Jeffrey Skilling, a Model Convict in More Ways Than One
Jeffrey Skilling is back in the news. He should jog memories about what used to happen to people charged with engaging in huge corporate accounting frauds.
The former Enron Corp. chief executive officer has worked out a deal with the Justice Department to reduce his time in prison. The deal followed a court decision that his sentence needed to be recalculated because of an error by a trial judge.
If the same trial judge approves the deal, Skilling would give up the right to further appeals, surrender claims to $40 million in forfeited assets, which would go to victims of Enron's collapse, and get out of prison as soon as 2017. He was sentenced in 2006 to a little more than 24 years.
Skilling was the highest-ranking executive convicted after a massive accounting fraud caused the 2001 collapse of the Houston-based energy trader. Enron's chairman, Kenneth Lay, also was found guilty of fraud, but died in 2006 before a ruling on his appeal.
You have to wonder, though, if Skilling would have done so much time -- or even been charged with a crime -- if he had run a major financial company during the 2008 credit crisis. The same question applies to the parade of executives who went to prison after the Internet bubble burst, including WorldCom Inc. CEO Bernard Ebbers and Adelphia Communications Corp. chief John Rigas.
Maybe they were just unlucky, committing their crimes during a slump that didn't seem to pose a threat to the world financial system.
Preet Bharara, U.S. attorney for the Southern District of New York, vowed that he would go after those guilty of white-collar crimes in the financial crisis. So far, he has little to show for it. To his credit, his office has played a central role in breaking up the insider trading rings that have infested some of the country's major hedge funds. The Justice Department has also secured settlements with major U.S. and overseas banks on charges stemming from money laundering and rigging interest rates, though this wrongdoing didn't figure in the 2008 financial meltdown.
Curiously, missing from those settlements are the names of responsible individuals. Just how does a fraud work when no one is personally involved?
Which brings us back to Skilling. If he gets out four years from now, he will have served more than 10 years in prison, a long stretch. There's no reason to feel sorry for him: His crimes eroded faith in the integrity of corporate financial statements. He serves as a reminder, and exemplar, of how the system is supposed to work.
(James Greiff is a member of the Bloomberg View editorial board. Follow him on Twitter.)