Former Enron CEO gets 24-year sentence
Former Enron Corp. Chief Executive Jeffrey K. Skilling was sentenced to more than 24 years in federal prison Monday for his role in the company’s 2001 collapse, one of the longest prison terms to arise from the recent era of corporate scandals.
Skilling, who was convicted in May on 19 counts of fraud, conspiracy, insider trading and lying to auditors, had faced 24 to 30 years in prison under federal sentencing guidelines.
“Mr. Skilling and his attorneys argue that the guideline range would be tantamount to life in prison,” U.S. District Judge Sim Lake said before pronouncing the sentence. “But as the many victims of his crime have so poignantly explained, his crimes have imposed on them a life sentence of poverty.”
In addition to handing down a prison term of 24 years and four months, Lake ordered Skilling to pay about $45 million in restitution to the thousands of investors and employees who lost money when Enron failed. The judge set investor losses from Skilling’s actions at $80 million.
Lake imposed the sentence after a two-hour hearing that featured angry testimony from former Enron workers and a ringing expression of innocence from Skilling.
“In terms of remorse, your honor, I can’t imagine more remorse,” Skilling told Lake. “That being said, your, your honor, I am innocent of these charges. I am innocent of every one of these charges.”
Skilling’s codefendant, former Enron Chairman Kenneth L. Lay, died of a heart attack July 5. Last month, Lake wiped away Lay’s conviction on 10 counts of fraud, conspiracy and lying to banks, ruling that his death denied him the chance to appeal the verdict.
Skilling’s pivotal role in what has been called the biggest scandal in the history of American finance made leniency unlikely, experts said. That’s especially true given the long sentences handed out to other corporate criminals of the era, such as former WorldCom Inc. CEO Bernard J. Ebbers, who was sent to prison for 25 years.
“This is a very tough time to be a white-collar defendant,” said Douglas R. Young, an attorney with Farella Braun & Martel in San Francisco. “In the public’s mind, there is something about wanting to punish people who have seemingly been at the top of the game.”
Lake denied Skilling’s request to be released on bond pending appeal, ordering him to home confinement. Federal prison officials will recommend when and where Skilling should report to prison. Lake suggested the federal prison in Butner, N.C.
With no parole in the federal prison system and only limited time off allowed for good behavior, it is probable that Skilling, 52, will serve the bulk of his sentence, said Stanford law professor Robert Weisberg.
That doesn’t sit well with Washington defense attorney Barry Boss.
“We’ve lost complete perspective when it comes time to sentence white-collar defendants,” said Boss, who formerly co-chaired the U.S. Sentencing Commission’s Practitioners Advisory Group.
“For somebody of Skilling’s age with no prior record, to impose what is essentially a life sentence doesn’t serve any recognized objective of the criminal justice system.”
Although Ebbers received a longer sentence than Skilling, other recent corporate criminals have gotten less. Andrew S. Fastow, the former Enron chief financial officer who designed the off-the-books partnership that helped destroy the company while making him millions, was sentenced last month to six years in prison. Fastow testified against Skilling and Lay at their trial.
Former Enron employees weren’t sympathetic.
“It was a good sentence, but if the judge had given him 199 years, I would have stood up and clapped,” Diana Peters, 56, who worked for Enron for 11 years as a computer technician, said afterward. “I’ll feel better once he’s locked in jail. When the jail door shuts on him, that will close the door on this for me.”
During the hearing, Anne Beliveaux, 64, who worked at Enron for 18 years, said she lost more than half a million dollars in retirement funds.
“Never in my wildest dreams did I think I’d be facing what I’m facing now, and that is: no retirement,” she said. “It was all in Enron stock.”
Skilling’s former assistant, Sherri Sera, defended her former boss, saying the man portrayed in the media wasn’t the caring, philanthropic person she knew.
Sera said she lost money when Enron collapsed, but she blamed it on “shortsighted investment decisions I made. I don’t blame Jeff Skilling.... It was my choice to put all my eggs in one basket.”
As for Skilling’s expressions of remorse, prosecutor Sean Berkowitz said he had “no doubt Mr. Skilling is sorry about the consequences of what happened, but that’s different than looking at his own responsibility for what he did.”
Defense attorney Daniel M. Petrocelli asked the judge to consider Skilling’s state of mind in determining his sentence.
“Mr. Skilling set out to harm nobody,” said Petrocelli, who is based in Los Angeles. “There was no intent. He wasn’t motivated by greed. He didn’t loot the company.”
