Don't get me wrong, because I'm pleased as punch that someone who used his corporate position to defraud shareholders is being sent away for a long, long time.
But if I use the "relative penalty" approach, I've got to wonder what Dynegy's (NYSE:DYN) Jamie Olis did that was so much worse than, say, Andrew Fastow at Enron, Martha Stewart at Martha Stewart Living Omnimedia (NYSE:MSO), Frank Quattrone at Credit Suisse (NYSE:CSR), Jack Grubman at Citigroup (NYSE:C), or any number of people who have been charged with some form of fraudulent act associated with publicly traded securities, and each of whom managed to destroy shareholder money many multiples of what Olis did.
Twenty-four years in the big house?! Wow. Olis was also convicted on federal, not state, charges. So, while he can get some time shaved off for good behavior -- about three years -- there's no such thing as parole. Even the judge seemed sympathetic, saying at the sentencing that "sometimes good people commit bad acts, and that's what happened in this case."
Olis was found guilty of perpetrating a fraud on Dynegy shareholders, one called "Project Alpha," which was essentially a series of entities that Olis created to treat debt on Dynegy's balance sheet as financing. This allowed the company to conceal debt and treat it as cash flows generated from its gas trading activities. Each of the entities created for Project Alpha was completely dependent upon Dynegy, and there should have been no question that the $300 million affected by these moves were the company's liabilities. The company's stock declined by more than 85% between January and July 2002, and has yet to fully recover.
Under sentencing guidelines, judges in white-collar cases must consider how much shareholder value was lost as a result of the fraud. This is the next best thing to impossible in this case, as it should be pretty clear that there were monumental problems throughout the energy trading businesses, with almost every company that joined the fray -- from Duke Energy (NYSE:DUK) to El Paso (NYSE:EP) to Mirant -- having been hammered as a result of its participation in energy trading.
Dynegy was no different, though few recognized the risks at the time. How much of its meltdown happened on account of Olis' actions? According to the judge, the answer is about 24 years' worth. Compared to the relatively light sanctions that our friends the garbage merchants on Wall Street have had to endure, this seems like overkill.
Bill Mann's got another word for "garbage" in mind. He holds none of the companies mentioned here. Please consider a free trial of the Motley Fool's just-launched newsletter, Champion Funds.
