The Fifth Circuit Court of Appeals in New Orleans on Monday overturned a lower court’s decision to sentence a former Dynegy Corp. accountant to just over 24 years in prison.

The three-judge appellate panel upheld the March 2004 conviction of Jamie Olis by a Houston district court on charges of securities fraud, mail and wire fraud and conspiracy, but it vacated and remanded the case for resentencing on the grounds that the punishment was excessive in light of the facts.

“We hold that the conviction is factually supported, but Olis must be resentenced. Olis sufficiently preserved a Booker challenge [Sixth Amendment objection] to the court’s application of the sentencing guidelines…, and the district court overstated the loss caused by Olis’s crime,” the appellate court said in its opinion [United States of America vs. Jamie Olis, No. 04-20322].

Olis was sentenced in Houston after being convicted in 2003 by a jury on charges related to Dynegy’s Project Alpha, a complex five-year deal involving natural gas transactions (see Daily GPI, March 31, 2004). Project Alpha was a company plan to borrow $300 million and make it appear to outsiders, particularly to Dynegy auditor Arthur Andersen, that the money was generated by Dynegy’s business operations. Olis was senior director of tax planning when Project Alpha was undertaken in early 2001, and later was promoted to vice president of finance.

In sentencing Olis to 292 months, U.S. District Judge Sim Lake said he considered a recommendation from probation officials who, according to court documents, concluded that the correct application of federal sentencing guidelines called for Olis to serve 292 months to 365 months in prison. Olis’s sentence also called for three years of supervised release and a $25,000 fine.

Two other ex-Dynegy executives — Olis colleague Helen Sharkey and Olis’s boss, Gene Foster — were indicted with Olis on the same charges, but struck plea bargains with prosecutors in exchange for maximum sentences of five years. Foster testified against Olis at the trial.

Olis’s sentence “was extraordinarily high based on the court’s findings that the fraudulent scheme caused a loss of $105 million to one shareholder, the University of California Retirement System (UCRS); that Olis employed ‘sophisticated means’ and a ‘special skill’ to carry out the fraud; and that there were more than 50 victims of the fraud,” the court ruling said.

The appellate court said it would not disturb the jury’s verdict conviction of Olis. “A reasonable jury, basing its conclusion on the testimony of Foster and [Jim] Hecker,” an Arthur Andersen partner who signed off on Dynegy’s statements to the Securities and Exchange Commission, “together with the incriminating e-mails among Olis and his co-indictees and a wealth of other evidence, could easily have found Olis guilty beyond a reasonable doubt of all the charged crimes,” the court noted.

However, “far more problematic are some of the issues that Olis raises concerning his Booker objection, the district court’s use of the 2001 version of the Sentencing Guidelines, and the reasonableness of the district court’s loss calculation,” the judges said. “The government asserts…that Olis did not properly preserve his Booker objection [Sixth Amendment challenge to his sentencing] and that we should review Olis’s sentencing points for plain error. We disagree. Olis repeatedly objected before and during his sentencing hearing to both the district court’s loss calculation and the burden of proof utilized by the court.”

The “most significant determinant” of Olis’s sentence was the district court’s calculation of the loss caused by Olis to Dynegy, the court said. “By the district court’s reasoning, this added 26 levels to his [Olis’s] base offense level and alone placed Olis in a punishment range exceeding 15 years imprisonment.”

But the court noted that Dynegy’s stock was “negatively affected,” even before the restatement of Project Alpha’s cash flow impact, by the company’s failed bid to acquire the faltering Enron Corp. “These factors and others cited in [a Rice University expert] report suggested that attributing to Olis the entire stock market decline suffered by one large or multiple small shareholders of Dynegy would greatly overstate his personal criminal culpability,” the judges said.

“Because the district court’s approach to the loss calculation did not take into account the impact of extrinsic factors on Dynegy’s stock price decline, Olis is entitled to resentencing on this factor.”

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