June 22 (Bloomberg) -- Former Enron Corp. Chief Executive Officer Jeffrey Skilling, who spearheaded the fraud that destroyed the world’s largest energy trader, will leave prison in 2017 after his sentence was reduced to 14 years from 24.
U.S. District Judge Sim Lake III in Houston yesterday approved the terms of the deal made between prosecutors and Skilling, who appeared at the hearing dressed in prison-issued green clothes and wearing handcuffs that were removed in court.
In exchange for a shorter sentence, Skilling, 59, agreed to forfeit $45 million, drop his bid for a new trial and end litigation over his 2006 conviction and sentence. The former CEO’s prison term was already set to be reduced by nine years, thanks to a 2011 appellate-court ruling that sentencing guidelines were incorrectly applied in his case.
Before he sentenced Skilling to the minimum sentence allowed under the deal, Lake praised Skilling’s charitable works before and after he went to prison, which the judge said he learned about from more than 200 letters he received on Skilling’s behalf.
“You’ve made a positive impact on his life and many others, and I applaud you for that effort,” Lake told Skilling, referring to a letter of support he received from a fellow inmate of Skilling’s.
Skilling tutored inmates in Spanish after learning the language himself in jail, taught business classes and set up job fairs to teach resume writing and interviewing skills to inmates, Daniel Petrocelli, Skilling’s lawyer, told Lake. He also reads a newspaper to a blind inmate daily, Petrocelli said.
“He still has a long way to go,” before being released, Petrocelli told the judge. “He will at least have the opportunity in the last part of his life so he can play a meaningful role” in his family and his community.
Long sentences are necessary to reflect the seriousness of the crime and the level of harm inflicted, Lake said.
“Mr. Skilling repeatedly lied to investors including Enron’s own employees,” and profited enormously through selling stock on inside information others didn’t have, Lake said. “The court has concluded a sentence of 14 years or 168 months adequately addresses all the sentencing factors. The court is not persuaded a longer sentence is necessary.”
Prosecutor Patrick Stokes said that both of Skillings’ parents and his oldest son died while he was incarcerated, calling that “a tremendous tragedy.” Stokes said the deal made only a small reduction in the sentence Skilling would have received after an appellate ruling knocked at least nine years from his term.
“We considered first and foremost the need to pay restitution,” Stokes told Lake. “This agreement completes the process of stripping Mr. Skilling of his ill-gotten gains” and returns roughly $41 million to victims.
Skilling’s assets were originally valued at $45 million but have liquidated at a slightly lesser value, Petrocelli said. The amount is “virtually all the property and assets he has,” Petrocelli said.
At yesterday’s hearing, Skilling listened to the lone Enron employee who spoke against him and smiled occasionally at family members in court, including his wife, brother and sister.
Diana Peters, the former Enron employee, told Lake that Enron’s employees gave “110 percent of their lives to Enron,” as well as their trust and loyalty to Skilling. “Jeff Skilling betrayed that trust,” she said.
Skilling told the court he had submitted a written statement to the judge supporting the deal and that he had nothing more to add.
A Houston jury convicted him and Enron’s former Chairman Kenneth Lay of manipulating the company’s financial statements and misleading investors. Lay died before he had the chance to appeal, and the verdicts against him were erased.
Skilling fought all the way to the U.S. Supreme Court, which agreed in 2010 that his convictions were based in part on an invalid legal theory known as the “theft of honest services.” The high court ordered an appeals court to review Skilling’s case to see whether the tainted theory required his convictions to be thrown out.
The U.S. Court of Appeals in New Orleans reviewed his case in 2011 and determined there was “overwhelming evidence” presented at trial to convict Skilling without the flawed legal theory. The appellate court upheld the verdicts against Skilling and ordered the trial judge to recalculate his term, as the appeals court previously had determined that sentencing guidelines were improperly applied.
Skilling has served more than six years for his conviction on 19 counts of conspiracy, fraud, insider trading and lying to auditors. He is expected to receive the standard 15 percent sentence reduction given all federal prisoners for good behavior, as well as a one-year credit for completing an inmate substance-abuse program.
Skilling’s lawyers had been pressing Lake for a new trial on claims prosecutors improperly withheld evidence Skilling contends might have undermined testimony by a key witness against him, former Enron Chief Financial Officer Andrew Fastow.
Skilling claims Federal Bureau of Investigation agents didn’t turn over notes of their early interviews with Fastow, in which Fastow’s account of his dealings with Skilling and other Enron executives allegedly differed from his trial testimony. Skilling’s attorneys have argued in hearings and court papers that these notes could have been used to undermine Fastow’s credibility with jurors, who knew Fastow had cut a deal with the government in exchange for leniency.
Fastow pleaded guilty to securities and wire fraud in 2004 and forfeited almost $24 million stolen from Enron through side partnerships he created. He testified extensively against Skilling at trial and was sentenced to six years in prison, four years less than he’d agreed to serve in his plea deal with the government.
Enron used Fastow’s off-books partnerships to hide billions of dollars in losses and debt, distorting the company’s true financial performance and inflating its share price. When the partnerships were revealed, Enron’s stock nosedived, plunging the company into insolvency in a matter of weeks.
More than 5,000 jobs and $1 billion in employee retirement funds were wiped out overnight when the company filed for Chapter 11 bankruptcy protection in December 2001.
The case is U.S. v. Causey, 4:04-cr-00025, U.S. District Court, Southern District of Texas (Houston).
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