High Court To Weigh Ex-Enron CEO's Appeal
STEVE INSKEEP, host:
Weve been hearing a lot about financial scandals in the past year, and our next report is a reminder that these cases linger for years in the courts. You will recall the energy trading company Enron, which went bankrupt in 2001. That wiped out $60 billion of Enron stock, decimated employee pensions and eliminated thousands of jobs in Houston.
Enron CEO Jeffery Skilling was convicted of multiple crimes and sentenced to 24 years in federal prison. The U.S. Supreme Court has agreed to hear Skillings appeal and NPRs Wade Goodwyn brings us up to date.
WADE GOODWYN: Sitting in a federal prison is a nearly forgotten man. He helped give birth to an entirely new industry, trading natural gas futures. Jeff Skilling was the real brains behind the magnificent success story called Enron. His fall from grace was just as spectacular, becoming one of the most despised men in Houston history, which is saying something. And now, after being consigned to the dustbin, Skilling could be posed to make his curtain call as the victim of a federal prosecution gone astray.
Mr. LOREN STEFFY (Business Columnist, Houston Chronicle): And I think there will be a lot of people who will be angry if the Supreme Court reverses this decision.
GOODWYN: Loren Steffy is the business columnist for the Houston Chronicle whos been covering the Enron prosecutions. He doesnt believe the U.S. Supreme Court should let Skilling walk, but he thinks there is a chance, Skilling might.
Mr. STEFFY: Usually when the Supreme Court takes a case like this, it usually winds up in some sort of a reversal.
GOODWYN: There are two questions that the court has agreed to consider. The first, should the judge have granted Skillings request for a change of venue? Daniel Petrocelli is Skillings lawyer.
Mr. DANIEL PETROCELLI (Lawyer for Jeffrey Skilling): The problem with the jury pool in Houston was that you could barely find a single individual anywhere who had not, himself or herself, suffered economic calamity.
GOODWYN: Before the trial Petrocelli pleaded with U.S. district judge Sim Lake to move the proceedings out of Houston - to Phoenix or Atlanta. He argued that the entire city felt duped after Enron imploded.
Mr. PETROCELLI: You cannot have the victims of a crime sitting in judgment of the defendant.
GOODWYN: But change of venue is just the first shot in Petrocellis arsenal. The second round concerns a federal statute that was at the heart of the governments case against Jeff Skilling - namely, that the Enron CEO deprived the companys employees and shareholders of what federal law calls his honest services.
Professor SUSAN KLEIN (Law, University of Texas Law School): His schemes deprived another of the intangible right of honest services. And thats a quote from the statute. The question is, what the heck does that mean?
GOODWYN: Susan Klein teaches law at the University of Texas Law School. Klein says the Honest Services Statute was originally designed to convict public officials who were lining their pockets. But as Wall Street corruption became higher profile during the last decade, prosecutors began to look for additional ways to charge those executives. Deprivation of honest services became that tool, giving the government the opportunity to introduce a broader range of evidence. It was a concept that was simple for juries to understand, and it had the benefit of being just vague enough to allow prosecutors to apply it to a number of allegedly dishonest and illegal acts.
Prof. KLEIN: And I think thats what the prosecutors would like. Theyd like it just to be whatever they charge it to be and they can convince 12 jurors that it should be. But a lot of circuit courts are very troubled by that.
GOODWYN: But federal prosecutors reply that the proof is in the conviction pudding. When prosecutors present evidence of repeated deceptions by a companys top officers, juries seem happy to convict of honest services fraud. Jacob Frenkel is a former federal prosecutor and an SEC enforcement lawyer.
Mr. JACOB FRENKEL (SEC Enforcement Lawyer): This is the law that has been used to prosecute them and prosecute them successfully. Given the broad range of fraud, with respect to corporate boardrooms, government prosecutors sought opportunity to enhance their arsenal with the expansion of the Honest Services Fraud Doctrine.
GOODWYN: The Federal Appeals Courts have upheld some honest services convictions and thrown out others. With the Appeals Courts pointing in both directions like the Scarecrow in "The Wizard of Oz," the question is ripe for the nations highest court. But University of Texas law professor Susan Klein predicts that the Supreme Court is not going to gut the Honest Services Statute entirely.
Prof. KLEIN: I dont think its going to happen. It wouldnt be just these cases that would be reversed. Theyre basically saying honest services isnt really a crime, but what do we do with all those people who have been convicted and who are now in prison, serving sentences for honest services mail fraud? They were convicted of something that isnt a crime.
GOODWYN: For those who want to see Jeff Skilling spend the balance of his life in prison, and there are many in Texas, the Supreme Courts decision to take the Skilling appeal is ominous. If the court rules that Skilling should have been granted a change of venue, his convictions would be thrown out. A reversal on the Honest Services Statute might result in a majority of the convictions tossed. For Jeff Skilling, the Supreme Courts decision is sweet hope that he wont have to spend the rest of his life in federal prison.
Wade Goodwyn, NPR News, Dallas.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
Correction Nov. 11, 2009
We incorrectly reported that former Enron CEO Jeffrey Skilling is currently at the Federal Correctional Institute in Waseca, Minn. Skilling is an inmate at the Federal Correctional Institution in Littleton, Colo.