Petition For en Banc Review and Hrg2

Case: 06-20885
Document: 00511540654
Page: 1
Date Filed: 07/14/2011
06-20885 UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
UNITED STATES OF AMERICA, Plaintiff-Appellee, v. JEFFREY K. SKILLING, Defendant-Appellant. DEFENDANT-APPELLANT JEFFREY K. SKILLINGS PETITION FOR REHEARING EN BANC On Appeal From The United States District Court For The Southern District Of Texas, Houston Division Crim. No. H-04-25 (Lake, J.)
OMELVENY & MYERS LLP WALTER DELLINGER JONATHAN D. HACKER SRI SRINIVASAN 1625 Eye Street, N.W. Washington, D.C. 20006 RONALD G. WOODS 5300 Memorial, Suite 1000 Houston, Texas 77007
OMELVENY & MYERS LLP DANIEL M. PETROCELLI M. RANDALL OPPENHEIMER MATTHEW T. KLINE DAVID J. MARROSO 1999 Avenue of the Stars, 7th Floor Los Angeles, California 90067 Telephone: (310) 553-6700 Facsimile: (310) 246-6779
ATTORNEYS FOR DEFENDANT-APPELLANT JEFFREY K. SKILLING
Case: 06-20885
Document: 00511540654
Page: 2
CERTIFICATE OF INTERESTED PERSONS The undersigned counsel of record for Defendant-Appellant Jeffrey Skilling certifies that the following listed persons and entities as described in 5TH CIR. R. 28.2.1 have an interest in the outcome of this case, United States v. Skilling, No. 06-20885. These representations are made in order that the judges of this court may evaluate possible disqualification or recusal: 1. 2. United States of America, Plaintiff-Appellee; Department of Justice, Counsel for Plaintiff-Appellee (Joseph Douglas Wilson); 3. 4. Jeffrey Skilling, Defendant-Appellant; OMelveny & Myers LLP, Counsel for Defendant-Appellant Jeffrey Skilling (Daniel Petrocelli, Walter Dellinger, Randall Oppenheimer, Jonathan Hacker, Matthew Kline, Sri Srinivasan, David Marroso, Meaghan VerGow, and Michael G. Williams); 5. Ronald Woods, Counsel for Defendant-Appellant Jeffrey Skilling. Respectfully submitted, /s/ Daniel M. Petrocelli Daniel M. Petrocelli Attorney of Record for Defendant-Appellant Jeffrey Skilling
Case: 06-20885
Document: 00511540654
Page: 3
RULE 35(b)(1) STATEMENT The panel decision conflicts with the following authoritative decisions of the Supreme Court and this Court, and consideration by the full Court is therefore necessary to secure and maintain uniformity of its decisions: Neder v. U.S., 527 U.S. 1 (1999) Kotteakos v. U.S., 328 U.S. 750 (1946) U.S. v. Howard, 517 F.3d 731 (5th Cir. 2009) Fratta v. Quarterman, 536 F.3d 485 (5th Cir. 2008) The questions presented below, infra at 1, are questions of exceptional importance, because the panel decisions resolution of them conflicts with not only the foregoing precedents, but also with the decisions of other circuits, including: U.S. v. Black, 625 F.3d 386 (7th Cir. 2010) U.S. v. Ofray-Campos, 534 F.3d 1 (1st Cir. 2008) U.S. v. Stewart, 306 F.3d 295 (6th Cir. 2002) U.S. v. Hollingsworth, 257 F.3d 871, 876 (8th Cir. 2001) U.S. v. Prigmore, 243 F.3d 1 (1st Cir. 2001) U.S. v. Coniglio, 2011 U.S. App. LEXIS 4631 (3rd Cir. 2011)
-i-
Case: 06-20885
Document: 00511540654
Page: 4
TABLE OF CONTENTS ISSUES PRESENTED FOR REVIEW .....................................................................1 STATEMENT OF THE CASE..................................................................................1 ARGUMENT .............................................................................................................2 A. The Harmlessness Standard Stated And Applied In The Panel Opinion Conflicts With Neder And Other Circuit Decisions..........................3 1. The Opinion Incorrectly Applies A Sufficiency-Of-TheEvidence Test................................................................................................3 2. The Opinion Incorrectly Rejects Skillings Own Testimony ...............5
B. Described Accurately, And Under The Correct Legal Standard, The Contested Securities-Fraud Record Precludes Finding Harmlessness............9 CONCLUSION........................................................................................................15
- ii -
Case: 06-20885
Document: 00511540654
Page: 5
TABLE OF AUTHORITIES Cases Fratta v. Quarterman, 536 F.3d 485 (5th Cir. 2008) ..............................................4 Kotteakos v. U.S., 328 U.S. 750 (1946) ...................................................................4 Neder v. U.S., 527 U.S. 1 (1999) ................................................................... passim Pulido v. Chrones, 629 F.3d 1007 (9th Cir. 2010) ..................................................8 U.S. v. Black, 625 F.3d 386 (7th Cir. 2010)..........................................................4,5 U.S. v. Bosch, 584 F.2d 1113 (1st Cir. 1978) ..........................................................9 U.S. v. Brown, 202 F.3d 691 (4th Cir. 2000) ...........................................................9 U.S. v. Coniglio, 2011 U.S. App. LEXIS 4631 (3rd Cir. 2011) ..............................5 U.S. v. Diaz, 296 F.3d 680 (8th Cir. 2002) ..............................................................9 U.S. v. Hollingsworth, 257 F.3d 871 (8th Cir. 2001) ..............................................8 U.S. v. Howard, 517 F.3d 731 (5th Cir. 2009) ........................................................7 U.S. v. Ofray-Campos, 534 F.3d 1 (1st Cir. 2008) ..........................................7, 8, 9 U.S. v. Prigmore, 243 F.3d 1 (1st Cir. 2001).................................................4, 8, 15 U.S. v. Stewart, 306 F.3d 295 (6th Cir. 2002) .........................................................4 Other Authorities J. Hueston, Behind the Scenes of the Enron Trial, 44 AM. CRIM. L. REV. 197 (2007) ..................................................................................................9
- iii -
Case: 06-20885
Document: 00511540654
Page: 6
ISSUES PRESENTED FOR REVIEW 1. Whether the government can prove harmlessness of an alternativetheory error by showing merely that the evidence supporting the valid theory was sufficient to prove guilt beyond a reasonable doubt, even when the jury returns a general verdict that does not disclose on which theory the jury actually relied. 2. Whether a defendants testimony, which a reasonable juror could credit, can be categorically disregarded by a court conducting harmlessness review. STATEMENT OF THE CASE Jeffrey Skilling is serving a 24-year sentence for alleged frauds at Enron. The government prosecuted an alternative theory case; the core offense was a conspiracy count alleging multiple objects, including honest services fraud and securities fraud. The jury convicted on 19 of 28 counts in a general verdict form. In 2010, the unanimous Supreme Court concluded the honest services theory the government pursued was invalid as applied to Skilling, and remanded to this Court. On April 6, 2011, a panel of this Court affirmed Skillings convictions, holding that the erroneous honest-services charge was harmless under Neder v. U.S., 527 U.S. 1 (1999), because the evidence was sufficient to prove beyond a reasonable doubt that Skilling was guilty of securities fraud under each of five schemes alleged. Op. 15. The panel sua sponte ruled that Skillings detailed testimony in his defense was irrelevant to the harmlessness analysis. Op. 8-10.
