Theft by Coercion: Extortion, Blackmail, and Hard Bargaining
![handle is hein.journals/wasbur44 and id is 563 raw text is: Theft by Coercion: Extortion, Blackmail, and Hard
Bargaining
Stuart P. Green*
Despite, or more likely because of, the many harms it has in-
flicted on its employees, investors, and the economy generally, the de-
mise of Enron-once the world's largest energy trading company, now
a bankrupt shell of its former self-has proved a bonanza for legal
scholars.' For white collar crime specialists in particular, the Enron
scandal provides a nearly endless source of alleged fraudulent ac-
counting practices, self-dealing, obstructions of justice, corruption, in-
sider trading, and other violations of law and ethics to ponder.
The particular strand of the Enron scandal I intend to focus on
here involves an Enron spin-off investment partnership known as
LJM-2. Starting in October 1999, Enron Vice President and Chief Fi-
nancial Officer Andrew Fastow began to look for investors in LJM-2
by soliciting various banks that had been doing business with his firm.2
According to media reports, there were two things Fastow allegedly
did that were potentially criminal: (1) he gave investors false informa-
tion about the state of Enron's and LJM-2's finances; and (2) he
threatened the investors that unless they agreed to invest in LJM-2,
Enron would no longer do business with them.3 These techniques ap-
parently worked: In the course of only a few months, Fastow managed
to raise approximately $349 million in equity.4
To the extent that he deceived investors about the state of En-
ron's finances, it seems likely that Fastow committed fraud. Because I
have discussed that offense elsewhere,5 however, I will not do so here.
Instead, the focus of this article will be on the significance, both moral
* L.B. Porterie Professor of Law, Louisiana State University. An earlier version of this
piece was presented at the Washburn Law School conference on Enron and white collar crime. I
am grateful to Mitch Berman, whose detailed and insightful criticism of an earlier draft should
not of course be taken as an endorsement. Thanks also to my colleague, Ron Scalise, for useful
conversations, and to my research assistant, Erica Brown.
1. See, e.g., NANCY B. RAPAPORT & BALA G. DHARAN, ENRON: CORPORATE FIASCOS
AND THEIR IMPLICATIONS (2004).
2. The solicitations are described in a Memorandum from Max Hendrick, III, outside
counsel for Enron at Vinson & Elkins law firm, to James V. Derrick, Jr., Enron General Counsel
(Oct. 15, 2001) (http://news.findlaw.comlhdocs/docs/enron/veenron101501ltr.pdf) (last visited
Apr. 10, 2005) [hereinafter Hendrick Memo].
3. David Ivanovich, Bankers Believed Deals Hinged on Investments, HOUSTON CHRON.,
Feb. 19, 2002, at A9, http://www.chron.com/cs/CDA/ssistory.mpl/specia/enron/1262132; Top For-
mer Enron Executive to Plead Guilty, THE GUARDIAN, Jan. 8, 2004, http://www.guardian.co.
uk/enron/story/0,11337,1118744,00.html; see also Press Release, SEC Charges Jeffrey K. Skilling,
Enron's Former President, Chief Executive Officer and Chief Operating Officer, with Fraud
(Feb. 19, 2004), http://www.sec.gov/news/press/2004-18.htm.
4. Hendrick Memo, supra note 2.
5. E.g., Stuart P. Green, Lying, Misleading, and Falsely Denying: How Moral Concepts
Inform the Law of Perjury, Fraud, and False Statements, 53 HASTINGS L.J. 157 (2001).](ViewImageLocal?handle=hein.journals/wasbur44&div=28&collection=&method=preview&ext=.png&size=3)
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Theft by Coercion: Extortion, Blackmail, and Hard Bargaining
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