The US Supreme Court agreed Tuesday to take up former Enron Chief Executive Jeffrey Skilling's appeal of his conviction on securities fraud, conspiracy and insider trading stemming from the high-flying energy company's implosion in late 2001.
In his petition filed with the high court, Skilling claims he received an unfair trial due to "searing media attacks" and the negative publicity surrounding Enron's demise, which resulted in a Houston jury that was hostile and biased. Enron's headquarters was based in the city and when the company collapsed in a wave of accounting scandals it took a severe economic toll on the city.
Skilling abruptly resigned from Enron in August 2001, two months before the company's accounting machinations were exposed. He said his departure was due to personal reasons.
The main argument in his Supreme Court petition is that the government misused a federal law that punishes corporate executives who fail to provide "honest services" to a company or the public.
Skilling said, although he was convicted of "honest services" fraud, the federal government never argued during his trial that his actions were motivated by personal gain and, according to his petition, the law requires the government to prove that white-collar defendants acted in their own self-interest as opposed to the interest of their company.
Even if his behavior "was wrongful in some way, [it] was not the crime of honest-services fraud, because the government conceded that his acts were not intended to advance his own interests instead of Enron's," Skilling's Supreme Court petition states.
Federal prosecutors had maintained that even if the application of the "honest services" law was misused the evidence against Skilling was overwhelming and would have still led to a conviction.
Skilling was convicted in 2006 on 19 counts of conspiracy, securities fraud, insider trading and lying to auditors. He was sentenced to 24 years in federal prison and ordered to pay $45 million in fines. But a federal appeals court, while upholding his conviction, vacated the prison sentence and the fines, ruling that the trial judge's calculations were off the mark in calculating his prison sentence. Skilling has not yet been resentenced.
Former Enron Chairman Ken Lay was convicted of similar charges, but he died of a heart attack before he was sentenced.
According to the SCOTUS blog, "The Skilling case puts before the Court the third case this Term on the proof that prosecutors must offer in order to win a conviction for failing to provide 'honest services' to someone else - the public, a government agency, or one's employer. Two of those cases will be heard back-to-back on Dec. 8."
One of the other cases challenging the "honest services" fraud law involves media magnate Conrad Black, the former chairman of Hollinger International Inc., who was convicted of siphoning millions of dollars from his company and sentenced to six and a half years in prison.
"The Court, in agreeing to add the Skilling case to the mix, rejected the advice of the US Solicitor General [Elena Kagan] either to deny review of that case, because of contemplated further proceedings on it in lower courts, or at least to hold it until it had ruled in the Black case."
Peter Zeidenberg, a former federal prosecutor told The Wall Street Journal that "it seems very likely that the applicability of the honest-services fraud statute, which is a favorite of federal prosecutors, is due to be trimmed back significantly by the court."
If the US Supreme Court rules against the government, the Journal reported, "it could have a significant impact on what types of corruption cases federal prosecutors bring."
In court papers filed in the years since he was convicted, Skilling's attorneys said the former chief executive "was pronounced guilty throughout Houston long before trial" and "the seismic effect of Enron's collapse on Houston frequently compared by residents to the September 11 attacks."
But it was Skilling who also compared Enron's collapse to the 9/11 terrorist attacks.
I was one of three reporters in the country who was granted an interview with Skilling in December 2001. At the time, I was Los Angeles bureau chief of Dow Jones Newswires, assigned to the energy beat and had spent two months trying to land an interview with the former energy executive.
I met Skilling at the Washington, DC, offices of his law firm O'Melveney & Myers, the firm he hired to represent him during his testimony before Congress and in matters before the Securities and Exchange Commission.
Skilling painted a picture of himself as an executive unaware of some of the details of the partnerships at the center of Enron's unraveling and reliant on others to ensure compliance with SEC and accounting rules. He said he learned of Enron's troubles primarily from media reports. Skilling, who held his post as chief executive for only eight months, spoke of his frustration at being forced to sit on the sidelines and watch from his mansion in Houston as Enron, the company he helped put on the map, fell to pieces.
"It was like watching the World Trade Center come down," Skilling said. "I spent 20 years of my life working to build this company. To see it brought to its knees is heartbreaking.
"I've gone back to try and think of any decisions I was involved in that could have caused this. I've agonized over this, and I'm convinced I haven't found anything. I believe we made the right decisions at the time given the information we had. We kept the interest of the shareholders. I believe the decisions that we made were correct decisions, and we'd do it again."
Skilling played a leading role in shaping the aggressive, "asset-light" company Enron became. Enron's reputation and stock price soared at the end of the 1990s. In November 2001, however, Enron restated four and a half years of financial reports stretching back to 1997 to reflect its failure to consolidate partnerships that were improperly kept off its balance sheet. The restatement cut Enron's earnings over those periods by about 20 percent. Skilling, prosecutors in his criminal trial argued, was well aware of the financial wrangling going on behind the scenes and in some instances directed subordinates to hide losses from Wall Street and the SEC.
Skilling said he relied on other people to run day-to-day operations and trusted them to make sure accounting and SEC filings were in order. He said he didn't read "individual documents" regarding the off-balance-sheet financing vehicles, which he said were dwarfed by the company's $60 billion balance sheet.
"You gotta realize Enron was a huge corporation," Skilling said. "We created an architecture that was very control oriented. We hired excellent people to manage the corporation."
Enron's collapse appeared to have been precipitated by circumstances, not individuals, Skilling said. The confluence of accounting restatements, allegations of self-dealing, a collapse in investor confidence and triggers in some of the company's financial arrangements left Enron without the liquidity it expected to have available.
"It's not 'Who' that caused this, it's a set of circumstances," he said.
Skilling's attorneys will have an opportunity to retell their client's story again sometime next year. His case - Skilling v. United States, 08-1394 - is expected to be scheduled for argument in February or March.