-1-
Case: 06-20885
Document: 00511540654
Page: 7
ARGUMENT The panel opinion holds it is harmless error to present a legally erroneous theory to a jury, so long as there is sufficient evidence to support a guilty verdict on a valid alternative theory, even when the jury returns a general verdict that does not disclose on which theory the jury actually relied. The opinion also holds that a defendants testimony may be disregarded in the harmlessness analysis, on the ground that a general verdict of guilt indicates that jurors rejected the defendants testimony across the board. Both holdings are legally wrong and in direct conflict with decisions of the Supreme Court, this Court, and other federal circuits. If left standing, the opinion will sow major confusion for courts and litigants within this Circuit over what should beand has beenthe simple and clear rule governing harmlessness in this context: whether a rational jury, viewing the entire record as a whole, could have acquitted the defendant on the valid alternative theory. The legal errors on which the opinion is predicated are manifest in its harmlessness analysis. That analysis incorrectly reviews the record in the light most favorable to the government and is replete with numerous errors of fact. Recited accurately, and viewed under the correct legal standard, the record reveals a sharp contest between prosecution and defense on the securities-fraud charges, especially as to the appropriate inferences to be drawn from the circumstantial evidence on which the government relied. Resolving this contested record was
Case: 06-20885
Document: 00511540654
Page: 8
solely the jurys duty. In these circumstances, Neder prohibits appellate judges from acting as a second jury and pronouncing guilt under the rubric of harmlesserror review. Review en banc should be granted. A. The Harmlessness Standard Stated And Applied In The Panel Opinion Conflicts With Neder And Other Circuit Decisions 1. The Opinion Incorrectly Applies A Sufficiency-Of-The-Evidence Test
To determine whether the erroneous honest-services object was harmless, the opinion applies the sufficiency-of-the-evidence standard to the record on securities fraud. According to the opinion, the crux of the matter, is whether, under the Neder standard, the evidence presented at trial proves that Skilling conspired to commit securities fraud. Op. 7. If the evidence presented at trial proved that Skilling participated in a scheme to deceive the investing public about Enrons financial condition, the panel could conclude beyond a reasonable doubt that absent the honest-services instruction, the jury would have convicted Skilling under a valid theory of guiltconspiracy to commit securities fraud. Op. 5.1 That standard conflicts with the rule in Neder. Neder is unambiguous: a court conducting harmlessness review must conduct a thorough examination of the entire record, including defendants contrary evidence and cross-examinations,
Accord Op. 16 n.6 (The evidence presented at trial proved beyond a reasonable doubt that Skilling personally committed many of the fraudulent acts that form the basis for the other charges. Thus, mostif not allof the other convictions rest on Skillings own conduct, and were not infected by error.). 3
Case: 06-20885
Document: 00511540654
Page: 9
to determine whether he contested the [valid theory] and raised sufficient evidence to support an acquittal by a rational juror on that theory. 527 U.S. at 19. The question is not whether the evidence was sufficient to support guilt beyond a reasonable doubt on the valid theory; that standard applies when there has been no error. See Fratta v. Quarterman, 536 F.3d 485, 510 (5th Cir. 2008); Kotteakos v. U.S., 328 U.S. 750, 765 (1946). When there is error, as here, the question is whether, absent that error, there was record evidence that could rationally lead to [acquittal]. Neder, 527 U.S. at 19. A reviewing court making this harmless error inquiry does not become in effect a second jury to determine whether the defendant is guilty. Id. Because determining guilt or innocence is solely the province of the jury, an error requires reversal if a rational jury could have found for the defendant on the valid theory because of the contested evidentiary record. Id.; accord U.S. v. Stewart, 306 F.3d 295, 325 (6th Cir. 2002) ([I]t is not enough that there might be some evidence in the record that might permit affirming. Rather the evidence must be overwhelming and essentially uncontroverted.); U.S. v. Prigmore, 243 F.3d 1, 22 (1st Cir. 2001) ([W]hile the governments evidence was strong, the competing evidence was not inherently incredible. That effectively ends the matter.). Circuit decisions since the Supreme Courts opinion in Skilling illustrate the correct application of Neder. In U.S. v. Black, 625 F.3d 386, 392 (7th Cir. 2010)
Case: 06-20885
Document: 00511540654
Page: 10
a case remanded in light of Skillingthe court found no harmlessness, because even though evidence supporting the valid alternative theory was very strong, it was not conclusive. The court found harmlessness as to a different count because the only rational explanation for the guilty verdict was the valid theory. Id. at 393. Here, even the panel recognized that Skillings convictions could be rationally explained by the erroneous honest-services object. Op. 7 n.4. The panel nevertheless found harmlessness because the securities-fraud evidence was also a rational path to conviction. But the fact that the jury could have found guilt on that legally valid theory does not establish that the jury did convict on that theory. This is the fatal flaw in the opinions analysis, as Neder permits a harmless-error finding only when a reasonable jury necessarily would have convicted on the valid groundi.e., when there was simply no triable issue of fact as to defendants guilt. U.S. v. Coniglio, 2011 U.S. App. LEXIS 4631, at *7 & n.4 (3rd Cir. 2011), confirms this rule, holding that an invalid theory is not harmless even when the government emphasized a valid theory to a greater degree, and even if it was not probable that jurors relied on the invalid theory. What matters is if, as here, the case involve[d] a large amount of sharply contested, circumstantial evidence. Id. 2. The Opinion Incorrectly Rejects Skillings Own Testimony
