After multiple rounds of appeals and years of litigation, the government came to an agreement today with Jeffrey Skilling, the former CEO of Enron, that will reduce his sentence by up to ten years.
The arrangement, which requires approval from the federal judge overseeing the case, is unlikely to have a broader impact on sentences issued in white-collar fraud cases or force the government to fundamentally alter its prosecutorial tactics.
In the wake of what was arguably the biggest corporate fraud in the nation’s history, Skilling was found guilty of one count of conspiracy, 12 counts of securities fraud, five counts of making false statements to auditors, and one count of insider trading in May, 2006.
The conviction came on the heels of a series of prominent victories for the Department of Justice. Though Enron emerged as the most recognizable name of the companies that imploded after the internet and telecommunications bubbles burst in 2000, prosecutors secured high-profile convictions of Bernard Ebbers, the former CEO of WorldCom (which Verizon later acquired), and Timothy and John Rigas of Adelphia (which Time Warner Time Warner and Comcast Comcast eventually purchased). Like Skilling, each of these executives received hefty sentences: Ebbers (25 years), Timothy Rigas (20 years), John Rigas (15 years).
While their attempts to overturn these convictions or lighten their sentences were to no avail, Skilling’s appeal gained traction when the Fifth Circuit Court of Appeals ruled that the judge presiding over his case, Sim Lake, had incorrectly applied a “sentencing enhancement” in calculating Skilling’s prison time. A year later, in 2010, the Supreme Court reduced the scope of the honest-services fraud statute, which the government had relied upon in prosecuting Skilling, and invalidated the application of the statute to his case. When the Fifth Circuit returned to the case in 2011, it instructed the district court to issue a new sentence that called for a reduction of up to 8.5 years.
In order to put an end to a case that the Department of Justice acknowledged has required “extraordinary resources,” the government conceded to a further reduction in the sentence, proposing that it be knocked down to a 14-17.5 year range instead of the original 24 years Skilling received. In return, Skilling promised to drop all of his appeals and forfeit $40 million of his assets to Enron’s victims.
It’s unlikely that other white-collar criminals will be as fortunate as Skilling. His appeal rested on an issue specific to his case rather than an overarching principle applicable to other prosecutions. In determining the sentence, Judge Lake concluded that Skilling had jeopardized ”the safety and soundness” of Enron’s retirement plans, which he classified as “financial institutions” for sentencing purposes. On appeal, an appellate panel called this categorization a mistake, leading to the significant reduction in Skilling’s sentence that served as the basis of today’s agreement.
This outcome is unlikely to fundamentally change the current white-collar crime landscape. Neither of the rulings finding fault with Skilling’s case question the government’s investigatory methods or prosecution strategies. The sentencing mistake was a one-off situation and while prosecutors will have to be more careful in applying the honest-services fraud statute, their long-established approach in bringing white-collar cases remains intact. Likewise, the judges overseeing these cases face no new restrictions on their ability to issue long sentences for white-collar fraud convictions.