Enron’s Skilling poised to get decade off sentence in deal

$40 million payment on $40 billion in losses...

Jeffrey Skilling, the convicted former Enron Corp. chief executive officer, may get out of prison in as little as four years if a judge approves a deal with prosecutors that would allow the payment of more than $40 million to victims of one of the biggest corporate frauds in U.S. history.

In exchange for cutting as many as 10 years from his 24-year sentence, Skilling will drop his bid for a new trial and end litigation over his conviction, in which a jury found he spearheaded a fraud of as much as $40 billion that in 2001 destroyed the world’s largest energy trader and caused the biggest U.S. bankruptcy at the time.

“The proposed agreement will bring certain finality to a long painful process, although the recommended sentence for Jeff would still be more than double that of any other Enron defendant, all of whom have long been out of prison,” his lawyer, Daniel Petrocelli, said in a phone interview. “Jeff will at least get the chance to get back a meaningful part of his life.”

Skilling, 59, has served more than six years of his 2006 sentence for fraud, conspiracy and insider trading. A 2011 appellate ruling effectively lopped nine years off his sentence, according to court records. With the potential benefit of two years off for good behavior and another year off for participation in a drug treatment program, Skilling could be released in 2017 or early 2018, according to his lawyer and the agreement, which was revealed today in a filing in federal court in Houston.

Speak Out

Skilling will be resentenced June 21 in Houston, where Enron victims will be given a chance to speak out on the deal, U.S. District Judge Sim Lake III said in an order issued today. Lake originally sentenced Skilling.

“This agreement ensures that Mr. Skilling will be appropriately punished for his crimes and that victims will finally receive the restitution they deserve,” Peter Carr, a spokesman for the Justice Department’s criminal division, said in an e-mailed statement.

Skilling entered prison in December 2006, following roughly six weeks of home confinement. Prosecutors won a forfeiture of more than $40 million of Skilling’s assets at trial, which have been held in reserve while the former executive continued to appeal his conviction, according to the filing. In dropping his bid for a new trial and any further appeals, Skilling agreed not to challenge the forfeiture order, which will immediately free up the funds for distribution to Enron victims.

Legal Battles

“Today’s agreement will put an end to the legal battles surrounding this case,” said Carr of the Justice Department. “Mr. Skilling will no longer be permitted to challenge his conviction for one of the most notorious frauds in American history, and victims of his crime will finally receive the more than $40 million in restitution they are owed.”

Former Enron investors and employees have until June 7 to send the judge letters stating their opinions of the agreement and whether they would like to speak at the hearing.

Lake said he was already in receipt of “letters from a number of victims” concerning Skilling’s proposed sentence. He said he may limit the number of speakers “to protect the rights of crime victims while not unduly complicating or prolonging the resentencing hearing.”

Misled Investors

After a 16-week trial, a Houston jury convicted Skilling alongside Kenneth Lay, Enron’s former chairman, for conspiring to use off-books partnerships to manipulate the company’s finances and mislead investors about the company’s true financial condition. Lay died before he could appeal, and his conviction was erased.

More than 5,000 jobs and $1 billion in employee retirement funds were wiped out when Enron plunged into bankruptcy in December 2001. Investors sued to recover more than $40 billion in market losses.

Skilling is incarcerated in a federal prison in Englewood, Colorado, outside of Denver.

He has sought a new trial for the last year based on what his lawyers claim was exculpatory evidence the government improperly withheld during the first trial.

In 2010, the U.S. Supreme Court heard Skilling’s appeal and agreed that his conviction was based in part on an invalid legal theory known as the “theft of honest services.”

Reviewed Case

The U.S. Court of Appeals in New Orleans reviewed his case in 2011 and determined there was enough other trial evidence to convict Skilling without the flawed theory. The appellate court upheld the verdicts against Skilling and ordered the trial judge to recalculate his sentence, having earlier found that sentencing guidelines were misapplied in his case.

News that Skilling was in talks to reduce his sentence surfaced in early April, after the Justice Department posted a public notice on its website. The notice requested comments by April 17 from “Enron employees, stockholders and other victims” regarding an unspecified “sentencing agreement” with an unnamed defendant.

Lake held a series of closed-doors status conferences in Skilling’s case on May 2, May 3, and again today. Journalists who asked to attend the meetings in Lake’s chambers were refused permission.

The case is U.S. v. Causey, 04-00025, U.S. District Court, Southern District of Texas (Houston).

Bloomberg News

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