In its harmlessness analysis, the panel opinion rules out all consideration of Skillings testimony, on the ground that it was self-serving and because the
Case: 06-20885
Document: 00511540654
Page: 11
jury, by finding him guilty, necessarily determined that his own self-serving testimony, in which he contested his liability under any theory guilt, including the honest-services theory, was not worthy of belief. Op. 8; see id. at 9, 10. That holding is contrary to law and makes no sense in a case involving an alternative-theory error. The very problem presented in such a case is that this Court cannot know whether the jury convicted on the valid or invalid theory or bothat least where the theories were based on distinct factual predicates, as the panel recognized was the case here. Op. 7 n.4. In this situationespecially given that Skilling was acquitted on nine of 28 countsa reviewing court cannot assume the jury rejected the defendants testimony contesting the legally valid theory. For example, as to the EES resegmentation scheme, Op. 8, the jury could have accepted Skillings testimony that he was advised by lawyers and accountants that the accounting and disclosures were proper and found he did not conspire to commit securities fraud, R:28996, 29009-10, 29322-29, while deciding that the resegmentation lacked a sufficient business purpose (as the government argued), R:19979-80, 36485-87, and was a breach of Skillings fiduciary duties and a violation of the honest-services statute (as it was erroneously defined), R:36424. The fact that the jury returned a general verdict of guilty, without specifying which fraud theory it accepted, assuredly does not mean jurors necessarily rejected Skillings testimony on both theories. The panels contrary holding violates its
Case: 06-20885
Document: 00511540654
Page: 12
duty under Neder to consider not what the actual jury did, but what a rational jury could have done if asked to determine guilt in the absence of the invalid theory. In fact, in another case involving Enron, this Court held that a defendants testimony cannot be ignored in the harmlessness analysis in an alternative-theory error case. In U.S. v. Howard, 517 F.3d 731, 734-36 (5th Cir. 2009), the Court found an alternative-theory error not harmless, specifically referring to the defendants trial testimony denying he falsified books and records, even though he had been convicted on all counts. This Court correctly held that Howards testimony could not be disregarded on account of the jurys guilty verdicts because those general verdicts did not reveal what theory the jury used. Id. at 736. The opinion here cannot be reconciled with that analysis, holding, or result. The panels rejection of Skillings testimony also squarely conflicts with U.S. v. Ofray-Campos, 534 F.3d 1 (1st Cir. 2008). There, the court noted that the jury by its guilty verdict had chose[n] to credit the accounts of the cooperating witnesses over the admittedly self-serving testimony of the defendant. Id. at 28. The court nevertheless held that defendants countervailing testimony on his own behalf is a factor in conducting the harmless error analysis. Id. at 28-29. And the court ultimately found the error harmful, in part, based on his testimony. Id. The point is not that a defendants testimony denying guilt, no matter how preposterous, always compels a harmlessness finding. The question is whether a
Case: 06-20885
Document: 00511540654
Page: 13
reasonable juror could have credited his testimony. Unlike other cases rejecting a defendants testimony,2 Skilling consistently provided rational explanations for his conductincluding why he believed it was consistent with applicable accounting and disclosure rules, thereby precluding the scienter required for securities fraud. This testimony was supported by expert witnesses, contemporaneous documents, and testimony from defense and government witnesses. See infra at 10-15. The jury acquitted Skilling on nine counts at the heart of the governments caseinsider-trading counts claiming he sold his Enron stock at prices he inflated through securities fraud. These acquittals refute the panels assertion that the jury categorically rejected Skillings testimony. Moreover, acquittals on the dump half of the pump-and-dump securities-fraud scheme suggest the jury rejected the governments securities-fraud conspiracy charge and convicted, instead, based on the legally infirm honest-services theory. In any event, credibility determinations about Skillings testimony were solely for the jury to makenot this Court.3
E.g., Pulido v. Chrones, 629 F.3d 1007, 1019 (9th Cir. 2010) (harmlessness found despite defendants testimony, where he gave no explanation why his fingerprints were at crime scene, and his trial testimony was at least the fourth version of the events he had offered). 3 See Prigmore, 243 F.3d at 22; U.S. v. Hollingsworth, 257 F.3d 871, 876, 877 (8th Cir. 2001) ([B]ecause in [Neder] the evidence concerning the omitted element was overwhelming and uncontroverted, no jury could have rationally found for the defendant. [Here, the] evidence could lead a rational jury to conclude appellant was only responsible for less than five grams of meth, even if such a result seems unlikely. However, unlikely does not equal irrational.) (emphasis 8
Case: 06-20885
Document: 00511540654
Page: 14
B.
