Corporate & Securities Law

A 5th Circuit panel affirmed the conviction of former Enron executive Jeffrey Skilling on all counts. The appellate court concluded, however, that the trial judge incorrectly applied the federal sentencing guidelines and vacated the sentence. As a result, Skilling will receive a reduced sentence. The minimum sentence will still be at least 15 years.

Initially, the court rejected Skilling's substantive challenge that he had been convicted under an improper legal theory. Skilling was properly convicted of "honest services" fraud because he acted on his own and not at the direction of any superior, concluded the court. The panel also rejected several other claims by Skilling, including jury bias, improper jury instructions and prosecutorial misconduct.

With regard to sentencing, the court found that the trial judge improperly enhanced Skilling's sentence under the guidelines for "substantially jeopardizing the safety and soundness of a financial institution.? The trial judge applied the financial institution enhancement because of the harm suffered by Enron's retirement plans. The appeals court rejected this interpretation, stating that "[u]nder the government?s position, any large corporation would become a
financial institution just by virtue of providing its employees with a tax-sanctioned retirement account."

The opinion is available here.

Full post as published by Jim Hamilton's World of Securities Regulation on January 07, 2009 (boomark / email).