Tuesday, January 6, 2009

Skilling - Commentary on the Decision

The Fifth Circuit issued a 106 page opinion in the Skilling case (see here or here) - here are some thoughts on it -

  • Many courts have struggled with the scope and definition of the honest services fraud statute.  Since its passage, section 1346 has caused several opinions that have attempted to provide a definition to "honest services" - a term that is undefined in the statute.  The Fifth Circuit, in a prior case - Brown had placed some restraints on prosecutions using this statute.  The Skilling decision narrows these restraints and allows more prosecutorial power in bringing an honest services fraud case. The court states:

"Therefore, it is not a matter of Skilling setting the corporation’s policy himself. Instead, the question is whether anyone who supervised Skilling specifically directed his actions—such as how Fastow sanctioned the scheme in Brown. Skilling never alleged that he engaged in his conduct at the explicit direction of anyone, and therefore he cannot avail himself of the exception from Brown."

Simplistically - will this mean that if you can blame someone else for your conduct (such as a higher-up in the corporation), this will mean the Brown exception applies, but if you are the person at the top you may be out of luck in trying to make this claim?

  • The court finds - at best- harmless error in the giving of a deliberate ignorance instruction.
  • The court rejects each of the claims regarding improper jury instructions.
  • The court also rejects the venue claims of Skilling saying -

"It would not have been imprudent for the court to have granted Skilling’s transfer motion. The issue before us, however, is whether the court committed reversible error. It did not."

  • The court rejects Skilling's claims of prosecutorial misconduct, and also rejects the Brady violation claims of the defendant.  But the court does let Skilling know that he can raise some of the Brady issues in the trial court.  So this issue may have a future. The court explicitly states:

"We find the omission of this statement from the 302s troubling. Perhaps even more troubling is that the government never disclosed the page of interview notes containing this statement to the district court. However, because the district court never had the opportunity to consider this page of interview notes, we cannot address this Brady claim for the first time on appeal. The district court did not assess the materiality of this statement or determine whether its suppression violated Brady. Thus, there is nothing for us to review. Skilling must bring this claim to the district court before we can address it."

Basically, this means that this case is far from over.

  • The sentencing aspect is the biggest win for Skilling. Although the court states that it was proper to use the SEC testimony, it does reject the "four-level enhancement for substantially jeopardizing the safety and soundness of a 'financial institution.'"  What is  the definition of a "financial institution" is the question here, and the court uses the rule of lenity and sides with the defense. I await Professor Doug Berman's calculations from the Sentencing Blog, as to exactly the amount of time that this could reduce his sentence.

(esp)(blogging from San Diego)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2009/01/skilling-commen.html

Enron, Fraud, Sentencing | Permalink

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Comments

A four point drop in the Offense Level (assuming all other enhancements stay the same) puts Skilling's Offense Level at 36, so the Guidelines range is 188-235 months. If Judge Lake gives a sentence at the bottomm of the Guidelines range, it will take off 104 months from Skilling's sentence, or 8+ years. Judge Lake could give a higher (or lower) sentence because of the discretion he has in sentencing, but he has shown that he tends to follow the Guidelines fairly closely.

Peter Henning

Posted by: Peter Henning | Jan 6, 2009 11:59:10 PM

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