The court yesterday sentenced former Enron President and CEO Jeffrey Skilling to 24 years, 4 months imprisonment. Skilling was convicted in May on 19 criminal charges for fraud, conspiracy, and insider trading. Former Enron CEO Kenneth Lay was also convicted on multiple criminal charges in May. Lay died in July and last week the Houston trial court voided his conviction because his death prevents it appeal. Federal prisoners must serve at least 85% of their sentences. If the appellate court upholds the guilty verdict and sentence Skilling must serve approximately 20 years, 8 months. Skilling is 52 years old. The court also announced an agreement by which $45 million, most of Skilling’s remaining assets, will go into a fund for financial victim’s of Enron’s collapse.
The New York Times reported that Skilling’s sentence just missed being a record for the longest given to a white-collar criminal. Former WorldCom CEO Bernie Ebbers’ 25-year sentence still holds the mark. Skilling’s sentence was at the low end of the range of 20.3 to 30.4 years in prison suggested by federal sentencing guidelines. Skilling continues to proclaim his innocence, one factor that explains the difference between his sentence and the six year sentence imposed on former CFO Andy Fastow earlier this month. Fastow pled guilty to conspiracy to commit wire fraud and securities fraud, cooperated with prosecutors, and was the star witness in the government’s case against Skilling and Lay. Their disparate sentences do not reflect disparate culpability for Enron’s spectacular failure. Their actions, and the actions of others, led directly to shareholder losses widely reported at $60 billion or more and job losses for thousands of employees, many of whom also lost their pension savings, and indirectly to incalculable collateral damage such as the demise of accounting giant Arthur Andersen. This took a team effort.
Is Skilling’s sentence fair? Too long? Too short? He is a first offender–but what a first offense. Today’s Wall Street Journal (John R. Emshwiller, Skilling Gets 24 Years in Prison, The Wall Street Journal, Page C1, 24-Oct-06) contains a quote from former federal prosecutor Jacob Frenkel, now in private practice: “Mr. Skilling’s sentence was entirely expected and grossly excessive” and shows “how distorted sentencing in white-collar cases has become.” I disagree. A sentence of, say, 6-7 years would be an insult to the millions harmed by Enron’s collapse. 292 months for $60 billion (conservatively) in financial loss works out to about $205 million/month. Using the same scale of economic harm caused to length of sentence, a non-violent bank robber who walks away with $10,000 should serve a sentence of a little more than an hour–63 minutes, to be exact.
Don’t try that at home.