Enron

 

Skilling gets 24 years

 

Ex-Enron CEO sentenced for his role in the grand-daddy of corporate frauds.

 

By Shaheen Pasha, CNNMoney.com staff writer

 

 

October 23 2006: 7:25 PM EDT

HOUSTON (CNNMoney.com) -- Former Enron Chief Executive Jeffrey Skilling, who gained infamy as the man who orchestrated the largest corporate fraud in history, was sentenced to more than 24 years in jail Monday.

The 52-year-old Skilling stood stoically, his hands clasped before him, as presiding Judge Sim Lake handed down his sentence. His wife Rebecca, however, sobbed quietly in her seat as victims of Enron's collapse watched the proceedings stone-faced.

Speaking to reporters outside of the courthouse, Skilling said he was disappointed by the judge's sentence but was hopeful that "if we review this in a calmer atmosphere," the appellate judges may find in his favor.

Skilling and his attorneys have maintained that he couldn't receive a fair trail in Houston - the epicenter of Enron's implosion. "I'm not happy about it but I believe deep down - and this is not an act - I believe I am innocent," he asserted.

Judge Lake ordered Skilling to remain on house arrest until the Bureau of Prisons determined his date of incarceration. He denied the government's motion for Skilling to be taken into custody immediately.

In addition, Judge Lake denied defense attorney Daniel Petrocelli's request to lower the sentence by 10 months in order to allow Skilling to serve his sentence at a lower security- level penitentiary.

Instead, Lake recommended that Skilling served his sentence at a Federal Bureau of Prisons facility in Butner, N.C.

Skilling was also ordered to pay about $50 million into a restitution fund for Enron's victims, rather than monetary damages to the government.

Legal experts had estimated that Skilling could receive between 20 and 30 years behind bars. Skilling was convicted in May of 19 counts of fraud, conspiracy, insider trading and lying to auditors.

"Skilling got the equivalent of a life sentence," said Thomas Ajamie, a securities lawyer at Ajamie LLP. "His prime years have been taken from him but if you take into consideration how many people lost everything, it's a fair sentence."

Skilling issued a statement before the court prior to hearing his sentence in which he said he felt remorse about the losses incurred by the victims of Enron's collapse as well as the pain suffered by his family and community.

But to the end he had maintained he did nothing wrong and blamed outside factors for Enron's implosion.

"I am innocent of these charges. I am innocent of every one of these charges," he said.

"We will continue to pursue my constitutional rights."

It's a mantra that he maintained throughout the trial earlier this year. But there was a noticeable difference in the courtroom as Skilling stood alone before the judge clad in a somber dark blue suit. Skilling was originally slated to face sentencing alongside his co-conspirator, Enron found Kenneth Lay. Lay was convicted of 10 counts of fraud and conspiracy.

Lay passed away in July of heart problem. With his death, Lay's conviction was legally vacated. Even so, some of Lay's family members were present in court in support of Skilling. His daughter Elizabeth Vittor -- who also served on their legal team -- embraced Skilling's family, seated in the front rows and Lay's sister tearfully hugged Skilling's wife Rebecca before court was in session.

Victim disappointment

After the sentence was rendered, former Enron jurors who attended Monday's proceedings said they thought the decision was fair but were disappointed Skilling still appeared to not take responsibility for his actions.

"He'll deny it till the end" said juror Freddy Delgado in an interview. "He was paid big bucks to be the CEO and the buck stopped with him."

And some victims felt that no amount of jail time was enough to punish Skilling for his crime.

"If it had been me, I would have given him more time," said Charles Prestwood, who lost $1.3 million when Enron collapsed. "I guess you can't win them all."

More than 4,000 Enron employees lost their jobs - and many their life savings - when the company declared bankruptcy in December 2001. Investors lost billions.

Still, government officials are hailing the sentence as a win.

"Today's sentence is a measure of justice for the thousands of people who lost their jobs and millions of dollars in investments when Enron collapsed under the weight of the fraud perpetrated by the company's top executives," said Assistant Attorney General Fisher in a statement. "Jeffrey Skilling will now spend more than 24 years in prison for committing one of the largest frauds in the history of corporate America."

Enron's collapse marked the first of the high-profile corporate scandals that rocked the nation after the 1990s economic boom, followed by WorldCom, Global Crossing, Adelphia and Tyco (Charts).

The wave of fraud led to passage of the Sarbanes-Oxley law that tightened oversight of how American companies are audited.

But the Enron saga is unlikely to end with the bang of the gavel this week.

Since Enron's implosion almost five years ago, Skilling has insisted that he committed no crimes at the company - even taking the stand in his own defense during the long-awaited Enron trial earlier this year.

