October 24, 2006

Enron’s Skilling Is Sentenced to 24 Years

HOUSTON, Oct. 23 — Jeffrey K. Skilling was sentenced to 24 years and 4 months in prison for his role in the pervasive fraud and conspiracy that led to the bankruptcy of Enron, closing the book on the government’s prosecution of top executives at the once-highflying energy company.

Enron’s fall ushered in a wave of prosecutions against corruption at the highest levels of American business. Since then the Justice Department has tightened the tourniquet around high-level executives involved in white-collar crime, leading to a series of stiff prison sentences.

Mr. Skilling stood stoically in his black suit as Judge Simeon T. Lake III read his sentence, which narrowly missed being the longest one ever handed down to a white-collar criminal. That record still belongs to Bernard J. Ebbers, the former chief executive of WorldCom, who was sentenced to 25 years last year for his role in the $11 billion fraud that led to that company’s collapse.

Mr. Skilling’s sentence nevertheless amounts to almost life imprisonment for the 52-year-old former chief executive, who in one decade transformed Enron from a sleepy pipeline company into an energy-trading juggernaut. Accounting schemes he approved masked huge debt and cash flow problems at the company that led to its ultimate demise. Shareholders at Enron, once the seventh-largest company in the country, lost billions of dollars in stock and retirement savings.

“As the many victims have testified, his crimes have imposed on hundreds if not thousands a life sentence of poverty,” Judge Lake said, responding to criticism of the sentence as overly harsh.

Once in prison, Mr. Skilling could trim his sentence by 54 days a year with good behavior. And he could knock off one more year for participating in an inmate drug and alcohol treatment program, which the judge required.

Mr. Skilling has recently struggled with alcoholism. Despite being ordered not to drink by the court after a drunken scuffle with bar patrons in Manhattan in 2004, he was arrested last month by Dallas police for public intoxication and forced to spend a night in jail.

At Enron, Mr. Skilling alone now bears the dear price for fighting the charges that he and his co-defendant and Enron founder, Kenneth L. Lay, deceived analysts and investors about the company’s true financial condition. Mr. Lay was convicted in May of fraud and conspiracy but died unexpectedly in July of heart-related problems. Several of Mr. Lay’s family members and lawyers attended Monday’s sentencing.

For now, at least, Mr. Skilling will avoid the discomfort of prison life.

Judge Lake denied Mr. Skilling’s request to remain free pending appeal. But he allowed him to be confined to his Houston home until the Bureau of Prisons assigns him to a correctional facility, which could be a few months. He left court wearing an electronic monitoring bracelet on an ankle under his trousers.

Mr. Skilling, who is appealing his verdict, continued to profess his innocence. “I am innocent of every one of these charges,” Mr. Skilling told the judge. “We will continue to pursue my constitutional rights and it’s not a dishonor to this court or anyone else who was involved in this, but I feel very strongly about this.”

In his five-minute speech, he reiterated that Enron collapsed because of a “severe liquidity crisis” and did not have “enough dry powder” to deal with the events that followed his abrupt resignation as chief in August 2001. “But I wasn’t there,” he said. “I wish I was there.”

While saying he did nothing illegal, Mr. Skilling said he did feel bad about what happened. “I can’t imagine more remorse,” Mr. Skilling said. “I have friends who have died. Good men.”

But some outside lawyers saw little remorse in Mr. Skilling’s words. “He was defiant to the end,” said Philip Hilder, a Houston criminal defense lawyer.

The judge’s sentence fell within the 2000 federal sentencing guidelines. Judge Lake rejected the government’s call to use stricter 2001 guidelines. But he found several reasons to increase Mr. Skilling’s sentence into a range of 292 months to 365 months, or 24 years and 4 months to 30 years and 5 months.

The higher sentence, the judge said, was because he found that Mr. Skilling had lied to the Securities and Exchange Commission about the real reasons for his sales of Enron stock before the company’s collapse in December 2001. Mr. Skilling said he sold the stock only because of the impact on the market of the 9/11 terrorist attacks.

Judge Lake said he would recommend that Mr. Skilling be assigned to the federal prison in Butner, N.C., for medium and low-security inmates. Because of the length of his sentence he will initially be placed in a medium-security facility.

The judge also approved a restitution order that will send as much as $45 million of Mr. Skilling’s money to the victims of the Enron fraud. Under the order, $15.5 million will go to Mr. Skilling’s lawyers and another $5 million to Enron shareholders if Mr. Skilling’s appeals are unsuccessful. Essentially all of Mr. Skilling’s almost $60 million fortune will be stripped from him, the judge said.

Some outside lawyers questioned Mr. Skilling’s willingness to agree to the restitution order, saying it amounted to a tacit admission of guilt that could affect his chances of successfully appealing his verdict. “That could hurt him down the line,” said Joel Androphy, a Houston criminal defense lawyer.

The government said Monday that it was also continuing to pursue the ill-gotten gains from Mr. Lay, even though his verdict was voided last week because of his death. Prosecutors filed a civil forfeiture action to recover more than $12.5 million from Mr. Lay’s Houston condominium, a family investment partnership and a bank account.

The courtroom Monday was packed with reporters and local citizens, including nine jurors from the criminal trial. Mr. Skilling’s brother, Mark, and his ex-wife, Susan, were there, but none of Mr. Skilling’s three children attended the sentencing.

Six Enron shareholders and former employees spoke in support of Mr. Skilling’s getting the maximum sentence for his crimes.

“Mr. Skilling has cheated me and my daughter of our retirement dreams,” said Dawn Powers Martin, who worked 22 years at Enron. Now, she said, he should be denied “the chance to walk the earth as a free man.”

Anne Beliveaux, who worked as an administrative assistant in Enron’s tax department, said: “The worst mistake Ken Lay ever did was to hire you, bring you in and let you run the company, which we all loved. You should be ashamed of yourself.”

One supporter, Sherri Sera, Mr. Skilling’s longtime administrative assistant, said Mr. Skilling had “revolutionized” the energy industry and was “the most intellectually honest person you will ever meet.”

Sean Berkowitz, the director of the Enron Task Force at the Justice Department, said Mr. Skilling’s sentence was appropriate and should serve to deter white-collar crime.

“The Enron fraud is as large and serious as any other fraud in this nation’s history,” Mr. Berkowitz said. He added that Mr. Skilling “sat at the top and set the culture of what happened at Enron — he should bear the brunt of the responsibility.”

Daniel Petrocelli, Mr. Skilling’s lead lawyer, argued for a sentence closer to 7 to 10 years. But he said that while the jury found Mr. Skilling had “crossed the line,” the “jury had no evidence that this man ever intended to harm anybody.”

Judge Lake likened that argument to someone’s committing arson to collect insurance but not intending for anyone to be inside the building.

One juror, Jill Ford, said she agreed with the judge. “Just because you don’t mean to do it doesn’t mean you don’t know it is wrong,” Ms. Ford said in an interview outside the courtroom. “But this is still really sad for everybody involved.”

At day’s end, Mr. Skilling told reporters outside the courthouse that he had no regrets in fighting for his innocence. A federal appeals court has overturned a string of convictions in Enron-related cases, giving him some hope, at least, of winning another trial.

For the next month or so, while confined to his home, he said he planned to spend as much time as he can with his family.

“Enron has become a horror to me,” Mr. Skilling said, glassy-eyed and shaking. “The word Enron conjures up some really awful things. I don’t blame the judge for what he did.”

Thayer Evans contributed reporting.