A federal appeals court last week upheld all of the 19 convictions against former Enron Corp. CEO Jeffrey Skilling. However, the three-judge panel ordered that the former Enron boss be resentenced, which likely will reduce Skilling's prison sentence.
The U.S. Court of Appeals for the Fifth Circuit in New Orleans denied a request to overturn Skilling's 2006 convictions based on defense motions that they were based on an incorrect legal theory and reversible errors (U.S. v. Skilling, 06-20885, U.S. Court of Appeals for the Fifth Circuit). In the 104-page decision issued by the appeals court, U.S. Circuit Judge Edward Charles Prado wrote that Skilling had "failed to demonstrate that the government's case rested on an incorrect theory of law or that any reversible errors infected his trial."
Skilling's lead attorney Daniel Petrocelli said the defense was "very disappointed in this decision," and he promised to "continue to fight" for Skilling, if necessary, all the way to the U.S. Supreme Court.
Skilling, who with founder Kenneth Lay transformed Enron into the world's largest energy trader before the company collapsed in late 2001, was convicted with Lay of corporate misdeeds in May 2006. The jury found Skilling guilty on 19 felony counts: one count of conspiracy (a joint count with Lay), 12 counts of securities fraud, one count of insider trading and five counts of making false statements to auditors and Enron shareholders (see NGI, May 29, 2006). The jury acquitted Skilling on nine counts of insider trading.
Besides the conspiracy count, the Houston jury convicted Lay on three counts of securities fraud and two counts of wire fraud. In addition, Lay was found guilty on three counts of making false statements to banks and one count of bank fraud. Less than two months after he was convicted, Lay died of a heart attack while he and his wife were at their vacation home in Aspen, CO (see NGI, July 10, 2006). His convictions later were extinguished by the court (see NGI, Oct. 23, 2006).
In October 2006 U.S. District Judge Simeon T. Lake III, who had presided over the jury trial, used federal guidelines based on Enron's monetary losses to sentence Skilling to 292 months in prison, or 24 years and four months (see NGI, Oct. 30, 2006). Skilling began serving his sentence at a medium-security federal prison in Minnesota later that year (see NGI, Dec. 19, 2006).
Skilling's defense team argued in its appeal that the convictions were based on incorrect legal theory, faulty jury instructions, a biased jury and prosecutorial misconduct. Among other things, the defense cited accusations of witness intimidation and withheld evidence.
The appeals court denied those arguments. However, the court agreed that Lake had misapplied federal guidelines in enhancing Skilling's sentence. Part of the enhanced sentence was based on Lake's interpretation that Skilling's conduct had endangered a "financial institution" because his actions had damaged the value of Enron's pension fund. However, the appeals court found that the company's pension fund was not a financial institution.
Using revised calculations, Skilling's resentencing is expected to range between 188 months and 235 months, or 15-19 years, which would trim at least five years from his jail term.
The "ruling is a victory for all those harmed by Jeff Skilling and his co-conspirators," said the Justice Department's Matthew Friedrich, an acting assistant attorney general. "We are gratified that the court...rejected all of Skilling's challenges to his conviction. Skilling was an architect of the crimes that caused Enron's collapse, the fallout of which is still being felt today."
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