Skilling Conviction Partially Reversed by U.S. Supreme Court; Sentencing Remand

Jeffrey Skilling, the former CEO of Enron, had a partial victory on the appeal of his conviction to the U.S. Supreme Court. But, the Court’s reproduction of jurors’ comments about him had to sting despite the victory.

  Mr. Skilling was charged with, among other things, conspiracy to commit “honest-services” wire fraud.  18 U.S.C. §§ 371, 1343, and 1346.  Honest-services fraud is an oxymoronic and a legalistc way of saying that Skilling deprived Enron and its shareholders of the intangible right of his honest services. There were also other charges of securities fraud, wire fraud, making false representations to Enron’s auditors, and insider trading. Skilling was convicted of most of the charges and sentenced to 24.4 years.  A federal court of appeals (see below for a summary of that decision) upheld the charges but remanded the case for re-sentencing because of new interpretations on sentencing formulas.  Skilling then appealed to the U.S. Supreme Court and the court at least partially reversed the case in June 2010. — S.Ct. —-, 2010 WL 2518587. In a 6-3 decision that did not include 3 full dissents (just partial dissents), the court held that the honest-services conviction could not stand. Skilling was charged with conspiring to defraud Enron’s shareholders by misrepresenting the company’s fiscal health, thereby artificially inflating its stock price. The Government’s theory was that Skilling “profited from the fraudulent scheme … through the receipt of salary and bonuses, … and through the sale of approximately $200 million in Enron stock, which netted him $89 million.” However, the clear intent of the statute was to get at bribery and the Government did not, at any time, allege that Skilling solicited or accepted side payments from a third party in exchange for making these misrepresentations. The indictment does not allege, and the government’s evidence did not show, that Skilling engaged in bribery. Without bribery, the government extension of honest services fraud is not applicable to Skilling’s conduct.

 In short, the Supreme Court did not allow the expansive interpretation of the honest-services fraud statute that prosecutors had been using for financial fraud.  The case was decided on the old fashioned grounds of “void for vagueness.”  The prosecution’s interpretation of the statute and expanded use would not permit individuals to understand the crime and what conduct rose to the level of a violation. 

 It remains unclear what will happen upon Skilling’s resentencing based on the earlier decision was well as the elimination of this portion of his conviction. 

 Skilling also challenged the fairness of his trial because of pre-trial publicity, a grounds that the Court rejected.  However, it was worth reading the case to see how the potential jurors described Skilling and their knowledge of the case:

Juror 1 (“Ken Lay and the others are guilty as all get out and ought to go to jail”; Skilling is “[b]rash, [a]rrogant [and] [c]onceited”; “I find it morally awful that these people are still running loose”); Juror 70 (“Mr. Skilling is the biggest liar on the face of the earth”); Juror 163 (Skilling “would lie to his mother if it would further his cause”); Juror 185 (“I think [Skilling] was arrogant and a crook”); Juror 200 (Skilling is a “[s]killful [l]iar [and] crook” who did “a lot of the dirty work”; the defendants would “have to be blind, deaf, [and] stupid to be unaware of what was happening!” (emphasis deleted)); Juror 206 (Skilling is “[t]otally unethical and criminal”; the defendants “are all guilty and should be reduced to having to beg on the corner [and] live under a bridge”); Juror 238 (“They are all guilty as sin-come on now”); Juror 299 (Skilling “initiated, designed, [and] authorized certain illegal actions”); Juror 314 (Lay “should ‘fess up’ and take his punishment like a man”; “[t]he same goes for Jeffrey Skilling. … He and his family … should be stripped of all of their assets [and] made to start over just like the thousands he made start all over”); Juror 377 (Skilling is “[s]mug,” “[g]reedy,” and “[d]isingenu[ous]”; he “had an active hand in creating and sustaining a fraud”).

They also had some thoughts on guilt:

  Juror 29 (Skilling is “[n]ot an honest man”); Juror 104 (Skilling “knows more than he’s admitting”); Juror 211 (“I believe he was involved in wrong doings”); Juror 219 (“So many people lost their life savings because of the dishonesty of some members of the executive team”; Skilling was “[t]oo aggressive w[ith] accounting”); Juror 234 (“With his level of control and power, hard to believe that he was unaware and not responsible in some way”); Juror 240 (Skilling “[s]eems to be very much involved in criminal goings on”); Juror 255 (“[T]housands of people were taken advantage of by executives at Enron”; Skilling is “arrogant”; “Skilling was Andrew Fastow’s immediate superior. Fastow has plead[ed] guilty to felony charges. I believe Skilling was aware of Fastow’s illegal behavior”); Juror 263 (“Nice try resigning 6 months before the collaps[e], but again, he had to know what was going on”); Juror 272 (Skilling “[k]new he was getting out before the [d]am [b]roke”); Juror 292 (Skilling “[b]ailed out when he knew Enron was going down”); Juror 315 (“[H]ow could they not know and they seem to be lying about some things”); Juror 328 (“They should be held responsible as officers of this company for what happened”); Juror 350 (“I believe he greatly misused his power and affected hundreds of lives as a result”; “I believe they are all guilty. Their ‘doings’ affected not only those employed by Enron but many others as well”); Juror 360 (“I seem to remember him trying to claim to have mental or emotional issues that would remove him from any guilt. I think that is deceitful. It seems as though he is a big player in the downfall”); Juror 378 (“I believe he knew, and certainly should have known as the CEO, that illegal and improper [activities] were rampant in Enron”; “I believe all of them were instrumental, and were co-conspirators, in the massive fraud perpetrated at Enron”).

Really tough crowd.

Here is the summary of the appellate court decision posted on this site in 2008:

The federal Court of Appeals for the Fifth Circuit has affirmed former Enron CEO Jeffrey Skilling’s conviction for securities fraud and the other usual charges that accompany mondo failures of high-flying companies.  However, the case has been remanded for a correction in the sentence imposed.  Skilling’s 24.4 years will be reduced because the sentencing judged lopped on extra time for Skilling’s “jeopardizing of a financial institution,” activity that warrants additional sentence length under federal sentencing guidelines.  It seems that the lower court included the utter decimation of the Enron employees’ retirement plans as a sort of aggravating factor in the sentence length because the judge defined those losses as being under the “the jeopardizing of a financial institution.   So, fewer years for Skilling!  U.S. v. Skilling, 2008 WL 22879 (C.A. 5)