Skilling: $205 million/month

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.

11 Replies to “Skilling: $205 million/month”

  1. judy Post author

    Retribution is a valid tenet of punishment. Sending Skilling to jail may not make his victims whole but it probably makes many of them feel better knowing that he is rotting in jail rather than roaming free. Ask any victim what they want and it most likely will be an eye for an eye. Retribution has been around for a long time. Having a third party (the courts) impose the punishment not only gives legitmacy to a victim’s injury, it keeps victims from engaging in self-help.

  2. lsbelle

    Okay. Going back to my analogy–ONLY the part about someone murdering in self-defense being considered a murder. That part might not work simply because if it is self-defense I don’t think it would be considered murder. But every other part of my argument, I’m sticking with. Except for that part. Just back tracking.

  3. lsbelle

    Prison is only prison to some extent. I don’t think that a minimum security prison is a vacation, but I certainly don’t believe, in fact we all know, that it doesn’t have the same elements, nor is it governed by the same characteristics of a maximum security prison. If prison was simply prison, we wouldn’t have the need for divisions of minimum, closed medium, maximum security facilities.

    That’s like saying murder is murder. Well if murder was simply murder, why the need for labeling whether its manslaughter or murder in the first degree and so on? Why the need for the different laws and sentencing guidelines governing murder? Is someone who commits murder for self defense a murderer? Okay, enough of that–just thought I TRY to make an analogy.

    So when I say “no one cares” if Skilling goes to a Club Fed like prison, what I mean is that is what is expected. After all the “oooos” and “aaahhhs” concerning his sentence, an assignment to a minimum security prison won’t elicit any “ooos” and “aaahhhs” from me. I think that is what everyone expects. Now if he is assigned to a maximum security facility, I think it would generate interest and surprise because its sending a powerful message. The message being that those who commit white collar crime belong with, and are just as dangerous as those who commit cold blooded murder(though not everyone in prison are murderers or even criminals for that matter).

  4. dpearl

    As far as I’m concerned, 25 years is more than enough. The purpose of the prison system is 1. punishment but also 2. rejuvination.

    The prison system is supposed to prepare inmates for a return to society once their sentence is complete. Is 25 years not enough to teach Skilling his lesson? Granted, I’m not personally affected by his actions and I admit that those people might disagree.

    Regardless, Skilling should definately not be subject to anything but a minimum-security prison. The level of security should be determined by “physical danger to society” as well as to other inmates. At 50+ years old and after a life of properity/fortune, Skilling ain’t hurting anyone. No one has to worry about his escaping or about him hurting another inmate. Rather, if he were in a maximum-security establishmemnt, he would not survive the 25 years. And, as much as we all dispise his actions, prison is not intended to kill an inmate.

  5. David Randall Post author

    TerrierSam says it is unfair to compare Skilling to a bank robber. My comparison was to a non-violent robber, one who made off with the money without pointing a gun or terrorizing anyone. My intent was to put the economic harm into admittedly over-simplified perspective. That Skilling did not walk away personally with $60 billion, or $1 billion, or $100 million is not the point. He presided over a corporate culture combining great arrogance and breathtakingly-bad business judgment that was responsible for grave financial hardship for thousands of people. He was convicted of multiple criminal counts of fraud, insider trading, and conspiracy.

    Punishment is a legitimate aim of our criminal justice system. It is Skilling’s misfortune to be the last man who is a household name standing on the Enron battlefield. Many legal commentators share TerrierSam’s view that Skilling’s sentence is grossly disproportionate (I’ll post a sampling of such views)–but what do the man and woman in the street think? Read news accounts of the non-defense-bar’s reaction and you’ll find many, many people who think 24 years is not enough. The fact that many people share this view does not make it right. It does not make it wrong, either.

  6. David Randall Post author

    “No one cares if he gets to spend 25 years in a Club Fed” is just plain wrong. Prison is prison. Don’t believe that time in a minimum-security federal prison is a vacation.

    I agree with lsbelle that our relationship to white collar crime is different from our relationship to street crime. White collar crime does not immediately threaten our physical safety. I also agree with JesseR’s point–losing one’s life savings through white collar crime results in fear and anxiety that are no less corrosive of the human spirit.

