Fifth Circuit Affirmed Skilling’s Conviction

Last week, the United States Court of Appeals for the Fifth Circuit affirmed Jeffrey Skilling’s convictions for conspiracy, securities fraud, making false representations to auditors, and insider trading. The court, however, vacated his 24-year sentence and remanded it for resentencing. United States v. Skilling, No. 06-20885, 2009 WL 22879 (5th Cir. Jan. 6, 2009).

Skilling argued the court should reverse his convictions because the government convicted him by using an invalid theory of “honest-services fraud.” According to Skilling, the government’s theory did not apply to his case because the fraud was in the corporate interest and therefore not self-dealing. The court, of course, disagreed because no one at Enron sanctioned Skilling’s conduct.

Skilling also alleged negative pre-trial publicity made it impossible for him to receive a fair trial in Houston and that actual prejudice tainted the jury box. Proof of “poisonous publicity” raises a presumption the jury was prejudiced. The government may rebut the presumption by showing vior dire impaneled an impartial jury. The court of appeals found sufficient “inflammatory” pretrial publicity because local newspapers ran over one hundred stories that humanized victims and “expressed anger and betrayal towards Enron.” Of the sitting jurors, Skilling only challenged one, Juror 11, for cause. The trial court denied the motion to disqualify Juror 11 because ‘“[it] looked him in the eye . . .’ listened to his answers, and believed he would make the government prove its case.” Although Skilling demonstrated sufficient community bias, the government met its burden of showing the impaneled jury was impartial.

Skilling also challenged his sentence under the 2000 Sentencing Guidelines. He argued the trial court's sentence enhancement for jeopardizing the safety and soundness of a financial institution was improper because the “retirement plans” are not “financial institutions.” Resolving the dispute in favor of the defendant, the court found retirement plans, like Medicare, is not a financial institution because it does not require registration with the SEC.

On remand, some predict the court could reduce Skilling’s sentence by as many as nine years, leaving him with a sentence from fifteen to nineteen years.

The primary materials for this post are available on the DU Corporate Governance website.