Speaking to reporters outside of the courthouse, Skilling said he didn't regret the decision not to reach a settlement with the government, adding that he would not admit to a crime he didn't commit in order to receive a lighter sentence.

Former Enron CFO Andrew Fastow pled guilty and received a sentence of 6 years while former accounting chief Richard Causey also cut a deal with prosecutors. He is scheduled for sentencing in November and could face up to 7 years behind bars.

Skilling's attorney Petrocelli said he was optimistic that a successful appeal in another Enron-related case would help Skilling's appeal.

In that case, lawyers for four Merrill Lynch (Charts) employees convicted of helping Enron defraud the public were able to convince an appeals court that the four were simply doing their jobs.

Skilling is hoping to convince the judge that he didn't do anything to deliberately profit from Enron's demise and that he tried to perform his duties to the best of his abilities.

Legal experts, however, think Skilling may be overreaching in his bid to remain free.

"It looks to me to be a very, very long shot," Sheldon Zenner, head of the white-collar crime practice at Kattan Muchin Rosenman, a Chicago law firm, said before the sentencing. "To use a football analogy, it's a Hail Mary pass with no time left on the clock."

For one thing, Skilling was the leader of the company, putting him at the helm making decisions that later resulted in Enron's collapse.

"He's the one that set policies and, according to the evidence, he masterminded the fraud," Jacob Zamansky, a lawyer and expert on securities law, said before the sentencing. "He's in a much different position from someone levels below [who was] just following orders."

But while legal observers see a very small chance of Skilling's conviction getting overturned based on that issue, some expect that Skilling may stand a better chance on appeal on other grounds.

"The appellate courts will look long and hard at the verdict on this case," Jacob Frenkel, a partner at the Maryland law firm Shulman Rogers, said before the verdict. "And the appellate courts haven't been shy about sharing their disagreement with Enron-related convictions in the past."

He noted that instructions to the jury may be one area for a successful appeal.

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Ken Lay's conviction tossed out by judge

 

Conspiracy, fraud verdicts vacated because late Enron founder can't appeal.

 

October 18 2006: 6:16 PM EDT

HOUSTON (CNN) -- A Houston judge Tuesday vacated Enron founder Kenneth Lay's fraud and conspiring convictions from the company's 2001 collapse, citing Lay's inability to appeal, according to a court administrator.

Lay, 64, died in July from severe coronary artery disease in Aspen, Colo., as he was awaiting sentencing, according to Dr. Robert Kurtzman.

Judge Sim Lake's decision terminates the criminal case against Lay and its effects on his estate, which was left to Lay's wife, Linda.

But according to Linda Lay's attorney, Sam Buffone, Lake's ruling does not have an impact on any of the many pending civil claims made on the Lay estate related to the collapse of Enron nor on any claims that may be filed in the future.

The motion to vacate Lay's conviction was made on behalf of his estate. The judge also dismissed Lay's indictment.

Lay was scheduled for sentencing on Oct. 23 after his May conviction on 10 counts of fraud and conspiracy related to the collapse of the company he founded.

Under Lay's hand, Enron grew into the nation's seventh-largest company before imploding in an accounting scandal in 2001. Lay was accused of lying to investors and Wall Street about the company's health even as he enriched himself by selling millions of dollars in stock.

The company filed for bankruptcy in December 2001 after investigators found it used off-the-books partnerships to inflate profits and conceal more than $1 billion in debt. Its downfall cost 4,000 employees their jobs and many of them their life savings and led to billions of dollars of losses for investors.

Enron's collapse marked the first of the high-profile corporate scandals that rocked the nation, followed by WorldCom, Global Crossing, Adelphia and Tyco (up $0.02 to $29.60, Charts). The wave of fraud, which included SEC settlements with Citigroup (up $0.14 to $50.19, Charts) and Merrill Lynch (down $0.14 to $84.38, Charts), led to passage of the Sarbanes-Oxley law that tightened oversight of how American companies are audited.

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Former Enron CFO sentenced to 6 years

 

A judge granted leniency for Andrew Fastow who could have served 10 years behind bars for his role in Enron's demise.

 

By Shaheen Pasha, CNNMoney.com staff writer

 

September 27 2006: 7:39 AM EDT

NEW YORK (CNNMoney.com) -- Former Enron financial chief Andrew Fastow, long vilified as the mastermind behind the collapse of Enron, was sentenced to six years in prison Tuesday - a lighter sentence than the 10 years he agreed to in his original plea agreement.

Fastow appeared before U.S. District Judge Ken Hoyt in Houston amid of throng of reporters and victims of the fraud that cost Enron shareholders billions of dollars. Hoyt sentenced him to 72 months in jail and two years of supervised probation following his release.

The judge cited his cooperation with prosecutors and eagerness to assist shareholders that had lost millions in Enron's collapse for the relatively lenient sentence.