Described Accurately, And Under The Correct Legal Standard, The Contested Securities-Fraud Record Precludes Finding Harmlessness Nobody has ever believed the case for securities fraud against Skilling was
open-and-shut. The prosecution itself harbored no such illusion: as its lead lawyer put it, the governments case was plagued by fundamental weaknesses, because Skilling took steps seemingly inconsistent with alleged criminal intent, there were no smoking gun documents, and government witnesses were subjected to vicious impeachment. J. Hueston, Behind the Scenes of the Enron Trial, 44 AM. CRIM. L. REV. 197, 198 (2007). That the governments securities-fraud case was built almost exclusively on cooperating witnesses whose testimony was induced by promises and threats is enough to show that a reasonable juror could have rejected its case. See U.S. v. Brown, 202 F.3d 691, 702 (4th Cir. 2000); Ofray-Campos, 534 F.3d at 28; U.S. v. Bosch, 584 F.2d 1113, 1123 (1st Cir. 1978). The government conceded its case pivoted on circumstantial inferences about knowledge and intent; because lawyers and accountants were all over the[] [charged] deals, prosecutors admitted they had to navigate around serious reliance defenses. R:13286-87. For each of the five schemes cited by the panel, Op. 15, Skilling mounted a vigorous defense to the governments securities-fraud case, based not only on his own direct testimony, but also on contemporaneous documents and admissions
added) (overruled in part on other grounds by U.S. v. Diaz, 296 F.3d 680 (8th Cir. 2002)). 9
Case: 06-20885
Document: 00511540654
Page: 15
extracted from the governments own witnesses. The record, including evidence and reasonable inferences favorable to the defense, is fully catalogued at Skilling Br. 16-60 (filed Sept. 7, 2007), Skilling Reply Br. 1-14 (Nov. 14, 2007), Remand Br. 12-36 (Jul. 28, 2010), Remand Reply 5-30 (Sept. 17, 2010). The panel opinion overlooks that hotly-contested record and finds harmlessness only by applying erroneous legal principles, as shown above. Its recitation of the factual record, as shown below, confirms it applied the wrong legal test. The opinion resolves disputed facts in the governments favor, ignores or misstates crucial evidence favorable to the defense, and even refers repeatedly to evidence against Skilling that did not exist at all, demonstrating that the panel did not give Skilling the benefit of reasonable inferences, as Neder requires.4 LJM: The opinion makes an especially glaring error in explaining why the evidence showed securities fraud in an alleged LJM scheme involving the Nigerian Barges and Cuiaba deals. The opinion cites no documents, but instead relies solely on the testimony of admitted fraudster Andrew Fastow that Skilling promised him in secret oral side deals that Enron would buy back these money-losing assets from LJM (thereby vitiating accounting treatment and disclosures). Op. 10-11. The opinion purports to corroborate Fastows testimony The following discussion is limited for space reasons and intended only to show that the panel did not apply the correct legal standard in reviewing the trial evidence. Skilling is contemporaneously filing a petition for panel rehearing that more thoroughly catalogues key factual omissions and mistakes in the opinion. 10
4
Case: 06-20885
Document: 00511540654
Page: 16
by stating that Enron was eventually forced to buy the assets back from LJM because both assets continued to deteriorate in value. Id. This is wrong. Enron did not buy back the Barges from LJM, at a loss or otherwise. To the contrary, LJM sold them to a third party (AES)and at a profit. R:22038-39; GX24606. Enron did repurchase LJMs interest in the Brazilian power plant Cuiaba, but Skilling introduced substantial evidenceincluding key company e-mails demonstrating that Enron repurchased the interest because, inter alia, it wanted LJMs board seat in order to possess voting control over its partner Shell, and LJM was threatening to sue Enron for misrepresentations made in the original sale. R:21997-98; 24627-29; DX21099:100; DX21105. Fastow disputed these reasons, but a rational jury plainly could have believed contemporaneous documents over Fastows uncorroborated testimony, especially when Skillings indictment accused Rick Causeynot Skillingof making the alleged promise to Fastow, and government witness Ben Glisan, who was closely involved with Cuiaba, testified that he never heard anyone say Skilling made any promise related to Cuiaba.5 Broadband: The opinion makes another stark mistake in describing the evidence against Skilling concerning Enrons Broadband unit (EBS). It states: EBS was due to report a loss of $102 million in the second quarter of 2001, so R:1888, 24337, 24342, 24616-18. The opinion states Skillings personal involvement with respect to those two deals is not controverted, Op. 12, but, again, Skilling and Glisan disputed it, id., and the only evidence of Skillings involvement in Barges came from Fastow, an admitted liar, see Skilling Br. 27-29. 11
5
Case: 06-20885
Document: 00511540654
Page: 17
Skilling approved a plan to merge EBS with Wholesale, knowing that, as a result, the losses attributable to EBS would be untraceable. Op. 13 (emphasis added). In fact, Enron openly and repeatedly reported EBSs $102M loss, including in an analyst call by Skilling himself. DX11907:959, GX1034 at 2534, DX20603 at 6. Skilling did not make this loss untraceable. Nor did he approve plans to do so; to the contrary, a government witness (Ken Rice) admitted that Skilling rejected an EBS deal with Qwest that would have eliminated the loss. R:17990-95. Worse yet, the government never even argued that Enron hid the $102M loss; the opinion simply asserts this alleged scheme. The only way such an error could have been made was by searching for evidence supporting a guilty verdict, rather than considering the entire record, including defense evidence, as Neder requires. EES: The opinion also errs in describing the EES resegmentation, in which Enron allegedly shifted losses from EES to its Wholesale division, so that EES would appear to be more profitable. Op. 7. The opinion incorrectly says Skilling relied almost exclusively on his own testimony at trial and his own sayso, Op. 8-9. Skillings defense, in fact, included uncontradicted testimony of an accounting expert that the resegmentation and earnings were properly disclosed and that no accounting rules were violated. R:33965, 33967-86. It also included admissions from government witnesses that the reorganization led to operational efficienciesEnrons stated reason for the move. Compare Op. 8, with R20172-
12
Case: 06-20885
Document: 00511540654
Page: 18
