Corporate Governance

Jeff Skilling Comes to Jefferson County Colorado

By Trevor Crow

In December 2006, Jeffrey Skilling, former CEO of Enron, started serving a twenty-four year sentence at a federal prison in Waseca, Minnesota.  Recently, Skilling was moved to a low-security federal prison in Jefferson County, Colorado because the Minnesota institution began its conversion to a women’s prison. At the new facility, Skilling lives in dormitory or cubicle housing surrounded by a double-fenced perimeter. Additional information about the Colorado facility is here and here.

However, Skilling may not be a visitor for long.  His case is on appeal before the Fifth Circuit and some believe that he has a strong chance of winning a reversal.  Skilling’s 2006 conviction included nineteen counts of conspiracy, fraud, lying to auditors and insider trading. Skilling appealed this decision to the United States Court of Appeals for the Fifth Circuit in New Orleans. The court of appeals heard oral arguments on April 2, 2008. Currently, Skilling awaits the court’s decision.  

During oral arguments, Skilling’s attorney, Daniel Petrocelli, focused on two main issues. First, Petrocelli argued that Skilling’s actions were well intentioned and for the company’s benefit; thus, his actions did not deprive Enron of his “honest services.” According to Petrocelli, the government’s entire case rested on the “honest services” theory of wire fraud that the Fifth Circuit subsequently rejected in U.S. v. Brown, 459 F.3d 509 (5th Cir. 2006). And because the defective theory infected every count against Skilling, the court should reverse the entire case.

Second, he argued that the government unlawfully withheld critical exculpatory and impeachment evidence. Specifically, prosecutors concealed critical evidence when it did not turn over 400 pages of notes from FBI interviews with Enron’s former CFO, Andrew Fastow. Instead, the prosecutors gave summaries of the notes to Skilling’s defense attorneys. After the trial, the Fifth Circuit ordered prosecutors to turn over the notes. Petrocelli asserts that the notes reveal that Fastow’s initial statements about Skilling’s knowledge of financial statement manipulation differ from his testimony, in which he testified that Skilling had knowledge.

Federal prosecutor J. Douglas Wilson presented oral arguments for the government. Wilson argued that as CEO of Enron, Skilling worked for the shareholders and if his actions were contrary to shareholder goals, then he deprived them of his “honest services” under the law. Further, Wilson argued that even if the court dismisses the conspiracy count because the “honest services” theory is defective, the remaining counts should stand because prosecutors proved those counts independently. Wilson rebutted the defense’s second argument by asserting that the notes referenced by Petrocelli concern another Enron deal that was not at issue in the trial.

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

Full post as published by The Race to the Bottom on November 20, 2008 (boomark / email).