Under his plea agreement in January 2004, Fastow pled guilty to two counts of conspiracy and agreed to accept a 10-year prison sentence and forfeit $23.8 million to the federal government. Judge Hoyt imposed no additional fine.

Fastow hugged his wife and surrendered immediately after the hearing, Reuters reported. The judge rejected a request from lawyers for victims suing banks to recover Enron-related losses that Fastow be allowed to surrender Oct. 23, after giving a deposition in that case.

Legal experts said it was a surprisingly lenient ruling given Fastow's prominent role in Enron's demise. Fastow was the creator of the questionable, off-balance sheet partnerships that helped Enron hide millions of dollars in losses from investors.And he admitted to siphoning millions of dollars from Enron through illegal side deals.

Surprising leniency

Legal observers said the 6-year sentence was particularly unusual given that Judge Hoyt had been harsh in sentencing Fastow's former Enron colleague David Delainey.

Delainey, the former head of Enron's energy trading business, was sentenced to 2 1/2 years behind bars for insider trading last week. Delainey, a Canadian citizen, pled guilty to the charge in 2003 and agreed to testify against both Lay and Skilling during their trial.

But Jack Sylvia, securities litigator at law firm Mintz Levin, told CNNMoney.com that Fastow's testimony against former Enron CEO Jeffrey Skilling and Enron founder Kenneth Lay, as well as his cooperation with attorneys in several shareholder lawsuits tipped the scale in his favor.

"The closest thing you're going to come to showing remorse for your action is to disgorge the money you made and help to recover the funds that shareholders were deprived of," Sylvia said.

But Sylvia said the level of leniency was a surprise, given the fact that before his plea agreement, Fastow faced over 90 different charges that would have resulted in a much stiffer penalty had he gone to trial and been convicted.

"Some might say that by cooperating, he already got a bargain," he said.

Under the original plea agreement, Fastow's sentencing was delayed until after his wife, Lea, served a year in jail for filing a false tax return that helped her husband hide millions of dollars in illegal profits from his side deals at Enron.

Fastow's rabbi speaking to reporters after the sentencing said that Fastow was a changed man and the family had hoped that he would serve even less time.

"What you have seen is a man that innately had good values...a moral man who strayed," said Rabbi Shaul Osadchey. "This man had returned to the true person he actually is [and] hopefully will be in the future."

Fastow was considered one of the star witnesses in the trial against Skilling and Lay earlier this year. He testified that the win-at-all-cost culture within Enron promoted fast dealings.

"In the culture of corruption within the company that rewarded financial performance over economic value, I believe I was being a hero," he testified in March, although he said he later regretted his illegal actions.

But Fastow said that Skilling was not only aware of some of the controversial partnerships used to artificially prop up Enron's performance but that he gave those deals his blessing.

And he said that Enron founder Kenneth Lay was aware of Enron's deteriorating financial condition and expected a big third-quarter loss in 2001, but kept telling the public and employees the company was "fundamentally strong."

Skilling was convicted of 19 counts of fraud, conspiracy, insider trading and lying to auditors. Lay was convicted of 6 counts of fraud and conspiracy related to Enron's collapse and four counts of bank fraud in a separate bench trial.

"There's no doubt that we could not have brought jurors inside the doors of Enron's executive suite without Andy Fastow, " John Hueston, lead prosecutor in the Enron trial, said to the reporters after the sentencing.

But Hueston added that Judge Hoyt's sentence "reflected mercy today."

More Enron sentences to come

Fastow's sentencing comes as the courts begin the process of sentencing other executives involved with Enron's collapse.

Enron's former chief accountant Richard Causey, who was originally slated to be tried alongside Lay and Skilling, cut a deal just weeks before the trial and agreed to serve seven years for securities fraud. Causey was widely expected to be called to testify against his former bosses but he never took the stand. He will be sentenced on Oct. 19. Meet the players.

But the main star of the show in Houston's courtroom will be former CEO Skilling, who will be sentenced on Oct. 23. Skilling will be facing between 20 and 30 years in prison.

He will be facing a judge alone because of Lay's death. But government prosecutors are attempting to hold Lay's co-defendant Skilling responsible for Lay's $43.5 million forfeiture. That would obligate Skilling to pay $183 million in restitution to government for his and Lay's convictions.

Enron's bankruptcy, the biggest in U.S. history when it was filed in December 2001, cost 4,000 employees their jobs and many of them their life savings. Investors lost billions of dollars.

Enron's collapse marked the first of the high-profile corporate scandals that rocked the nation, followed by WorldCom, Global Crossing, Adelphia and Tyco (Charts). The wave of fraud led to passage of the Sarbanes-Oxley law that tightened oversight of how American companies are audited.