* Skilling’s appeal to go before U.S. Supreme Court
* Argument says trial should have been moved from Houston
* Controversial prosecution theory in the crosshairs
By Kristen Hays
HOUSTON, Feb 28 (Reuters) - Former Enron chief executive Jeff Skilling lost the first half of the fight of his life when a jury convicted him nearly four years ago for committing fraud while at the helm of the once high-flying energy trader.
On Monday before the U.S. Supreme Court, lawyers for federal prisoner 29296-179 will take their last shot at shredding a lower court’s conviction that sentenced him to 24 years in jail. If Skilling succeeds, his sentence could be shortened or he could win a new trial.
The federal government already has a 0-2 Enron record before the high court and a sloppy Enron trial record riddled with convictions overturned and reversed on appeal. For the Justice Department’s long-disbanded Enron Task Force, Monday’s arguments are about keeping their biggest Enron catch.
“At the end of the day, the task force is going to be judged mainly on whether this conviction stands,” said Barry Pollack, a Washington D.C. white-collar defense lawyer who represented two lesser-known Enron defendants.
Skilling, 56, was convicted in May 2006 of 19 counts of conspiracy, securities fraud, insider trading and lying to auditors. He has been serving time at a prison in Colorado, where he has been teaching Spanish to fellow inmates.
Skilling led Enron’s transformation from a sleepy natural gas pipeline company into a global energy trading powerhouse, which disintegrated in bankruptcy in 2001.
Skilling and Enron founder Kenneth Lay, once called “Kenny Boy” by President George W. Bush, were vilified as thieves and liars who erased billions of dollars in investor wealth.
Lay was convicted of fraud and conspiracy alongside Skilling, but died of heart failure before he was sentenced, prompting a judge to erase his criminal record.
Skilling’s appeal is the third Enron case to reach the Supreme Court, which has not smiled on the prosecution.
In 2005, the high court unanimously overturned former Enron auditor Arthur Anderson LLP’s obstruction of justice conviction, saying vague jury instructions allowed jurors to convict without finding criminal intent.
Last year, the court barred the government from retrying a former Enron broadband division executive on charges from a 2005 trial that garnered some acquittals but no convictions.
The 5th U.S. Circuit Court of Appeals has thrown out convictions in other Enron cases, leaving the government record of Enron prosecution success to rest largely on 20 guilty pleas -- and Skilling’s conviction.
‘HONEST SERVICES’ THEORY
Skilling’s appeal hinges on his contention that his trial should have been moved from Enron’s home town of Houston amid public hostility and pervasive publicity and a prosecution theory that backfired in other Enron cases.
That theory holds that Skilling robbed Enron and its shareholders of his “honest services” by setting a corporate agenda met by fraud while he and other top executives hid the company’s troubles with lies and murky financial statements.
The 5th Circuit shot down the same theory and reversed convictions of lower-level executives in other cases, saying it applied only if they took money or property from the company. But the appeals court upheld Skilling’s convictions, siding with the government’s argument that as a CEO, he set fraudulent goals, unlike subordinates who carried them out.
The honest services theory has been used in other fraud cases elsewhere, particularly when outright theft, embezzlement or bribery were absent. Some appellate courts upheld it while others did not, prompting challenges that it is too vague and apt to stretch business aggression or failure into crimes.
The high court last December heard arguments involving honest services fraud in two other appeals, those of former Hollinger International CEO Conrad Black and former Alaska state legislator Bruce Weyhrauch.
“Honest services is on its last legs,” said Brian Wice, a Houston appellate lawyer. “It is circling the drain as a theory of prosecution until they manage to remedy the multiple defects they find with it.”
The government says the jury’s decision to acquit Skilling of nine counts of insider trading, to which prosecutors gave little attention during the trial, shows the panel was fair.
Skilling’s trial lawyer, Daniel Petrocelli, said Skilling remains closely involved with the case. “Jeff is very hopeful that the Supreme Court will provide a full, frank and fair hearing on these issues,” Petrocelli said. (Editing Todd Eastham)