Enron’s Skilling to Exit Prison Early If Deal Approved

Former Enron Corp. Chief executive Officer Jeffrey Skilling is set to appear in court to learn how much longer he’ll stay in prison for spearheading the fraud that destroyed the world’s largest energy trader.

Under terms of a deal with prosecutors, Skilling, 59, could see his 24-year prison sentence cut by as much as 10 years, freeing him as early as 2017, if a U.S. judge approves it at a hearing today in federal court in Houston.

In exchange for a shorter sentence, Skilling 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.

“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-mail last month when the deal was announced.

Seized Assets

Prosecutors agreed to ask U.S. District Judge Sim Lake III to knock another year off if Skilling dropped his appeals and released assets seized by the government after a Houston jury convicted him and Enron’s former Chairman Kenneth Lay of manipulating the company’s financials and misleading investors. Lay died before he had the chance to appeal, and the verdicts against him were erased.

“The proposed agreement will bring a 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 last month. “Jeff will at least get the chance to get back a meaningful part of his life.”

Former Enron employees and shareholders have contacted the court to express disapproval of the deal, Lake said in a May court order. The judge didn’t specify how many letters he’s received or how many people he will let speak at the re-sentencing hearing today under the Victims’ Rights Act, which requires judges to hear from victims before sentences are pronounced.

Supreme Court

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.

2020 Release

These deductions, coupled with the added reduction negotiated with prosecutors, could shave Skilling’s total sentence to about 10 to 13.5 years, releasing him from prison no later than 2020. If Lake rejects the deal, the terms of which he can’t alter, Skilling will resume litigation and could remain incarcerated until 2028.

Skilling’s lawyers have 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 Testimony

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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