Skilling Should Be Granted Bail During Appeal of Enron Case, Lawyer Says

Convicted ex-Enron Corp. Chief Executive Officer Jeffrey Skilling, claiming a June U.S. Supreme Court ruling entitles him to a new trial, asked an appeals court to release him from prison on bail while he pursues an appeal.

“Jeffrey Skilling should immediately be released on bail pending this court’s ruling on his case on remand,’’ Daniel Petrocelli, Skilling’s lawyer, said in a bail request filed yesterday with the U.S. Court of Appeals in New Orleans.

Skilling, 56, is serving a 24-year sentence after a Houston jury convicted him for leading what prosecutors said was a widespread accounting fraud that deceived investors about Enron’s true financial condition. In June, the high court ruled in Skilling’s favor, saying he was prosecuted under a law barring honest services fraud that doesn’t apply to his case.

Skilling also asked that his convictions be reversed and he be retried by a lower-court jury that isn’t allowed to consider honest-services fraud in weighing his guilt or innocence.

“Because it is impossible to know whether the jury convicted Skilling on any of the 19 counts without relying on the honest-services theory, all 19 counts must be reversed, and Skilling must be retried before a jury that is not permitted to rest any count of conviction on a legally invalid fraud theory,’’ Petrocelli wrote to the appellate court.

Tracy Schmaler, a spokeswoman for the Justice Department, said after the Supreme Court ruling that the government “will vigorously defend’’ the Skilling case when it returns to the New Orleans appeals court.

Flight Risk

Petrocelli said that courts have on six previous occasions found that the former Enron executive wasn’t a flight risk.

“A decision to skip bail would be all the more irrational now that Skilling has won a landmark victory in the Supreme Court, completed close to four years of his sentence, and has every intention of continuing to pursue his legal rights to clear his good name - as he has been doing for some nine years,’’ the lawyer wrote.

Petrocelli called the court’s attention to a Chicago appeals court’s decision on July 21 to release former Hollinger International Inc. Chief Executive Conrad Black from prison on $2 million bail while it reviews his convictions. Black won a Supreme Court ruling on the same day and on the same grounds as Skilling.

Skilling was found guilty in May 2006 of 19 criminal counts including conspiracy, fraud, lying to auditors and insider trading. The same jury convicted former Enron founder Kenneth Lay, who died six weeks later and whose verdicts were erased as he’d had no chance to appeal.

Bribery, Kickbacks

Writing for the Supreme Court on June 24 of this year, Justice Ruth Bader Ginsburg said the law, which covers fraud schemes to “deprive another of the intangible right to honest services,’’ applied only to instances of bribery or kickbacks.

The appeals court must determine the extent to which prosecutors relied on the honest services prohibition in persuading jurors to convict Skilling, who wasn’t accused of bribery or kickbacks.

Ginsburg said the court’s decision “does not necessarily require reversal of the conspiracy conviction.’’ She said prosecutors could argue that their reliance on the honest- services provision was “harmless’’ because jurors would have convicted Skilling of conspiracy, regardless. Prosecutors offered evidence that Skilling had conspired to engage in securities fraud, in addition to honest-services fraud.

Ginsburg also said the high court wasn’t addressing Skilling’s contention that his entire conviction hinged on the conspiracy count and thus must be thrown out. Skilling’s lawyers claim all the counts are tainted.

‘Erroneous’ Theory

“The government cannot now exclude the possibility that the jurors applied the erroneous honest-services fraud theory to convict Skilling for conspiring to commit an act of fraud that does not legally exist, and then applied that finding to convict Skilling on every other count,’’ Petrocelli said in court papers filed yesterday.

Prosecutors also urged jurors to wrongly convict Skilling for the illegal acts committed by other Enron employees under the theory that each conspirator is equally guilty of all acts in the scheme, Petrocelli said.

“For every securities-fraud count, one or more of Skilling’s alleged co-conspirators testified that they themselves had committed the acts of securities fraud at issue (and in many cases formally pled guilty to them), while Skilling himself often had little involvement in the statement (or underlying conduct affecting the statement),’’ Petrocelli said.

Parallel Enron Case

Petrocelli also called the New Orleans appellate court’s attention to an earlier ruling it made in a parallel Enron case, reached three months after Skilling’s conviction, which rejected the honest-services theory. Relying on that decision, U.S. Circuit Judge Patrick Higginbotham said in a later ruling concerning Skilling’s bail that there were “serious frailties’’ in 14 of the 19 counts against him.

At that same time, Higginbotham wrote that Skilling “raises no substantial question that is likely to result in the reversal of his convictions on all of the charged counts.’’ He denied Skilling’s request to remain free on bond while he appealed his case. The former executive is serving his sentence in a federal prison in Englewood, Colorado.

More than 5,000 jobs and $1 billion in employee retirement funds were wiped out when Enron plunged into bankruptcy following the revelation of widespread accounting fraud. The December 2001 bankruptcy of what was then the world’s largest energy trader cost investors more than $60 billion in market losses.

The case is U.S. v. Skilling, 06-20885, U.S. Court of Appeals for the Fifth Circuit (New Orleans).

To contact the reporters on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com; or Greg Stohr at gstohr@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.