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Judge Vaughn Walker on Monday called a last-minute appeal by federal prosecutors “a fly in the ointment” of the first energy-crisis trial to be tried in California. That fly turned into a bee over the course of the hourlong morning hearing and was well stuck in the Northern District chief judge’s bonnet by the time he adjourned. Walker — who repeatedly mentioned the 80 to 90 prospective jurors waiting for the trial to begin — was bugged when the government on Friday appealed his Oct. 17 bench ruling restricting evidence the prosecution could submit. “You presumably want a trial,” Walker told Assistant U.S. Attorney Haywood Gilliam Jr., “although you keep changing the indictment and appealing evidentiary rulings.” In the past three weeks, Walker has issued evidentiary rulings and jury instructions making it hard to prove that Reliant Energy Services and four of its traders artificially inflated electricity prices during the 2000 energy crisis. This may have prompted prosecutors’ revisions of the indictment. The current indictment charges traders with one count under a rarely used 80-year-old commodities trading law and five counts of wire fraud for reporting false energy prices and engaging in conduct that was “designed to create and did create the false and misleading appearance of an electricity supply shortage.” This version, which softens the price manipulation language, prompted a motion by defense lawyers to dismiss the case. And while Walker did not rule on the motion Monday, he seemed inclined to give it serious consideration — and will likely rule on it next week. Those changes and appeals seem to signal prosecutorial jitters in the run-up to what will be a closely watched trial. “I’d feel pretty good if I was the defense,” said Rory Little, a professor at Hastings College of the Law and a former federal prosecutor. Indeed, with the worries about jury instructions and admissible evidence now out in the open, the defense seems to be in a strong position entering the trial. On Oct. 25 prosecutors attempted to attack the problematic jury instructions — which say that an energy producer’s decision to withhold supplies is not in itself the creation of an artificial price — by superseding their indictment for the third time, and for the second time in three weeks. On Monday, Walker stayed the trial until the 9th U.S. Circuit Court of Appeals rules on the evidence issue, but refused the government’s request to stay the defense motion to dismiss the case. That motion to dismiss was filed Friday, claiming that last week’s superseding indictment broadens charges to the extent that they amount to a new set of allegations — and the new indictment therefore violates the statute of limitations. “With less than a week remaining before trial, the government has revamped its theory of the case,” defense attorney William Goodman wrote, saying prosecutors have altered accusations of “artificially inflating” electricity prices in 2000 with the theory that they “increased prices.” Though Walker hasn’t granted their wish — yet — the armada of defense lawyers at the hearing seemed heartened by his response. Their only public statement on Monday, however, echoed Walker’s annoyance. “The defense is ready to go to trial today,” said Goodman, a partner at Topel & Goodman in San Francisco. “We’re very disappointed.” The changed indictment seems to indicate concern with the jury instructions. For example, the words “artificially inflated” are repeatedly changed to “prices that were higher than they would have been.” But Little said the changes don’t necessarily indicate a doomed case. “It’s not necessarily a sign of weakness,” he said, adding that prosecutors are better off taking a judge’s evidentiary concerns into account before a trial than stubbornly trying to pursue a problematic case. “It’s a good thing when the government is responsive to judges.” As Walker pointed out during the hearing, any decision he makes on the motion to dismiss may be appealed to the 9th Circuit. And while the judge expressed hope that the appeals court will issue a quick ruling in the case — he decided to keep the jurors waiting until next week — a decision by the 9th Circuit to accept briefs could push the trial back for months. In the meantime, Little said, Walker’s decision on whether to dismiss the case — U.S. v. Reliant Energy Services, 04-0125 — will give a good sense of how the challenging prosecution will pan out. “It’s a hard case for the government because it was a hard civil case,” he said, referring to suits brought by regulators. “If it was a hard civil case, it’s a doubly hard criminal case.”

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