Jeff Skilling -- the former CEO of Enron now serving a roughly 24-year sentence at a minimum-security correctional facility near Denver -- is taking his case to be released to the U.S. Supreme Court. But, if anything, he deserves to spend the rest of his life in prison. In case you've forgotten, Enron's collapse put 5,000 people out of work, slashed $2 billion in employee pensions and eliminated $60 billion in Enron stock market value. Skilling was convicted in 2006 on 19 counts of conspiracy, securities fraud, insider trading and lying to auditors.
And at the core of Enron's collapse was Skilling's contribution to creating Enron's false facade of prosperity that masked a money-losing business, which I wrote about in my book Value Leadership.
That's what makes his latest legal battle for a new trial particularly ironic. The Associated Press reports that Skilling's high-priced legal talent is heading to the Supreme Court to argue that one law under which he was convicted is unconstitutional. That's the so-called honest services law, which makes it illegal for officials, executives and others to scheme to deprive those they serve and possibly others of "the intangible right to honest services."
'Opportunistic and Arbitrary'?
Opponents of the honest services law argue that it's vague -- which makes it illegal -- while advocates defend it, claiming that it makes sense to apply in many specific situations. Daniel Petrocelli, Skilling's main attorney, wrote in his Supreme Court brief that prosecutors have used the law to pursue "opportunistic and arbitrary prosecutions."
Prosecutors counter that the law makes sense in cases involving bribes, kickbacks or conflicts of interest. They argue that Skilling faked his loyalty to Enron and its shareholders, and intended to deceive them so he could prop up the value of Enron stock before he sold it.
The prosecutors write that Skilling "deprived shareholders of the information they needed to make informed decisions and thereby defrauded them of his honest services." And they argue that Skilling wasn't simply doing this for the fun of it -- he was doing it to make money. They contend that the facade of prosperity he held up in front of Enron to mask its negative cash flow bought him time to cash out of his Enron stock before the company collapsed.
An Annoying Requirement
So here's the situation: Skilling, who oversaw a company that was fundamentally dishonest, is trying to get the Supreme Court to throw out a law that requires executives to behave honestly. I guess you have to hand it to Skilling. All he wants is to change America's legal system so business leaders can be safe from the annoying requirement that they be honest. He just wants the U.S. to be safe for dishonest business leaders like him.
It would be a mistake to conclude that the Supreme Court would let political considerations enter into its analysis of the fate of honest services. But it's worth remembering that Skilling's boss, the late Kenneth "Kenny Boy" Lay, gave $552,025 to the campaigns of George W. Bush. And Bush appointed two justices to the Supreme Court -- John Roberts and Samuel Alito -- who may now have the power to return the favor to one of Lay's key lieutenants.
If the Supreme Court declares honest services unconstitutional, then the spirit of Enron -- that it's OK for executives to deceive a company's shareholders and employees -- will get an implied endorsement from the very chamber that should ensure it never happens again.
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