A Year Later, Prosecutors Fight To Keep Enron's Skilling in Prison

By Carrie Johnson
Washington Post Staff Writer
Wednesday, November 14, 2007

Nearly a year after Enron's Jeffrey K. Skilling walked into prison for his role in one of the era's most devastating corporate scandals, the federal government unexpectedly finds itself fighting to keep him behind bars until his sentence ends in 2028.

Skilling's conviction last year on fraud, conspiracy and insider-trading charges was the crowning glory of the Justice Department's drive to police misconduct at the nation's largest companies.

But an appeals court ruling months later invalidated one of the government's legal theories and undermined Skilling's conviction on a criminal conspiracy charge. His defense team made that a centerpiece of its appeal in September, and yesterday prosecutors responded with more than 200 pages of argument urging the court to preserve the conviction -- and the lengthy prison term.

The critical issue, legal experts say, is whether Skilling's high-priced defense team can use the earlier appeals court ruling as a wedge to pry open the rest of the case and spring him from prison far sooner than his 24-year, four-month sentence would allow.

The government's predicament began in August 2006, when the U.S. Court of Appeals for the 5th Circuit threw out several other Enron-related convictions. There, the court reasoned that employees needed to steal money or engage in otherwise blatantly corrupt behavior to be guilty of conspiracy for violating their duty to provide honest services to a company's investors.

Defense lawyers at O'Melveny & Myers cited the ruling this year as they asked the court to throw out all 19 of Skilling's criminal convictions and for a new trial or a reduced sentence.

But in yesterday's court papers, prosecutors refused to concede that the August 2006 case applied to Skilling, the former president and chief executive of the Houston energy-trading company. Instead, the government argued, Skilling was "no mere employee carrying out perceived goals imposed from above" but rather a corporate leader who devised the plan to hide Enron's losses and manufacture phony revenue.

"Skilling repeatedly violated the law by . . . making false and fraudulent representations to Enron's shareholders and the investing public, approving improper earnings manipulation and participating in off-the-books side deals that were concealed from Enron's auditors," Assistant U.S. Attorney Douglas Wilson wrote.

Since December, Skilling has been in a Waseca, Minn., federal prison, where he has been teaching himself and some fellow inmates Spanish.

The Enron prosecution team, since disbanded, has had spotty results on appeal. Besides the August 2006 ruling, which involved a questionable deal with Merrill Lynch to unload energy-generating barges, the U.S. Supreme Court two years ago overturned a conviction of Enron's accounting firm, Arthur Andersen, for obstructing justice.

It remains to be seen how an appeals court ruling that is at least partly favorable to the defense would affect Skilling's prison term. Federal judges have unusual discretion when it comes to fashioning sentences. And U.S. District Judge Simeon T. Lake III, who presided over last year's trial, has developed a reputation as a no-nonsense jurist who does not hesitate to throw the book at people who break the law.

Yet Lake has backtracked before. In one case that drew national attention, Lake sentenced a mid-level Dynegy executive embroiled in a far less devastating accounting scheme to 24 years in prison, setting off an outcry that helped prompt an appeals court to order a do-over. Ultimately the judge reduced the prison term to six years.

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