HOUSTON — A federal appeals court Tuesday upheld former Enron Corp. CEO Jeff Skilling’s convictions for his role in the energy giant’s collapse but threw out his 24-year prison term and ordered that he be resentenced.
A three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans denied Skilling’s request to overturn his convictions. Skilling argued his convictions were invalid because of what his lawyers argued were incorrect legal theory, faulty jury instructions, a biased jury and prosecutorial misconduct, including accusations of witness intimidation and withholding evidence.
The panel wrote in its opinion that Skilling “failed to demonstrate that the government’s case rested on an incorrect theory of law or that any reversible errors infected his trial.”
While denying those arguments, the appellate panel also found that U.S. District Judge Sim Lake improperly applied a sentencing guideline that resulted in a longer prison term for Skilling, and ordered that he be resentenced. But legal experts still expect Skilling to get a lengthy prison term whenever he is resentenced.
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 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, more than $60 billion in Enron stock value and more than $2 billion in employee pension plans after the company imploded in 2001.
Company founder Kenneth Lay also was convicted of conspiracy, fraud and other charges, but his convictions were vacated after he died less than two months later of heart disease.
Skilling’s attorney, Daniel Petrocelli, said he was “extremely disappointed.” Petrocelli said he planned to ask for a rehearing before the three-judge panel, or before the entire 5th Circuit court, or he’ll appeal to the U.S. Supreme Court.
Skilling is serving his time, the longest sentence in the Enron scandal, in a federal prison in Minnesota.
Federal prosecutors said they were pleased with the decision.
Prosecutors won their convictions of the top two men at Enron by arguing 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.
Prosecutors argued Skilling’s actions were dishonest and contrary to the needs of the company’s shareholders and its financial stability.
When Petrocelli argued his appeal before the 5th Circuit in April, he characterized his client as a loyal employee who didn’t commit a crime and might have only bent the rules for the company’s benefit.
The 5th Circuit has overturned several Enron-related convictions that were based on the honest services theory, ruling that executives did only what Enron wanted them to do and did not profit at its expense.
Petrocelli said Tuesday that Skilling’s honest services argument was the same as those other cases and that his client was unfairly being singled out.
Jack Sylvia, a Boston-based attorney with the firm of Mintz Levin, said Skilling was not able to show that he was acting under the orders of anyone at Enron. Some legal experts had thought that because of the prior reversals, the honest services argument was Skilling’s best chance at overturning some or possibly all of his convictions.
“That’s why a lot of people were anxious for this opinion to be handed out,” said Christopher Bebel, a former federal prosecutor now in private practice in Houston. This opinion “represents an overwhelming victory for the government.”
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