Skilling May Stay in Prison Even If He Wins Appeal (Update1)
By Laurel Brubaker Calkins and Thom Weidlich
April 2 (Bloomberg) -- Jeffrey Skilling, Enron Corp.'s imprisoned former chief executive, may have to spend more than four years in prison even if he wins the appeal of his convictions for defrauding the energy trader's investors.
Skilling, sentenced to 24 years and four months for his role in Enron's collapse, today will try to persuade a U.S. appeals court in New Orleans to void two 10-year terms he got for securities fraud and his 52-month sentences for insider trading and lying to auditors.
The latter convictions rest on firmer evidence and different legal theories than the fraud verdicts, said former federal prosecutor Jacob Frenkel, a Rockville, Maryland, defense lawyer.
``If Skilling were to succeed in having his fraud counts overturned, his conviction on lying alone would result in his remaining in jail for another four years,'' Frenkel said.
Should Skilling, 54, win reversal of the fraud counts, prosecutors must decide whether his reduced sentence is adequate punishment or if they should retry him for spearheading a conspiracy that destroyed the seventh-largest U.S. company by sales.
Skilling is serving his term in a federal prison in Waseca, Minnesota, as he appeals his guilty verdicts on grounds they were based on an invalid fraud theory and that prosecutors withheld exculpatory evidence from him.
Any potential retrial depends on how the appellate judges ``slice and dice the verdicts,'' said Frenkel, a lawyer with Shulman, Rogers, Gandal, Pordy & Ecker. ``This appeal will turn on what their tolerance level is for how far the government pushed the envelope in Enron.''
2006 Conviction
Skilling's lawyer Daniel Petrocelli didn't return a call for comment nor did Justice Department spokesman Paul Bresson.
Skilling was convicted in 2006 with former Enron Chairman Kenneth Lay of deceiving shareholders about the company's financial performance and prospects. Lay died at age 64 of a heart attack before he could be sentenced or appeal. Under federal criminal law, his verdicts were erased.
More than 5,000 jobs and $1 billion in employee pensions were wiped out when Enron collapsed into bankruptcy in 2001, following revelations of widespread accounting fraud. Investors sued to recover more than $40 billion in losses and secured more than $7 billion in settlements from Enron's banks.
U.S. District Judge Sim Lake sentenced Skilling to 10 years on each of two securities-fraud counts, to be served consecutively. He sentenced Skilling to an additional 52 months on each of the remaining 17 counts, to be served simultaneously after both 10-year sentences were completed.
Related Appeal
Skilling was sentenced almost three months after the appeals court in New Orleans threw out verdicts against four former Merrill Lynch & Co. bankers convicted of helping Enron inflate its 1999 earnings. The government argued that the bankers had deprived Enron of their ``honest services'' by disguising a loan to Enron as the sale of electricity-generating barges moored off the Nigerian coast.
The bankers countered that they couldn't have deprived Enron of the services because they were acting in the company's best interest and didn't personally profit from the deal. The appeals court agreed in a ruling Petrocelli says should apply to the former chief executive officer.
Prosecutors disagree.
``Skilling was Enron's president and CEO, and he hatched the scheme to defraud and directed others to carry it out,'' Assistant U.S. Attorney Douglas Wilson wrote in November in a brief opposing Skilling's appeal. Wilson said the honest-services ruling applied only to lower-level executives carrying out superiors' orders.
No Retrial
Petrocelli also urged the appeals court to bar the government from retrying Skilling on any counts they toss out. He claims prosecutors withheld potentially helpful information from notes of interviews that former Enron finance chief Andrew Fastow gave investigators in 2005. Fastow pleaded guilty to conspiracy and is serving six years in federal prison in Oakdale, Louisiana.
Petrocelli claims the notes prove Fastow's story changed over time and differed substantially from his testimony at the Skilling trial. He said Skilling could have used the notes to undermine Fastow's credibility as the chief prosecution witness.
``In its zeal to prosecute and convict Skilling, the Enron Task Force did not merely cross the line -- they obliterated it,'' Petrocelli told the appeals court in a filing earlier this month. ``Rarely, if ever, has there been such a defiant and shocking abuse of prosecutorial power.''
The U.S. Justice Department told the court in its appeals brief earlier this month that Skilling was distorting ``isolated snippets culled from 420 pages of handwritten notes'' that were taken out of context.
``I think Skilling's got a hell of a shot at getting at least a partial reversal,'' said Houston attorney David Berg, who followed the Enron prosecutions. ``If Skilling walks out of the federal penitentiary after serving a four-year sentence, that will be a minor miracle in and of itself.''
The case is U.S. v. Skilling, 06-20885, U.S. Court of Appeals for the Fifth Circuit (New Orleans).
To contact the reporters on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com; Thom Weidlich in New York at tweidlich@bloomberg.net.
Last Updated: April 2, 2008 08:09 EDT |