Skilling sat quietly in the packed courtroom during the hearing. As Lake prepared to pronounce his sentence, Skilling stood before the judge with his hands clasped in front of him. He remained expressionless as he heard the sentence, but his wife, Rebecca, sobbed, put her hands to her face and bent over as the woman sitting to her left rubbed her back.
“I’m obviously disappointed with the sentence,” Skilling later told reporters outside the courthouse. “I don’t blame the judge. I’ll appeal it, and I think we’ll win.”
Boss and other defense attorneys said Skilling’s appeal might get a boost from the decision by a federal appeals court in August to reverse several convictions against former Merrill Lynch & Co. executives in a case involving Enron and Nigerian power barges. The decision was issued by the U.S. 5th Circuit Court of Appeals -- the same court that would hear Skilling’s appeal.
“There’s no doubt he’s going to have substantial issues on appeal,” Boss said. “It’s impossible to say whether he’s going to prevail, but I suspect he’ll give it one hell of a fight.”
In addition to prison time, Skilling faces a Securities and Exchange Commission civil suit and a massive shareholder lawsuit, which also includes Lay’s estate as a defendant.
Of Skilling’s remaining $60 million in assets -- which have been frozen by the government -- $45 million will go to the restitution fund for victims and $15 million to legal fees.
The government said Monday that it was filing a court action to seize Lay’s condominium in Houston, property associated with a Lay family investment partnership and a bank account with more than $22,000 -- “all proceeds obtained directly or indirectly as a result of various federal crimes.”
Skilling’s tenure as CEO of Enron was supposed to be the capstone of his career. Instead, it linked him tightly to a chapter in business history that would be known by the name of its signature scandal.
The Pittsburgh native came to Enron in 1990 with a master’s of business administration degree from Harvard and the reputation of being a star at consulting giant McKinsey & Co.'s Houston office. By 2000, Enron was ranked seventh on Fortune’s list of the nation’s 500 biggest companies and claimed $101 billion in annual revenue.
Skilling was promoted to CEO in February 2001, only to resign six months later, citing personal reasons. His abrupt departure was the first clear signal of serious trouble at Enron.
Enron filed for bankruptcy protection in December 2001, wiping out more than 4,000 jobs, $60 billion in stock market value and billions of dollars in retirement savings.
Zimmerman reported from Los Angeles, Hart from Houston.
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Portraits of corporate scandals
John J. Rigas
Accused of: With son Timothy Rigas, fraud and theft at Adelphia Communications Corp.
Result: Convicted in 2004; John Rigas sentenced to 15 years in prison, Timothy Rigas to 20 years.
Status: Free pending appeal.
Accused of: Encouraging his staff at Credit Suisse First Boston to destroy old records when the brokerage was under investigation.
Result: Found guilty in 2004, but conviction was overturned in March. Prosecutors agreed in August not to pursue retrial if Quattrone obeys the law for a year.
Andrew S. Fastow
Accused of: Conspiracy, fraud and money laundering at Enron Corp.
Result: In plea deal, admitted to two counts of conspiracy. Sentenced in September to six years in prison and two years of full-time community service.
Status: In federal detention center in Houston.
Bernard J. Ebbers
Accused of: Accounting fraud at WorldCom Inc.
Result: Convicted in 2005 and sentenced to 25 years in prison.
Status: In federal prison in Oakdale, La.
L. Dennis Kozlowski
Accused of: With Mark Swartz, defrauding Tyco International Ltd. shareholders.
Result: Convicted in 2005; both sentenced to eight to 25 years in prison. Kozlowski ordered to pay $167 million in fines and restitution; Swartz ordered to pay $72 million.
Status: In New York state prison.
Accused of: Lying about her sale of ImClone Systems Inc. stock.
Result: Convicted in 2004; served five months in prison and five months of home detention.
Accused of: Accounting fraud at HealthSouth Corp.
Result: Acquitted of fraud charges in 2005, but convicted this year of separate charges of bribing Alabama’s governor.
Status: Free pending sentencing.
Kenneth L. Lay
Accused of: Fraud and conspiracy at Enron.
Result: Convicted in May, but a judge erased the conviction after Lay’s death.
Status: Died in July.
Accused of: Accounting fraud at Homestore Inc.
Result: Convicted in June and sentenced this month to 15 years in prison.
Status: Free pending appeal.
Source: Times research
Jeffrey Skilling is the latest high-level executive to be sentenced in a corporate scandal. Here is a look at other prominent executives accused of wrongdoing.
Value of shares Skilling sold in 2000 and 2001
Enron’s lost market value
Number of jobs wiped out by the bankruptcy
Skilling’s federal prison sentence