Court hears Skilling Enron appeal
NEW ORLEANS (AP) - April 2, 2008 Attorneys for Skilling planned to argue Wednesday before a
three-judge panel of the 5th U.S. Circuit Court of Appeals that
Skilling's 2006 convictions for his role in Enron's collapse should
either be dismissed or he should be retried.
Federal prosecutors say Skilling received a fair trial in
Houston and his convictions should be upheld.
Skilling and company founder Kenneth Lay were convicted in May
2006 on 19 counts of fraud, conspiracy, insider trading and lying
to auditors for their role in the collapse of Houston-based Enron,
once the nation's seventh-largest company.
Lay died less than two months later and his convictions were
vacated. Skilling reported to a federal prison in Minnesota in
December 2006, where he is serving a 24-year sentence. Skilling
will not be present for Wednesday's arguments.
Skilling is the highest-ranking executive to be punished for the
accounting tricks and shady business deals that led to the loss of
thousands of jobs, more than $60 billion in Enron stock value and
more than $2 billion in employee pension plans after the company
imploded in 2001.
Skilling attorney Daniel Petrocelli has claimed prosecutors used
a flawed legal argument at trial known as "honest services."
Prosecutors theorized that Enron employees were bound to serve
honestly and not put their interests ahead of the company's. If
they failed to do so, they deprived the company of "honest
services" and committed a crime.
The 5th Circuit has already overturned several Enron-related
convictions that were based on the honest services theory, ruling
it was flawed and that executives did only what Enron wanted them
to do and they did not profit at its expense.
Petrocelli has argued that Skilling's conduct followed the
corporate goal of improving Enron shareholders' stock value.
"He is likely to get a reversal on the honest services
(claims). But it won't affect all counts," said Chuck Ross, a
white-collar crime attorney based in New York.
But legal experts are uncertain about the success of Skilling's
appeal when it comes to claims by his attorneys that prosecutors
hid important evidence by not turning over more than 400 pages of
notes from FBI interviews with former Enron Chief Financial Officer
Andrew Fastow.
At Lay and Skilling's trial, Fastow testified his bosses were
aware of fraudulent financial structures engineered by Fastow and
his staff. Fastow, considered the mastermind behind financial
schemes that doomed Enron, is serving a six-year sentence.
Prosecutors gave summaries of the notes to Skilling's defense
team. The trial judge, U.S. District Judge Sim Lake, denied
requests to turn over the full notes to Skilling's lawyers.
After the trial, the 5th Circuit ordered the notes be turned
over.
Petrocelli claims the notes contradict much of Fastow's
testimony, including that Skilling orally agreed to secret side
deals to manipulate Enron's financial statements.
"Dismissal with prejudice is necessary to remedy the grave
injustice and prejudice to which Skilling has been subjected,"
Petrocelli wrote the court in March.
Prosecutors dispute Petrocelli's claims.
"Skilling's microscopic and misleading dissection of the Fastow
notes provides no basis for overturning the jury's verdict,"
prosecutors wrote last month.
Jack Sylvia, a Boston-based lawyer with the firm Mintz Levin,
said Skilling's defense team has put together a good appeal, making
good arguments that the trial's jury selection - which lasted one
day - was insufficient, that the trial should have been held
outside of Houston, and that his 24-year sentence was too harsh.
But he said it is difficult to predict whether the appeal will
be successful.
"It's a very low number of cases that get overturned on
appeal," he said.