By Burt Rose
The United States Court of Appeals for the Fifth Circuit has decided the remanded case of UNITED STATES OF AMERICA v. JEFFREY K. SKILLING, Appellant, 2011 WL 1290805, No. 06–20885 (April 6, 2011).
In May 2006, former Enron Corporation CEO Jeffrey K. Skilling was convicted by a jury of one count of conspiracy, twelve counts of securities fraud, five counts of making false representations to auditors, and one count of insider trading. The indictment alleged several possible objects of the conspiracy, including securities fraud and honest-services fraud, and the district court’s jury instructions permitted the jury to convict on any of the alleged theories of guilt. The district court sentenced Skilling to 292 months of imprisonment and three years of supervised release, and assessed $45 million in restitution.
Skilling appealed, arguing, among other things, that his conspiracy conviction was premised on an improper theory of honest-services fraud. The Fifth Circuit affirmed the convictions, holding that the Government’s honest-services theory was proper under Fifth Circuit case law. See United States v. Skilling, 554 F.3d 529, 595 (5th Cir.2009), vacated in part, ––– U.S. ––––, 130 S.Ct. 2896, 177 L.Ed.2d 619 (2010). The court also vacated the sentence and remanded for resentencing because the district court had incorrectly applied a sentencing enhancement for substantially jeopardizing a “financial institution.” On appeal, the Supreme Court reduced the scope of the honest-services fraud statute and invalidated the Government’s honest-services theory in this case. See Skilling, 130 S.Ct. at 2907 (“Because Skilling’s alleged misconduct entailed no bribe or kick-back, it does not fall within [the honest-services fraud statute]’s proscription.”). The Court did not, however, reverse any of Skilling’s convictions, but remanded the case to the Fifth Circuit to determine whether the honest-services instruction amounted to harmless error.
The Court of Appeals for the 5th Circuit has now ruled that the jury was presented with overwhelming evidence that Skilling conspired to commit securities fraud, and thus the court concluded beyond a reasonable doubt that the verdict would have been the same absent the alternative-theory error. Skilling and his co-conspirators committed securities fraud in that they manipulated Enron’s reported earnings or concealed Enron’s losses from the investing public with the intent and result of affecting Enron’s stock. Because the verdicts were supported by overwhelming evidence, the Court found that the flawed honest-services instruction was harmless error beyond a reasonable doubt.
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