Entries in Jeffrey Skilling (5)
Frederic Bourke is now an inmate of Englewood Camp, a minimum-security facility in the southwest suburbs of Denver, Colorado, in the foothills of the Rocky Mountains.
With so much to lose by going to trial, how many organizations and people will plead guilty to white collar crimes they didn't commit? Ellen Podgor (left) of Stetson University College of Law and the White Collar Crime Prof Blog asks that question in her latest essay, "White Collar Innocence: Irrelevant in the High Stakes Risk Game." She looks at three defendants who claimed their innocence at trial but were convicted -- Arthur Andersen LLP, Jamie Olis, and Jeffrey Skilling. And three who pleaded guilty and avoided trials -- KPMG, Gene Foster, and Andrew Fastow. The first group, as everyone knows, got clobbered. The second group, Prof Podgor says with considerable understatement, enjoyed reduced sentences and finite results.
"The pronounced gap between those risking trial and those securing pleas is what raises concerns here," she says. "Some refer to this as a 'trial penalty' while others value the cooperation and support the vastly reduced sentences."
In Olis's case, for example, she points out that the 'trial penalty' paid by the former Dynegy tax executive convicted of accounting fraud resulted in "an initial sentence that was 288 times greater than a non-risk taker and an eventual sentence that was approximately seventy-two times greater than a co-worker who decided not to take the risk of going to trial. [Olis's] boss, who also did not risk trial, received a sentence less than one quarter of what Olis received."
No wonder guilt or innocence doesn't always figure in decisions to fight white collar charges in court. For individuals, the trial penalty can mean sitting in jail for decades (or as long as they survive); for organizations it can mean a corporate death sentence. Plea bargaining, though, removes the risks and limits the damage.
When the amount and quality of law enforcement are just right, when the guilty are usually punished and the innocent usually go free, we call it the "rule of law." Most of us don't think much about the rule of law. We enjoy its benefits and take it for granted, forgetting that it's a rare blessing -- and very fragile. So when the rule of law is out of balance and someone points that out, we should be grateful. Ellen Podgor is someone we're grateful for.
Her essay, "White Collar Innocence: Irrelevant in the High Stakes Risk Game," can be found on SSRN here. It'll be published soon in the Chicago-Kent Law Review.
On the subject of Frederic Bourke -- the wealthy entrepreneur convicted in July of conspiring to violate the Foreign Corrupt Practices Act and lying to FBI agents -- we now know what issues his lawyers plan to raise on appeal. Most relate to what Bourke knew and intended -- his mens rea. In a recent pleading arguing for his release pending the appeal, his lawyers said:
[T]he issues Bourke intends to raise on appeal relate closely to each other and, in turn, to the critical disputed aspects of the case. A series of issues—the conscious avoidance instruction, the good faith instruction, the absence of an instruction on "willfully and corruptly," and the exclusion of the Dresner testimony, for example—bear directly on Bourke's mens rea, which was the central battleground at trial. The assessment of Bourke's mens rea, in turn, depends heavily on the weight given the testimony of Bodmer and Farrell. . . .The mens rea argument didn't work for Bourke in his motion for acquittal or a new trial (see here). Nor did it work for David Kay and Douglas Murphy in the Fifth Circuit or with the Supreme Court. See our posts here and here.
But it might work for Bourke on appeal. He's got deep pockets and good facts. And the timing is right. There are more questions these days about the criminalization of business mistakes and mere negligence. Under the influence of thoughtful commentators such as Ellen Podgor at the White Collar Crime Prof Blog and Tom Kirkendall at Houston's Clear Thinkers, more appellate justices must be wondering if the vague elements that are part of so many white-collar prosecutions are fair -- including the ever-more elusive mens rea element. Last month, the Supreme Court agreed to review whether the honest-services statute used to prosecute Jeffrey Skilling and Conrad Black (18 U.S.C. § 1346) is too vague to meet constitutional standards. If that's a signal of wider judicial discomfort with some of the push-the-envelope white-collar prosecutions, mens rea could be in play, and that could help Bourke.
His prosecution didn't include a substantive FCPA charge. Bourke was tried and convicted for conspiracy to violate the FCPA. On appeal, some of his arguments will probably relate exclusively to the conspiracy elements -- such as whether there needs to be an overt act. So he could still win on appeal without us learning anything new about the FCPA itself.
Bourke is scheduled to be sentenced on November 10, 2009. He faces up to ten years in prison.
View a copy of the October 16, 2009 Reply Memorandum in Support of Defendant Frederic Bourke, Jr.'s Motion For Release Pending Appeal here.
Read all our posts about the prosecution of Frederic Bourke here.
One consistent measure of a compliance culture is executive responsibility. In the case of Enron's CEO, Jeffrey Skilling, there was little evidence of that. True, he was obligated to comply with the Foreign Corrupt Practices Act. But remarkably, his January 1, 1996 Employment Agreement might have allowed him to be convicted under the FCPA and still keep his job. How? By his own declaration that he had no personal knowledge of or involvement in the crime -- the same defense he later bet on and lost at his federal trial for conspiracy, securities fraud, wire fraud and insider trading.
Fellow executives Rebecca Mark, Kenneth Rice and Joseph Sutton lacked Mr. Skilling's sui generis right to declare themselves innocent. Upon an FCPA offense, however, their employment agreements, like his, allowed the board to decide that if they'd acted in good faith after all, they could remain employed by Enron (never mind the mens rea element of a federal criminal conviction under the FCPA).
Mr. Skilling's Employment Agreement said in part:
Employee shall at all times comply with United States laws applicable to Employee's actions on behalf of Employer, including specifically, without limitation, the United States Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the FCPA may hereafter be amended, and/or its successor statutes. If Employee pleads guilty to or nolo contendere or admits civil or criminal liability under the FCPA, or if a court finds that Employee has personal civil or criminal liability under the FCPA, or if a court finds that Employee personally committed an action resulting in any Enron entity having civil or criminal liability or responsibility under the FCPA with knowledge of the activities giving rise to such liability or knowledge of facts from which Employee should have reasonably inferred the activities giving rise to liability had occurred or were likely to occur, such action or finding shall constitute "cause" for termination under this Agreement unless (i) such action or finding was based on the activities of others and Employee had no personal involvement or knowledge of such activities, or (ii) Employer's Board of Directors or Enron's management committee (or, if there is no Enron management committee, the highest applicable level of Enron management) determines that the actions found to be in violation of the FCPA were taken in good faith and in compliance with all applicable policies of Employer and Enron.
View Jeffrey Skilling's Employment Agreement Here.