The Supreme Court agreed on Tuesday to reopen one of the biggest corporate scandals in US history by hearing the appeal of former Enron chief executive officer Jeffrey Skilling.
Skilling, who is serving a 24-year prison sentence and has doggedly insisted he did nothing to defraud investors, reportedly broke down in tears when he heard the news.
“Jeff is overwhelmed with joy,” lawyer Daniel Petrocelli told the Houston Chronicle.
Enron’s spectacular 2001 collapse, the largest corporate bankruptcy in history at the time, with more than US$40 billion in outstanding debt, came to epitomize corporate greed in the heady days of the Internet boom.
Skilling and Enron founder Kenneth Lay hid company losses and hyped the stock’s value while selling their own shares on the sly as the massive energy empire crumbled.
Thousands of people lost their jobs and life savings when Enron collapsed. The ensuing scandal undermined faith in corporate America and led to a massive stock market sell-off.
Followed by other mega scandals — the collapse of WorldCom, excesses at Tyco — Enron led to significant regulatory changes.
The case was also one of the most complex involving corporate crime in US legal history and represented a high-profile test for the government’s crackdown on corporate wrongdoing.
Lay died of heart failure in July 2006 before he could be sentenced and his conviction on 10 counts of fraud, conspiracy and banking violations was thrown out because his death prevented him from appealing the verdict.
Skilling, who became the poster child for corporate malfeasance, appealed his May 2006 conviction by challenging the federal law that punishes executives who fail to provide “honest services.” His lawyers argued that the statute is “vague and unenforceable” and does not require proof that the accused received a personal gain from the alleged fraud.
“The government instead alleged that Skilling took assertedly inappropriate measures to maintain or improve Enron’s stock price, in violation of his fiduciary duties of ‘honesty,’ ‘candor,’ ‘loyalty’ and ‘honest services,’” his lawyers argued in court filings.
The Supreme Court agreed in May to review the conviction of newspaper tycoon Conrad Black based on his appeal of the same honest services statutes that prosecutors have increasingly used to crack down on executives and government officials.
The former Enron chief also appealed on the basis that he did not receive a fair trial.
“Skilling was pronounced guilty throughout Houston long before trial,” his lawyers argued in court documents, noting that “the seismic effect of Enron’s collapse on Houston [was] frequently compared by residents to the September 11 attacks.”
Media coverage included “blistering daily attacks on the executives — principally Skilling and Lay — deemed responsible for Enron’s demise,” they said.
“Skilling and Lay were compared to Al-Qaeda, Hitler, Satan, child molesters, rapists, embezzlers and terrorists,” they wrote, arguing that the jury pool was “biased” and their request for a change of venue should have been approved.
They further said the “honest services” statues under which Skilling was prosecuted are “vague and unenforceable.”
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