77; R:16559, 19445, 20193-94, 21209, 26711; DX20670. A reasonable juror could have credited this proof and decided the EES resegmentation was proper. The evidence also corroborated Skillings testimony that he believed it was proper. R:28996, 29009, 29323-29, 28992-93. Yet the opinion omits any mention of it.6 Wholesale: The opinion states that Skilling falsely portrayed [Enrons] Wholesale [unit] as a low-risk company focused on energy delivery (logistics), when it was actually a high-risk trading company. Op. 9. There is no evidence Skilling ever referred to Wholesale as low risk, and the uncontradicted record showed that Wholesales Value-at-Riska widely used measure of risk and potential losswas fully disclosed in public filings, meaning investors could assess Enrons risk for themselves, see how it changed over time, and compare Enron to so-called trading companies.7 The opinion addresses none of this.8 The opinion also ignores that the governments EES case pivoted on David Delaineys professed interpretation that when Skilling asked what do you want to do, Dave?, he was instructing Delainey to break the law. R:19979-82. Putting aside that this was not even a direct order, on cross, Delainey was shown (through videotape and undisputed computer records) to have lied twice in his testimony implicating Skilling on EES. R:19975-76, 30753-55; DX22380-22383. Delainey also conceded that Enrons two top accountants told Skilling that the accounting on the resegmentation was rock solid. R:19976-78, 20277-79. 7 E.g., GX995:1120 (1999: $21M in commodity price risk); GX1032: 2346-47 (2000: $66Ma three-fold change that year); GX1040:3001 (2001: $60M). 8 It also fails to address Enrons Daily Position Reports (DPRs), which showed actual daily, monthly, and quarterly positions and actual profits and losses. These reports showed Enrons open, non-hedged positions were modest, R:288907-11; JKS-3; DX5194; DX5235; DX5253; DX5262-80; that Enron was not making large, speculative bets; and that the alleged large, one-day $485M gain 13
6
Case: 06-20885
Document: 00511540654
Page: 19
Reserves: Finally, the opinion misreads the record on reserves accounting. It asserts that Enron misstated reserves in 2000 (misidentified as 2002, Op. 14), because it shifted some of Wholesales reserve into income [a]fter the end of the accounting year, but before Enron had reported earnings. Id. The opinion states that, after the end of 2000, Skilling learned that Wholesale had made a significant over-reservation for contingent liabilities, and shifted reserves into earnings. Id. Not only is this timeline wrongthe reserve was set [o]n December 29, 2000, GX4643 (emphasis added), and not adjusted after the end of the year to hit earnings, R:19612-13, 18331-41the government never denied the final reserve correctly reflected Enrons risks, GX4643; DX4126:5797; R:21734-41, 33932-33. In any event, the opinion itself concedes that an accounting expert testified it is permissible to pick a reserve number based on an earnings target, provided the reserve number reasonably estimates the contingent liability. Op. 15 n.5. That should end the matter, but the opinion says the testimony did not support Skillings defense because the reserve was adjusted after the end of the quarter. Id. That assertion is not only counterfactualthe reserve in question was set during the quarter, GX4643it misunderstands basic accounting. As shown at trial, an
and $551M loss cited in the opinion, Op. 9, did not occur, DX5262-80; R:28893905. On cross, Koenig admitted he did not understand the Kupiec test that noted the alleged one-day loss and gain, GX289; R:16449-50, and the DPRs showed the actual loss and gains for those daysnot those cited in the testwere fractions of those cited in the opinion, and also anomalies, in any event. R:28904-06, 6754-57. 14
Case: 06-20885
Document: 00511540654
Page: 20
accounting period may end December 31, but the books stay open for entries related to that period. R:33916-17. Earnings from a particular gas contract, for example, are not known until meters in the field are read, which often happens after the end of the accounting period. R:28599-602. A key government witness testified that the timing of Enrons reserves adjustments were not an issue, R:19589-90, and other evidence showed the timing was irrelevant, R:18368-78, 19598; R:15942-43, 18183-84, 18318-19, 28544-50, 33916-17.9 The jury was entitled to believe that testimony, and the panel was not entitled to disregard it, or to make a different credibility determination of its own.10 CONCLUSION The petition for rehearing en banc should be granted. Respectfully submitted, /s/ Daniel M. Petrocelli Daniel M. Petrocelli OMELVENY & MYERS LLP Attorneys for Mr. Skilling The opinion also asserts it is fraudulent to adjust reserves based on earnings targets, Op. 15, but cites no precedent, statute, regulation, or record evidence to support that claim. None exists, and the expert testimony refuted it. R:33930. 10 See Prigmore, 243 F.3d at 22 (appellate court not equipped to make the credibility determinations that must be made in choosing between these clashing blocs of evidence). Another stark example of the opinion wrongly making such a credibility judgment is its claim that a contemporaneous Enron accounting memo falsely stated reasons for the reserve transfer discussed above. Op. 14. Disbelieving the memos analysis and conclusions was a fact issue for the jury. That careful memo, GX4643, easily could have been credited by a rational jury, especially given the evidence corroborating it, DX4126:5797; R:21734-41, 33933. 15
9
Case: 06-20885
Document: 00511540654
Page: 21
CERTIFICATE OF SERVICE This is to verify that true and correct copies of the following document (Defendant-Appellant Jeffrey K. Skillings Petition For Panel Rehearing) have been filed by hand and served by both Federal Express and electronic mail on this 14th day of July, 2011 on counsel listed below.
/s/ Matthew T. Kline Matthew T. Kline J. Douglas Wilson U.S. Attorneys Office 450 Golden Gate Avenue, 11th Floor San Francisco, CA 94102 Facsimile: (415) 435-7234
CC1:852878
-1-
Case: 06-20885 Document: 00511540654 Page: 1 Date Filed: 04/06/2011 Case: 06-20885 Document: 00511437412 22 Date Filed: 07/14/2011
IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
April 6, 2011 No. 06-20885 Lyle W. Cayce Clerk
UNITED STATES OF AMERICA, PlaintiffAppellee v. JEFFREY K SKILLING, DefendantAppellant
Appeal from the United States District Court for the Southern District of Texas
ON REMAND FROM THE SUPREME COURT OF THE UNITED STATES Before SMITH and PRADO, Circuit Judges, and MOSES, District Judge.* EDWARD C. PRADO, Circuit Judge: Former Enron Corporation CEO Jeffrey K. Skilling was convicted of conspiracy, securities fraud, making false representations to auditors, and insider trading. After we affirmed his convictions, the Supreme Court
invalidated one of the objects of the conspiracy chargehonest-services fraudand remanded, instructing us to determine whether the error committed by the district court in submitting the honest-services theory to the jury was
District Judge of the Western District of Texas, sitting by designation.
