Supreme Court to hear appeal by Enron's Skilling

WASHINGTON Tue Oct 13, 2009 11:53am EDT

Former Enron Corp. CEO Jeffrey Skilling gestures as he testifies before the Senate Commerce, Science and Transportation Committee on Capitol Hill, February 26, 2002. REUTERS/Mike Theiler

Former Enron Corp. CEO Jeffrey Skilling gestures as he testifies before the Senate Commerce, Science and Transportation Committee on Capitol Hill, February 26, 2002.

Credit: Reuters/Mike Theiler

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WASHINGTON (Reuters) - The U.S. Supreme Court said on Tuesday that it would hear an appeal by former Enron Corp Chief Executive Jeffrey Skilling of his 2006 felony conviction stemming from the giant energy trader's collapse.

The justices agreed to review a U.S. appeals court ruling that upheld Skilling's 19 felony convictions. Skilling's attorneys appealed to the Supreme Court, arguing that prosecutors used a flawed legal theory to convict him and there had been juror bias against him.

Skilling's attorneys said prosecutors improperly relied on the "honest services" theory, under which employees are bound to provide honest services and not put their interests ahead of those of a company.

They said Skilling did not breach his honest services duty because he never was dishonest to his employer and always acted in Enron's interest.

The attorneys also said that prejudicial pretrial publicity in Houston after Enron's collapse resulted in Skilling being denied an impartial jury. They unsuccessfully had argued that the trial should be moved from Houston.

The U.S. Justice Department urged the Supreme Court to deny the appeal -- or to at least hold it -- until the top court decided another pending case that raised a similar issue about the "honest services" theory used by federal prosecutors.

Skilling and former Enron Chairman Ken Lay were convicted in May 2006 on conspiracy and fraud charges. Lay later died of a heart attack.

Before it collapsed and filed for bankruptcy in December 2001, Enron was the seventh-largest U.S. corporation.

Daniel Petrocelli, who represented Skilling in the appeal and at the original trial, welcomed the Supreme Court's decision to hear the case.

LAWYER EAGER TO TELL SKILLING THE NEWS

"I cannot wait to get on the phone with Jeff Skilling. We've been waiting now for almost three years for this day. To say we are relieved that finally a court has agreed to review these issues is understatement. Jeff deserves a full, fair and frank hearing on these issue and it now appears that he will get it," he said.

Skilling received a sentence of 24 years in prison, but the appeals court ordered him resentenced because the judge erred in applying federal sentencing guidelines. The high court case involved only Skilling's conviction, not his sentence.

Peter Henning, a former lawyer at the Securities and Exchange Commission as well as the Justice Department who now is a Wayne State University law professor, said the "honest services" issue could be tough for Skilling to prove.

"He will essentially have to show that the board of directors approved his illegal actions," Henning said.

"Congress adopted a vague concept. I think the court is going to try to set some guideposts for the lower courts as to what they should look for, and for prosecutors as to what they have to prove," he said.

On pretrial publicity, Henning said this will be the first time the court will examine the issue for economic crimes.

The court historically has considered it for high-profile murders or heinous crimes of violence that have inflamed the community. He said the court has not revisited the issue since the 1960s.

George Maddox, a retired Enron natural gas plant manager who lost more than $1.2 million of retirement money in the company's collapse, said of Skilling: "If he gets out, he gets out. I've lost enough already."

The justices are expected to hear arguments in the case early next year, with a ruling likely by the end of June.

(Additional reporting by Matt Daily, Editing by Maureen Bavdek)

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