Bloomberg News

Enron’s Skilling in Talks With U.S. on Possible New Term

April 05, 2013

Jeffrey Skilling, the former Enron Corp. chief executive officer, is in talks with the U.S. Justice Department to possibly reduce his 24-year sentence for helping mastermind the fraud that brought down the world’s biggest energy-trading company.

The U.S. issued a notice April 3 to thousands of former Enron employees and shareholders asking them to alert authorities by April 17 if they wish to express their views in court on a possible new sentence. The notice didn’t provide any details about the basis of the talks, though a person familiar with the matter said a resolution may speed payment of restitution to victims.

“On occasion, the U.S. Department of Justice enters into agreements with defendants to resolve certain disputed matters concerning sentencing,” the department said. The U.S. “is considering entering into a sentencing agreement with the defendant in this matter.”

The talks were disclosed 11 months after Skilling’s lawyer, Daniel Petrocelli, said his client would seek a retrial based on what he called newly discovered evidence. Last month, U.S. District Judge Sim Lake in Houston, where Enron was based, gave the 59-year-old Skilling until May 28 to file a request for the new trial, according to court records.

Patrick Stokes and Robert Heberle, two of the government lawyers on the case, didn’t immediately return calls for comment on the notice.

‘Substantially’ Jeopardize

While a federal appeals court in April 2011 upheld Skilling’s conviction, the judges ruled he still needs to be resentenced because the trial court incorrectly applied a sentencing enhancement used when defendants “substantially” jeopardize a financial institution.

Skilling has delayed the resentencing with his bid for a new trial, and a sentencing deal could speed up the court- ordered restitution to victims that hinges on the case being resolved, according to the person familiar with the matter, who asked not be identified because the talks are private. The restitution amounted to as much as $45 million at the time of Skilling’s conviction in 2006.

The U.S. may have entered into negotiations with Skilling to avoid a new trial that could highlight problems with the way it handled evidence in the case, said Matt Orwig, a white-collar defense lawyer at Jones Day in Dallas, who served as U.S. Attorney in the city from 2001 to 2007.

‘Routine Housekeeping’

The talks could also be a “routine housekeeping matter” or a tactical decision “to speed up sentencing and put this whole issue behind them,” Orwig, who wasn’t involved in Skilling’s prosecution, said yesterday in a phone interview.

Skilling, imprisoned at a low-security facility in Littleton, Colorado, was convicted by a Houston jury in 2006 of misleading investors about Enron’s financial condition. He was also convicted of lying to auditors and insider trading. According to the U.S. Bureau of Prisons, he’s scheduled to be released on Feb. 21, 2028, when he will be 74.

Enron, once the world’s largest energy trader, filed for bankruptcy in 2001 after revelations that it was using off- balance-sheet vehicles to hide billions of dollars in losses and inflate the company’s stock price. More than 5,000 jobs and $2 billion in employee retirement funds were wiped out, while investors sued to recover more than $60 billion in losses.

Lay Conviction

Kenneth Lay, Enron’s founder and chairman, was convicted of leading the fraud alongside Skilling. Lay’s conviction was erased when he died six weeks after the verdict, before he had a chance to appeal.

If Skilling reaches a sentencing deal with the U.S. and it’s approved by the court, a judge will schedule a new sentencing hearing and the government may be barred from appealing a final order, the Justice Department said in yesterday’s notice to victims.

Last year’s court filing about a bid for a new trial didn’t give details of new evidence. Petrocelli didn’t immediately return a call for comment yesterday on the U.S. notice.

Skilling has been challenging his conviction for five years. The U.S. Supreme Court agreed that he had been convicted, partly, on an improper legal theory. The high court sent his case to the federal appeals court in New Orleans for further review.

The appellate court in turn upheld the verdicts, finding that evidence against Skilling was sufficient to convict him regardless of the improper legal theory.

Skilling, who is from Pittsburgh, studied at Southern Methodist University in Dallas and Harvard Business School. He joined Enron in 1990 and oversaw its expansion from a pipeline company to a broad-based trading and energy-services concern.

The case is U.S. v. Skilling, 04-cr-00025, U.S. District Court, Southern District of Texas (Houston).

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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