Patterico's Pontifications

4/2/2008

Oral Argument Today in Enron’s Skilling Case

Filed under: Law — DRJ @ 8:57 am



[Guest post by DRJ]

Jeff Skilling was an Enron CEO convicted on 19 criminal counts in connection the collapse of Enron. He appealed his conviction, and oral argument is set for today in the Fifth Circuit Court of Appeals. Some legal experts believe he has a good chance to have his convictions set aside:

“Jeff Skilling suffered a knockout when he faced a Houston federal court jury two years ago. But he’s flexing more potent muscle in his appeal, scheduled for court argument today.

Thanks to an appeals ruling in a separate Enron case, issued less than two months after Skilling was convicted in 2006, legal experts say Skilling has a strong chance to get most — and perhaps all — of his 19 convictions overturned.”

The prosecution’s theory was that “Skilling was guilty of conspiracy to commit wire and securities fraud by perpetuating Enron’s illusion of health through fraud and lies.” Under this theory, Skilling’s actions robbed Enron of Skilling’s “honest services.”

However, Skilling didn’t steal money or property from Enron, and Skilling’s appeal claims it was error to charge that his behavior robbed Enron of his “honest services” based on a 2006 Fifth Circuit decision that required the taking of money or property:

“Soon after Skilling’s trial, an appeals panel rejected the “honest services” theory prosecutors used in gaining convictions against participants in Enron’s sale of three barge-mounted power plants, which the government alleged was a disguised loan.

The 2-1 ruling said that the “honest services” issue didn’t apply because the defendants didn’t steal, embezzle or otherwise take money or property, and their actions were aligned with corporate goals.”

Skilling claims that “his actions — criminal or not — were aligned with Enron goals to increase its stock price and maintain good relationships with Wall Street.” The government has a different view:

“The government counters that Skilling should be viewed differently from defendants in other Enron cases because as a CEO, he set the fraud agenda rather than followed it. Therefore, he set actions in motion that cannot be seen as consistent with legitimate corporate goals, prosecutors say.

[Peter] Henning, the Wayne State law professor [specializing in corporate law and white-collar crime], said the 2006 ruling didn’t make an exception for CEOs, so it’s unlikely that the panel that hears Skilling’s appeal will do so.”

In 2006, the Fifth Circuit overturned an “honest services” conviction involving Enron official Kevin Howard:

“So far, the government has had trouble getting appellate blessing in Enron cases.

The 5th Circuit upheld former Enron auditing firm Arthur Andersen’s conviction of obstruction of justice in 2004, but the U.S. Supreme Court unanimously reversed it the next year.

And in addition to the 2006 ruling in the barge case, in February another 5th Circuit panel upheld a district judge’s decision to throw out all five convictions against Kevin Howard, the former finance chief for Enron’s broadband division.

That case involved four counts tainted by the honest services theory, which prosecutors conceded should be erased. The fifth count, which prosecutors tried unsuccessfully to restore, also was linked to the others by the same kind of instruction given to jurors in Skilling’s case. 5th Circuit Judge Jerry Smith, one of the judges on the panel that issued the 3-0 decision in Howard’s case, will hear Skilling’s appeal.”

However, one legal analyst believes Skilling’s insider trading conviction – for the sale of 500,000 shares of Enron stock on September 17, 2001, because he believed Enron was in financial trouble – may survive appellate review.

A decision in the case is not expected for some time.

— DRJ

4 Responses to “Oral Argument Today in Enron’s Skilling Case”

  1. Dear DRJ: I’ve been following Tom Kirkendall’s
    blog on the Skilling appeal. Kirdkendall has been writing about the Enron case for some time and I think you’d really enjoy his comments and observations. Houston’s Clear Thinkers

    You’ll need to scroll past the top entry. Oh, and be sure to clink on the link to Carl Icahn discussing his role in the Pennzoil-Texaco settlement with Joe Jamail. Mild content warning but well worth the watch.

    Lesley (d671ab)

  2. Tom is also my go-to guy for intelligent commentary on all matters Enron.

    I don’t think Skilling’s conviction will stand. I think after the Fifth Circuit reverses, he’ll reach a plea that’s substantially better than his current sentence. That’s because he and his defense team know, in their heart of hearts, that while he’s not guilty of everything he was convicted of and certainly didn’t get a fair trial (due mostly to prosecutorial overreaching, not bad rulings by the trial judge), he’s not innocent. And if they re-try him more conservatively (assuming that option is left open by the Fifth Circuit, which it will be on at least some charges), he’s likely to be convicted again. Post-reversal will be the classic situation in which both sides ought to re-assess and negotiate hard, in good faith.

    Beldar (c7d2f9)

  3. (Icahn’s absolutely full of crap, by the way, about Pennzoil v. Texaco.)

    Beldar (c7d2f9)


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