Skilling's long shot
Despite a last-ditch effort to overturn his conviction, former Enron CEO Jeff Skilling could face 20 to 30 years in prison at his sentencing this week.
NEW YORK (CNNMoney.com) -- Former Enron chief executive Jeffrey Skilling is about to face the music for his part in the fraud that brought down the nation's seventh-largest corporation as his sentencing hearing begins this week in Houston.
Skilling, who was convicted May 25 on 19 counts of fraud, insider trading and conspiracy, could face between 20 and 30 years behind bars and hefty financial penalties, legal experts said. He is expected to be sentenced either Monday or Tuesday.
Legal observers expect presiding Judge Sim Lake to come down hard on the former Wall Street star.
"I expect the judge will throw the book at Skilling," said Jacob Zamansky, principal of Zamansky & Associates, a securities law firm that represents shareholders. "It's unlikely the judge will show any leniency because Skilling fought vigorously and is still proclaiming his innocence with no remorse."
In fact, motions to try to overturn Skilling's conviction were filed last week. And appeals are expected to be filed after the sentencing.
Judge Lake will allow victims to speak before the court on Oct. 23 before handing down his sentence.
More than 4,000 Enron employees lost their jobs when the company declared bankruptcy in December 2001. Many of those workers also lost their life savings and investors lost billions of dollars. Under the law, these victims are allowed to voice their grievances during sentencing, although its unlikely that the judge will make any changes to sentencing based on their statements.
Zamansky said Skilling is likely to receive 25 years in prison - identical to former WorldCom CEO Bernie Ebbers's sentence for orchestrating an $11 billion accounting fraud.
And like Ebbers, Zamansky expects Skilling will likely remain out on $5 million bail pending appeal. Attorneys for Skilling already filed a motion to allow Skilling to remain free until an appeals court renders its verdict.
"If someone isn't involved in a violent crime and there's no real concern about risk of flight, a judge may grant a stay," Zamansky said. "But whether he goes in now or three months from now, he's facing a life sentence."
More legal drama
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 been vocal in his assertions that he committed no crimes at Enron - even taking the stand in his own defense during the long-awaited Enron trial earlier this year.
And in a court filing last week in Houston, Skilling asked presiding Judge Lake to overturn his conviction in the wake of a successful appeal in another Enron-related case.
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 based on directions and didn't deprive the company of "honest services."
Honest services is a legal statute implying that a person to the best of his or her knowledge provided a company with the professional services that person was hired to do.
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 - in essence, providing "honest services" to the company.
Legal experts, however, think Skilling may be overstretching in his attempt to remain free.
A long shot
"It looks to me to be a very, very long shot," said Sheldon Zenner, head of the national white-collar and investigative practice group at Chicago-based law firm Kattan Muchin Rosenman. "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," said Jacob Zamansky. "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 the "honest services" issue, some expect that Skilling may stand a better chance on appeal on other grounds.
Jacob Frenkel, partner at Rockville, Maryland-based law firm Shulman Rogers, said Skilling's case has a number of issues that may satisfy the appellate courts. One is Judge Lake's jury instructions that they could find Skilling and Enron founder Kenneth Lay guilty of "deliberate ignorance" - in other words, that the two men ignored signs of wrongdoing.
In a court filing last week, Skilling's attorneys said, "Skilling never purposefully blinded himself to any allegedly criminal facts ... and finally the [Enron] Task Force all but conceded that the instruction should only apply to Lay, yet the Court refused to give an instruction informing the jury that the deliberate ignorance theory could apply only to one and not to both defendants."
Faulty jury instructions in recent white-collar cases have resulted in overturned convictions in the past. In March, a federal appeals court voided Credit Suisse (Charts) First Boston's former star investment banker Frank Quattrone's conviction on that issue, and the Supreme Court overturned the Enron-related conviction against accounting firm Arthur Andersen last year.
In addition, lawyers for both Skilling and Lay - who passed away in July after being convicted of 10 counts of fraud and conspiracy - unsuccessfully attempted repeatedly to change the venue of the trial from Houston, the epicenter of the whole Enron scandal, saying the two men wouldn't be able to have a fair trial in the city.
But Frenkel said Lay's death may wind up providing Skilling with another cause for appeal. With Lay's death, Lay's conviction was wiped clean for all intents and purposes. In fact, legally, it's as if he was never charged with a crime in the first place.
Given the fact that Lay and Skilling were tried together, Frenkel said Skilling's attorneys could argue that his case was tainted by evidence against Lay.
"The appellate courts will look long and hard at the verdict on this case," he said. "And the appellate courts haven't been shy about sharing their disagreement with Enron-related convictions in the past."
Judges in Houston have been busy in the past few weeks as several former Enron employees received sentences for their role in Enron's demise.
Among the more high-profile sentencings was that of Andrew Fastow, the company's former chief financial officer. Fastow, who was originally slated to serve 10 years under his plea agreement, will only spend six years in prison. Fastow was an integral witness in the case against Lay and Skilling and received a lighter sentence - despite some anger from victims of Enron's collapse - thanks to his cooperation.
Former chief accounting officer Richard Causey, who was originally slated to be sentenced on Oct. 19, will now face a judge on Nov. 15. Causey cut a last-minute deal in December to avoid trial. He pleaded guilty to securities fraud and agreed to serve seven years in prison
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.