No. 06-20885 harmless as to any of Skillings convictions. Because we find that the error was harmless, we affirm the convictions. In addition, for the reasons stated in our previous opinion, we vacate the sentence and remand for resentencing. I. BACKGROUND In May 2006, Skilling was convicted by a jury of one count of conspiracy, twelve counts of securities fraud, five counts of making false representations to auditors, and one count of insider trading. The indictment alleged several possible objects of the conspiracy, including securities fraud and honest-services fraud, and the district courts jury instructions permitted the jury to convict on any of the alleged theories of guilt. The jury returned a general verdict of guilty on the conspiracy charge without identifying the specific object of the conspiracy. The district court sentenced Skilling to 292 months of imprisonment and three years of supervised release, and assessed $45 million in restitution. Skilling appealed, arguing, among other things, that his conspiracy conviction was premised on an improper theory of honest-services fraud. We affirmed the convictions, holding that the Governments honest-services theory was proper under Fifth Circuit case law. See United States v. Skilling, 554 F.3d 529, 595 (5th Cir. 2009), vacated in part, 130 S. Ct. 2896 (2010). We also vacated the sentence and remanded for resentencing because the district court had incorrectly applied a sentencing enhancement for substantially jeopardizing a financial institution. See id. On appeal, the Supreme Court reduced the scope of the honest-services fraud statute and invalidated the Governments honest-services theory in this case. See Skilling, 130 S. Ct. at 2907 (Because Skillings alleged misconduct entailed no bribe or kick-back, it does not fall within [the honest-services fraud
No. 06-20885 statute]s proscription.). The Court did not, however, reverse any of Skillings convictions, but remanded the case to us to determine whether the honestservices instruction amounted to harmless error. Id. at 293435. II. STANDARD OF REVIEW In Hedgpeth v. Pulido, 129 S. Ct. 530 (2008) (per curiam), the Supreme Court recently confirmed that an alternative-theory errori.e., where a jury rendering a general verdict was instructed on alternative theories of guilt and may have relied on an invalid theoryis subject to harmless-error analysis so long as the error at issue does not categorically vitiat[e] all the jurys findings. Id. at 532 (alteration in original) (citation omitted); see Skilling, 130 S. Ct. at 2934 n.46 (extending the holding of Pulido, which was a case on collateral review, to this case and other cases on direct appeal). The Court did not
specifically identify the harmless-error standard that is applicable to alternativetheory errors, but it cited to a string of cases that apply a common harmlesserror standard to other types of instructional errors. See Pulido, 129 S. Ct. at 532 (citing Neder v. United States, 527 U.S. 1 (1999) (omission of an element of an offense); California v. Roy, 519 U.S. 2 (1996) (per curiam) (erroneous aiderand-abettor instruction); Pope v. Illinois, 481 U.S. 497 (1987) (misstatement of an element of an offense); Rose v. Clark, 478 U.S. 570 (1986) (erroneous burdenshifting as to an element of an offense)). The Court declared that [a]lthough these cases did not arise in the context of a jury instructed on multiple theories of guilt, one of which is improper, nothing in them suggests that a different harmless-error analysis should govern in that particular context. Pulido, 129 S. Ct. at 532.
No. 06-20885 Consistent with this line of cases, there are two ways to prove the harmlessness of an alternative-theory error. First, as set forth in Neder v. United States (which is the most recent of the line of cases cited in Pulido), an error is harmless if a court, after a thorough examination of the record, is able to conclude beyond a reasonable doubt that the jury verdict would have been the same absent the error. 527 U.S. at 19. If the defendant raised evidence sufficient to support a contrary finding, then the error was not harmless. Id. Thus, under the so-called Neder standard, a reviewing court, in typical appellate-court fashion, asks whether the record contains evidence that could rationally lead to [an acquittal] with respect to the [valid theory of guilt]. 1 Id. Second, as we held in United States v. Holley, 23 F.3d 902 (5th Cir. 1994), and United States v. Saks, 964 F.2d 1514 (5th Cir. 1992), an alternative-theory error is harmless if the jury, in convicting on an invalid theory of guilt, necessarily found facts establishing guilt on a valid theory. See United States v. Howard, 517 F.3d 731, 738 (5th Cir. 2009) (stating that Holley and Saks stand for the proposition that legally erroneous jury instructions [are] harmless in fraud cases when the inevitable result of the fraudulent activity proved at trial
Before Pulido, we often applied an impossible to tell harmless-error standard to alternative-theory errors. See United States v. Howard, 517 F.3d 731, 736 (5th Cir. 2009) (cataloguing cases). This standard had its origins in Yates v. United States, 354 U.S. 298 (1957), which states that a general verdict should be set aside when it is supportable on one ground, but not on another, and it is impossible to tell which ground the jury selected. Id. at 312 (emphasis added). The impossible-to-tell standard is more stringent than the Neder standard; it is closer to the absolute certainty standard that the Supreme Court invalidated in Pulido. See Pulido, 129 S. Ct. at 533 (holding that the absolute-certainty standard is similar to a finding that no violation had occurred at all, rather than that any error was harmless). Because the impossible-to-tell standard is inconsistent with harmless-error review, we hereby abandon it.
No. 06-20885 established that the defendants participated in the scheme that justified their convictions on legally correct instructions). Our rulings in Holley and Saks predate the Supreme Courts decision in Pulido, but they apply a harmless-error test that is consistent with the Neder standard, and therefore we affirm their continuing vitality in our case law.2 III. ANALYSIS A. The Conspiracy Conviction The Government asserts that the invalid honest-services instruction was harmless with respect to the conspiracy conviction. Specifically, it argues that the evidence presented at trial proved that Skilling participated in a scheme to deceive the investing public about Enrons financial condition in order to maintain or increase Enrons stock price. If so, then we would be able to
conclude beyond a reasonable doubt that absent the honest-services instruction, the jury would have convicted Skilling under a valid theory of guiltconspiracy to commit securities fraud.3 Before examining the evidence presented at trial, however, we must address two nonevidentiary arguments raised by Skilling. First, Skilling argues that the district courts jury instructions, by permitting the jury to convict on
Skilling argues that to prove harmlessness, the Government must show complete factual identity between the valid and invalid theories of guilt. This argument is not consistent with Neder, which permits a court to find harmlessness based solely on the strength of the evidence supporting the valid theory, regardless of the evidence presented in support of the invalid theory. Further, Skilling provides absolutely no support for his erroneous claim that, to succeed, the Government must show that the valid theory was the only factually supportable basis on which the jury could have convicted. The Governments harmless-error argument is consistent with the indictment, which focused primarily on securities fraud and did not emphasize any act of honest-services fraud that is not also an act of securities fraud.