  7. lsbelle

    My analysis of the 25 year imprisonment sentence is that besides being a retributive social benefit, it serves, or aim to serve as a means for deterrence. That’s common sense because those are the social benefits of imprisonment anyway. I think where he’s imprisoned is going to play into this 25 year sentence–no one cares if he gets to spend 25 years in a Club Fed like minimum security facility. That’s easy time! TerrierSam is right that prospect might not stop the next CEO Wallstreet guy from stealing in that respect. BUT if he has to do HARD time in a maximum security prison, then that MIGHT work as a deterrence. A maximum security facility is exactly where the EX- CEO and CFO of Tyco ended up after they stole from Tyco.

    And to be honest, when you weigh the cost of white collar crime to the cost of imprisoning Skilling or the like of him, which was previously estimated to be roughly $1 million big ones–imprisoning him is FARR more cheaper. In the mid 90s, street crime cost $163 billion; white collar crime is approximated to be 10X more expensive than street crime. We’re talking BILLIONS. I’ll update my stats to this century one day, but I’m sure the cost of crime didn’t DECREASE drastically; if anything, it increased, though I can’t speak on how drastic or not it did.

    The only thing is that we don’t FEAR white collar crime (well we might now)generally because its easier for us to deal with psychologically (the general public).

  8. JesseR

    Initially, I also believed Skilling’s sentence was too extreme, but after thinking about Sam’s post, I think Skilling received his just desserts. He did attempt to deceptively defraud the employees of his company, and others through insider trading and falsely reporting to auditors. Even though he did not physically threaten anyone, his actions were still life threatening. I would much rather be threatened at gun point in a bank for a few moments, rather than have my entire savings wiped away before my very eyes!
    Say what you will about people’s knowledge of their finances and the stock market, but these Enron employees were encouraged to contribute to their uninsured 401(k) plans (Google “defined contribution plans” and “Pension Benefit Guarantee Corp” to find out more). These employees were ill advised and kept in the dark by their bosses, who violated their fiduciary duties outright. Considering these facts, Skilling’s punishment is quite just in my opinion.

  9. TerriersSam Post author

    I totally disagree with your post on Skilling. First of all, while Skilling was largely responsible for the $60 billion loss, he didn’t attempt to pocket that amount. The fact that he had just $45 million in assets indicates that he didn’t profit that much from his heist at all – I would imagine there are not many former CEOs of fortune 10 companies who are worth less than Skilling.

    More importantly though, analogizing Skilling to a bank robber is a totally unfair comparison. Skilling didn’t hold anyone at gunpoint or physicially terrorize anyone. While there were many victims of his crime, they were solely economic. Someone who attempted to steal $10,000 through non-violent measures would likely walk away with little more than a slap on the wrist as a first time offender – probation or a short sentence would be expected.

    Skilling is a terrible person, I am not contesting that. But by criticizing his sentence as too short, you are feeding into the American obsession with incarceration and vengeance. A more appropriate punishment would be a massive civil judgment supported by the threat of incarceration. Make him work to pay back the millions he stole from others. A 25 year sentence accomplishes nothing. Those sitting in corporate boardrooms in position to be the next Skilling are far too arrogant to think that they will be caught for their crime, let alone sent to prison for it. Meanwhile, Skilling will go to prison for what will likely be the rest of his life at a cost to the American taxpayers of roughly $1 million dollars.

  10. lsbelle


    -So he goes to jail anyway, but his lawyers are still well paid–as of Monday it is reported Skilling still owed $30 million in legal fees-what a pay day.

    -What about Skilling’s family? I know he has a wife–if there are children involved, I certainly feel for them. It’s unfair to them. I wonder what the family’s “Plan B” is.

    -And I wonder where he’ll be incarcerated. Will he get to spend 25 years in a Club Fed like minimum security prison or in a maximum security facility?? If he happens to find a home in the likes of Rikers or sayyy Sing Sing, he better hope he can keep his “former life” a secret from the largely poor population of convicts, majority of whom probably don’t have the best socioeconomic backgrounds. I would also recommend investment in a butt-plug.

  11. MacallMerrick

    In this case, the punishment fits the crime. Although 24 years does seem like a long time (I haven’t even experienced 24 years yet) we need to take into consideration how many people have been affected by his actions. So many people have lost everything they have, everything they’ve worked for. What about them and their families? His actions caused extreme damages and now he has to pay. I don’t think just because he was a president and CEO of a huge corporation that he should be treated differently. He got what he deserved.

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