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Skilling Loses Appeal of Criminal Convictions

The U.S. Court of Appeals for the Fifth Circuit has rebuffed former Enron Corp. CEO Jeffrey Skilling's appeal of his May 2006 convictions.

Skilling in 2006 was sentenced in Houston by the U.S. District Court for the Southern District of Texas to 24 years in federal prison following his convictions on 19 criminal charges related to Enron's bankruptcy in 2001: one count of conspiracy, 12 counts of securities fraud, five counts of making false representations to auditors and one count of insider trading (United States v. Jeffrey K. Skilling, No. 06-20885).

The defense appealed, arguing, among other things, that the 19 counts were tainted by the use of the "honest services" fraud theory, which was one of the objects of the conspiracy charge. In early 2009 the Fifth Circuit denied a defense motion to overturn the convictions, but it said Skilling's sentence needed to be recalculated and ordered he be resentenced.

The defense again appealed, and the U.S. Supreme Court last year narrowed Skilling's conviction for honest services fraud (see Daily GPI, June 25, 2010). The justices, however, did not reverse any of Skilling's convictions, but they remanded the case back to the Fifth Circuit to determine whether the honest services instruction to the district court jury amounted to "harmless error."

The district court's instruction to the Houston jury was indeed a harmless error, the Fifth Circuit judges said in their ruling. As it had ruled in 2009, the Fifth Circuit also stated that Skilling's sentence had been miscalculated. According to the opinion, the circuit court now will take up resentencing.

"The indictment alleged several possible objects of the conspiracy, including securities fraud and honest services fraud, and the district court's jury instructions permitted the jury to convict on any of the alleged theories of guilt," wrote Fifth Circuit Judge Edward C. Prado in a 16-page opinion. "The jury returned a general verdict of guilty on the conspiracy charge without identifying the specific object to the conspiracy."

Other evidence unrelated to the honest services fraud supported Skilling's conviction, Prado wrote.

"These five fraudulent schemes, which formed a large part of the basis for the government's proof at trial, all represent efforts by Skilling and his co-conspirators to manipulate Enron's reported earnings or conceal Enron's losses from the investing public with the intent and result of affecting Enron's stock."

Following the circuit court ruling, lead defense attorney Daniel Petrocelli said, "We disagree with the court's decision and believe it does not conform with the law. We will continue to fight to overturn the wrongful convictions of Mr. Skilling."

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