3
No. 06-20885 either the honest-services theory or the securities-fraud theory, are dispositive evidence of the harmfulness of the error. We disagree. The instructions were clear and easy to understand, and they did not contain any statement that gave a preference to one theory over another. Moreover, the fact that the jury may have relied upon an invalid theory of guilt shows only that an alternative-theory error occurred, not that the error was not harmless. See Paredes v. Thaler, 617 F.3d 315, 318 (5th Cir. 2010) (confirming that a jury instruction on alternative theories of guilt, one of which is invalid, is not a fatal structural error, but instead is subject to harmless-error analysis). Second, Skilling contends that the Governments opening and closing statements made it more likely that the jury would rely on the honest-services theory rather than on the securities-fraud theory. Again, we disagree. The Governments opening and first closing statements both mentioned honestservices fraud only in relation to Skillings co-defendant, Ken Lay, who, unlike Skilling, was charged with several counts of honest-services wire fraud. With respect to Skilling, both statements focused exclusively on conduct that constitutes securities fraud. In its rebuttal closing statement, the Government made reference to the honest-services allegations against both defendants, but it mentioned the honest-services theory in relation to Skilling only once. Further, it never argued that the jury should convict Skilling solely on the honest-services theory, nor did it tell the jury that it should disregard the evidence of securities fraud in reaching a conviction. This single reference to Skillings honest services, in light of the Governments extensive argument on securities fraud, merely permitted the jury to decide the case on the wrong
No. 06-20885 theory. It did not force or urge it to do so, and therefore, it shows only that an alternative-theory error occurred, not that the error was not harmless. Having disposed of these two preliminary arguments, we next turn to the crux of the matter: whether, under the Neder standard, the evidence presented at trial proves that Skilling conspired to commit securities fraud. Based on our own thorough examination of the considerable record in this case, we find that the jury was presented with overwhelming evidence that Skilling conspired to commit securities fraud, and thus we conclude beyond a reasonable doubt that the verdict would have been the same absent the alternative-theory error.4 First, the evidence overwhelmingly proved that Skilling and his coconspirators transferred losses and the risk-management books from Enrons struggling retail division, Enron Energy Services (EES), to Enrons Wholesale division, which accounted for most of Enrons revenue, so that EES would appear to be more profitable than it really was. The testimony at trial established that under the mark-to-market accounting rules that EES professed to follow, it should have booked hundreds of millions of dollars in losses in the first quarter of 2001. These losses arose from bad-debt write-offs, errors in how EES had originally booked the value of its retail contracts, and unanticipated expenses that could not be passed on to EESs retail customers. According to the
We do not rely on the harmless-error test set forth in Holley and Saks. At trial, the Government introduced evidence that Skilling made misleading statements to Enrons Board of Directors. Some of these statements were not communicated to the investing public. This evidence would prove honest-services fraud, but not securities fraud, and so we cannot say that a conviction on honest-services grounds in this case would necessarily find facts establishing guilt on securities-fraud grounds. Nonetheless, the fact that the jury had the option to rely on a pure honest-services theory to convict Skilling has no effect on the strength of the evidence going to the other alleged fraudulent schemes and on whether that evidence satisfies the Neder standard.
No. 06-20885 testimony, Skilling knew about the extent of the losses attributable to EES and approved a plan to (1) shift the losses and EESs risk-management books (and therefore most of EESs money-losing components) to Wholesale, even though the losses arose from EESs own retail contracts, not from Wholesales business; and (2) justify this resegmentation as an operational change, even though it resulted in no efficiencies, Wholesale had no experience in handling retail contracts, and Wholesale and EES had different contracting procedures, origination policies, risk assessments, and marketing efforts. Dave Delainey, the CEO of EES at the time, testified that he warned Skilling that the resegmentation was fraudulent because it had no real business purpose and was designed to hide EESs losses from investors, and that Skilling approved the resegmentation anyway. In his brief, Skilling argues that he established through each of the government witnesses, as well as his own, that the accounting for this transaction was rock solid and complied with the disclosure rules. His record citations, however, do not substantiate his claim. In fact, his argument relies almost exclusively on his own testimony at trial, which was that he has been told that the EES resegmentation adhered to generally accepted accounting principles and that he had not been told that it might be illegal. The jury, by finding him guilty, necessarily determined that his own self-serving testimony, in which he contested his liability under any theory of guilt, including the honest-services theory, was not worthy of belief. Therefore, we too decline to give Skillings testimony any weight in our harmless-error review when unsupported by other evidence or testimony in the record.
No. 06-20885 Skilling also argues that he presented evidence at trial that EESs losses had either not occurred, had not occurred in the way the governments witnesses described, or were only speculative losses that had to be reserved against, and that proper reserves had been taken on all accounts. The record also proves that this claim is false. The testimony at trial clearly showed that EESs losses were real, recognizable under mark-to-market accounting rules, and due to be booked. Skilling points to no evidence, other than his own say-so, that disputes this finding. Second, the evidence overwhelmingly proved that Skilling and his coconspirators falsely portrayed Wholesale to the investing public as a low-risk company that made sustainable profits by delivering gas and electric power to customers (i.e., a logistics company), even though they knew that Wholesale actually made most of its profits from its highly volatile trading operations. The evidence presented at trial proved that the majority of Wholesales earnings in 2000 and early 2001 came from trading activities, especially from speculative trading during the California energy crisis. This trading activity created huge gains (as much as $485 million in a single day) and losses (as much as $551 million in a single day). Witnesses testified that Skilling knew about the
riskiness of Wholesales business, but falsely represented to investors and analysts that Wholesale was a logistics company, not a trading company. In addition, from 1999 to the analysts conference during the first quarter of 2001, Skilling repeatedly prohibited other Enron managers from calling Wholesale a trading company or referring to any of Wholesales employees as traders, often citing the negative effect such language would have on Enrons stock price. That is, if the market perceived Wholesale to be a trading company,
Case: 06-20885 Document: 00511540654 Page: 10 Date Filed: 04/06/2011 Case: 06-20885 Document: 00511437412 Page: 31 Date Filed: 07/14/2011
