an administration coming in that is in general said that it is hoping to massively strip back on regulation. And there may be, you know, lots of areas where we need to have less regulation. But I certainly hope, uh, although I'm not optimistic that it That it doesn't involve stripping the regulators of the personnel and the resources that they need to be [01:36:00] credible within the industries that they're regulating.

Caleb Newquist: Sorry. I did think of one last question. Um, what continues to surprise you in this field?

Sam Buell: Well, I guess that, you know.

Caleb Newquist: The ingenuity of fraud.

Sam Buell: The scandals never stop. Yeah. Right. And and that's good for me. It's kind of like a full employment act for somebody who, you know, studies and teaches this stuff. Right. Um, but maybe it gets back to your point about psychology. You know, [01:36:30] humans are human. I mean, you know, it's just it, you know, it never ceases to amaze. You know, FTX is a great example. I mean, look at those people who testified at his trial. Yeah. And their stories about almost being unable to explain how they got down this tunnel that they were sucked into, you know, and and not people that anybody would have said, you know, oh, [01:37:00] that person's going to end up in a massive fraud.

Caleb Newquist: Right?

Sam Buell: Um, so the, the, the kind of allure of this, um, it does come down to basic psychology, dynamics that don't ever seem to change. And so we, you know, and every time one of these things blows up, there's all this talk about lessons learned.

Caleb Newquist: Right? Right.

Sam Buell: But the lessons don't actually seem to get learned.

Caleb Newquist: There [01:37:30] you have it. Greg, that was so fun.

Greg Kyte: So yeah, his stories are amazing. That guy. He said at the end, he said he he'd only been ten years at the DOJ, and that just hearing that all that happened in ten years made me exhausted. I need a nap now. He was part of Whitey Bulger, a part of nine over 11. Not part of nine, you know, but he, like.

Caleb Newquist: Nine over 11 worked its way in there.

Greg Kyte: He worked on 9/11.

Caleb Newquist: Did not see that coming, but maybe I should have.

Greg Kyte: Um, [01:38:00] Enron, uh, the fact that he had rubbed shoulders with Robert Mueller, that that was a name drop I was not expecting in the conversation. Uh, and he didn't say this out loud, but I am sure that part of the reason why he got out of big law and went back to the DOJ is that at the DOJ, you don't have to fill out any goddamn time sheets.

Caleb Newquist: That's we. That man. I can't believe you didn't ask him that I wanted to.

Greg Kyte: Oh, we got on a [01:38:30] far more interesting.

Caleb Newquist: Things than.

Greg Kyte: Time sheets.

Caleb Newquist: That was that was a little bit of fan service for one fan only. And that is you, Ron Baker.

Greg Kyte: We're so glad you listen.

Caleb Newquist: Thank you. We are so glad you listen. Ron.

Greg Kyte: Check out his. Oh I'm going to be on his on his show. Uh, the uh, the soul of enterprise. Oh. You are? Yeah. I'm his annual Christmas guest.

Caleb Newquist: Oh, so.

Greg Kyte: Have been for. This is maybe my third or fourth year. So.

Caleb Newquist: Yeah. Greg. What? I mean, jeez, we talked about so much. Is there anything? It [01:39:00] was really just. I don't know if I learned anything. I just had fun listening to his stories. But, I mean, I think we did learn a little bit about, like, I think his, his conversation about corporate fraud and kind of the complexities of that, I think are really interesting. And I think that kind of explains why it's it's sometimes hard to prosecute those cases because, um, it's it's not it's not always clear cut. Who is responsible.

Greg Kyte: Yeah.

Caleb Newquist: And whether they can prove [01:39:30] it in a court of law.

Greg Kyte: Right, exactly. I some of the stuff that I thought was the most interesting and, and I think I'm going to have to spend some time kind of unpacking it to figure out exactly what I did learn from it was the obstruction of justice portion of the Arthur Andersen case. Because I did. I thought that was very interesting that he. Because I've said this out loud multiple times where I've said Arthur Andersen was never, uh, was never found to have committed a crime. And he was like, that is not true. They were found [01:40:00] to commit a crime. Uh, just later, they. What did he say? That the jury was given bad instructions. Right? Is what they.

Caleb Newquist: Determined. Right. And it was the. So it was it had to do with, um, the conscious, uh, knowledge of, uh, the intent to commit a crime because, like, he was explaining how that partner, he was just doing that because he thought he could do it up until they received the subpoena. And what the law says is like, [01:40:30] no, you can't. You can't just destroy stuff because it conceals a crime.

Greg Kyte: Right, right. But but it was weird that. Yeah, like you said, it was his intent. And I thought. And that must be specific to obstruction of justice cases, because I have gotten pulled over before. And the cops said, do you know how fast you were going? And I was like, yeah, 45. That's the speed limit. He's like, no, it's 35 here. And so I did not have any intent to break the law then, but I still got a ticket.

Caleb Newquist: So [01:41:00] of course.

Greg Kyte: So yeah, because I remember that early on being told that, uh, ignorance is not innocence.

Caleb Newquist: It's not a, it's not a, it's not a legit defense. Right.

Greg Kyte: But apparently with, uh, Arthur Andersen, it was somehow in a weird, convoluted way.

Caleb Newquist: Well, and if I understood him right, it had to do with the instruction instructions that they gave to the jury. Right. So that doesn't if I, you know, and I think he went into this a little bit, he's like, look, he's like, by the time [01:41:30] this all happened and by the time the that the Supreme Court overturned the decision, the, the the conviction of Andersen. Andersen was already out of business. Right. Sarbanes-oxley was He was already the law of the land like so much time had passed. He's like DOJ could have retried the case and probably won. Won it again. But there was no point. It was moot by that point. And so that's you.

Greg Kyte: Know, it's like hitting hitting a dead body with a shovel. Why what's the point? Whitey bulger. Okay, [01:42:00] that's it for this episode. Remember, never dig up dead bodies yourself. Just watch other people dig them up.

Caleb Newquist: And also remember, no matter how good looking you think you are, Hollywood will find someone better looking to play you in the fraud movie.

Greg Kyte: If you want to drop us a line, send us an email at fraud@earmarks.com. Caleb, where can people find you out there on the internet?

Caleb Newquist: They can find me on LinkedIn. Backslash. Caleb Newquist. Greg, I assume you've [01:42:30] left the internet for good.

Greg Kyte: I kind of have. I kind of have. I keep telling people, just be patient. I'll find your direct message on LinkedIn. And I it has probably been a couple of months since I've been on any social media other than, uh, I like to watch, uh, to, to get on Instagram to see my wife's stories because she often will say very sweet things about me.

Caleb Newquist: Oh, that's so nice.

Greg Kyte: It's like, is there something on Instagram about me? Then I'll go on there. That's that's basically my that's.

Caleb Newquist: Where you're at.

Greg Kyte: Motivation. Yeah.

Caleb Newquist: Excellent. [01:43:00] Well, my fraud is written by Greg Kite and myself, our producer Zach Frank. Rate review and subscribe to the show wherever you listen to podcasts. If you listen on earmark, you can earn free CPE. It's a new year, so might as well get started.

Greg Kyte: Start now.

Caleb Newquist: Yeah, join us next time for more avarice, swindlers and scams from stories that will make you.

Greg Kyte: Say oh my, why didn't I start my CPE earlier?