Skilling Didn't Deprive Enron of 'Honest Services,' Attorney Says

Former Enron chief executive Jeffrey Skilling is appealing his May 2006 conviction.
Former Enron chief executive Jeffrey Skilling is appealing his May 2006 conviction. (Pat Sullivan - AP)
  Enlarge Photo    
By Juan A. Lozano
Associated Press
Thursday, April 3, 2008

NEW ORLEANS, April 2 -- Former Enron chief executive Jeffrey K. Skilling, convicted for his role in the energy giant's collapse, took risks when he ran the company but they were always for its benefit, his attorney told an appeals court Wednesday.

His well-intentioned actions negate his convictions, which rest on a legal theory that Skilling deprived Enron of his "honest services" and put his own interests above those of the company, defense attorney Daniel M. Petrocelli told a three-judge panel of the U.S. Court of Appeals for the 5th Circuit.

But prosecutors argued that Skilling's actions were dishonest and contrary to the needs of the company's shareholders and its financial stability.

Skilling was convicted in May 2006 on 19 counts of fraud, conspiracy, insider trading and lying to auditors for his role in the collapse of Houston-based Enron, once the nation's seventh-largest company. Skilling, who is serving a 24-year sentence in a federal prison in Minnesota, was not present during Wednesday's arguments, but his wife and siblings attended.

Company founder Kenneth L. Lay also was convicted, but he died less than two months later and his convictions were vacated.

Petrocelli made the honest services theory the centerpiece of his arguments. Legal experts say that is Skilling's best chance at overturning his convictions.

Prosecutors theorized at trial that Enron employees were bound to serve honestly and not put their interests ahead of the company's. If they failed to do so, they deprived the company of "honest services" and committed a crime.

The 5th Circuit has already overturned several Enron-related convictions that were based on the honest services theory, ruling that executives did only what Enron wanted and did not profit at its expense.

Petrocelli characterized Skilling as a loyal employee who at times might have bent the rules, but only for the company's benefit.

"In this case, we have an employee, Mr. Skilling, acting in pursuit of Enron's interests at all times," Petrocelli said. "Skilling urged risky transactions that were unwise but violated no rules."

But federal prosecutor J. Douglas Wilson told the judges that Skilling's actions were inconsistent with the short- or long-term goals of the company's shareholders.

"At Skilling's level, the corporation is the shareholders," Wilson said. "Skilling works for the shareholders, and if his actions are contrary to [their] long-term or short-term goals, then that is a violation of honest services."

Skilling is the highest-ranking executive to be punished for the accounting tricks and shady business deals that led to the loss of thousands of jobs and more than $60 billion in Enron stock value after the company imploded in 2001.

© 2008 The Washington Post Company