No. 06-20885 it would lead to a decrease in Enrons priceearnings multiplier, which, in turn, would drag its stock price down. The managers obeyed Skilling and referred to Wholesale as a logistics company at their own engagements with investors and analysts. Skilling argues that he presented sufficient contradictory evidence at trial proving that Wholesale actually was a logistics company because it owned one of the largest pipeline and energy distribution systems in the world, which allowed Wholesale to meet supply and demand for its energy customers and cover its trading positions. Yet again, this evidence is from Skillings own selfserving testimony. Moreover, even if we were to believe Skillings assertions, they do not undermine the Governments proof at trial, which showed that Skilling fraudulently kept from the investing public the reality that Wholesale was driving up its profits through highly risky and volatile trading operations, not through its energy distribution system. Third, the evidence overwhelmingly proved that Skilling and his coconspirators used LJM and LJM2, which were two partnerships run by Andy Fastow, who also served as Enrons CFO at the time, to hide Enrons nonperforming assets and book earnings to meet its earnings targets. Specifically, the testimony showed that Skilling was intimately involved in the EnronLJM Cuiaba deal involving the sale of Enrons interest in a power plant in Brazil and the Enron-LJM Nigerian Barges deal involving the sale of Enrons interest in power-generating barges off the coast of Nigeria. In both cases, Fastow testified that Skilling personally asked him, on behalf of LJM, to buy money-losing assets at a price that no third party would be willing to pay and, in secret oral side deals, guaranteed that LJM would make a certain rate
10
No. 06-20885 of return (or at least not lose any money) while it owned the assets. Skilling also agreed that Enron would buy the assets back from LJM if a permanent buyer could not be found, which it was eventually forced to do because both assets continued to deteriorate in value. For both deals, Enron booked gains on the sales of the assets to LJM, thereby allowing Enron to meet its earnings targets, even though neither transaction was a true sale because Skillings secret guarantee eliminated any risks LJM might have suffered in the transactions. This caused Enrons financial statements to be false and misleading. Skilling makes a number of arguments about the proof at trial, none of which are especially relevant. He argues that the Governments theory at trial was (1) that the very creation of the partnerships was fraudulent; (2) that the conflict of interest inherent in the formation of the partnerships was illegal; (3) that by creating and using these partnerships Skilling was opening Enron up to excessive risk and was therefore not doing his job properly; and (4) that the deals themselves made no business sense and therefore Skilling was not doing his job properly. We disagree with Skillings characterizations of the Governments case, although we do not need to discuss them since we do not rely on them. Rather, we find that the evidence is overwhelming that Skilling was personally involved in the Cuiaba and Nigerian Barges deals and that he used those deals to cause Enron to book fake profits and hide money-losing assets from its investors. Nonetheless, the Governments other arguments (as characterized by Skilling) are supported by strong evidence, and this evidence, in turn, bolsters the assertion that Skilling engaged in the two deals on which we rely. Likewise, we do not rely on any of the other dozen transactions that LJM and LJM2
11
No. 06-20885 executed with Enron, although there is also strong evidence that Skilling and his co-conspirators committed securities fraud in relation to those transactions as well. Such evidence further bolsters the assertion that Skilling engaged in the Cuiaba and Nigerian Barges deals. For all of Skillings many counterarguments, his personal involvement with respect to those two deals is not controverted. Fourth, the evidence overwhelmingly proved that Skilling and his coconspirators underreported the projected losses of Enrons broadband division, Enron Broadband Services (EBS), and when those losses became too large to hide within EBS, merged EBS into Wholesale. Enron had marketed EBS to the investing public as an important part of its future growth strategy, but the evidence presented at trial showed that EBS lost money in every quarter of its existence and only met its earning targets in 2000 by engaging in a series of transactions that fell outside of its core businesses: (1) the sale of part of its fiber-optic network to LJM2 at a price that no third party would pay; (2) the hedging of a gain on its investment in Avici, an Internet start-up, into the Raptor special-purpose entity, which allowed EBS to recognize the gain as earnings under mark-to-market accounting; and (3) the monetization of a video-on-demand contract with Blockbuster, which allowed EBS to book anticipated future earnings from the contract. Skilling knew about all of these transactions, but failed to tell investors about their impact on EBSs bottom line. During the first quarter of 2001, EBSs managers informed Skilling that EBS was making almost no revenue from its core businesses and would likely suffer a loss of $146 million, which was well short of its first quarter target of a loss of $30 million. After remarking that Enron was getting pressure from analysts to improve its return on invested capital, Skilling refused to adjust the
12
No. 06-20885 unrealistic earnings target. Instead, he authorized a second monetization of EBSs contracts and approved a cost-cutting plan that included the dismissal a number of EBS employees. Again, Skilling, while selling investors on the growth potential of EBS, failed to disclose that EBS had almost no revenue from its core businesses. When EBS continued to deteriorate during the second quarter of 2001 (EBS was due to report a loss of $102 million), witnesses testified that Skilling approved a plan to merge EBS with Wholesale, knowing that, as a result, the losses attributable to EBS would be untraceable. Again, Skillings counterarguments are unavailing. It is not true, as Skilling claims, that the Governments theory at trial was that Skilling made bad business decisions; its argument was that Skilling hid those bad business decisions from investors. Moreover, we disagree with Skilling that the
Governments case relied upon the selective editing of his statements. The record shows that Skillings comments to investors were more than just hopeful views about a troubled new venture. Rather, given that EBS was sinking and Skilling knew it, his comments were deceitful. There was no reason for hope about EBSs prospects, and Skilling failed to disclose fundamentally important facts about EBSs problems. Fifth, the evidence overwhelmingly proved that Skilling and his coconspirators manipulated Enrons accounting reserves for contingent liabilities in order to hit specific earnings targets (known as consensus estimates). The evidence showed that Skilling knew that missing the consensus estimate by even a small amount would have a significant negative effect on Enrons stock price and, conversely, that exceeding the consensus estimate would have a significant positive effect on the stock price. Toward the end of the fourth
13
No. 06-20885 quarter of 2002, Delainey told Skilling that Wholesale, which was making huge profits from its speculative trading, had a couple of quarters [of reportable earnings] in its pocket. Skilling was pleased to hear this news and later said at an Enron management committee meeting that Enron had significant reserves that were available to meet its earnings targets for 2000. In fact, Wholesale set aside $873 million in trading income as reserves for contingent liabilities, which the testimony showed was a significant over-reservation. After the end of the accounting year, but before Enron had reported earnings, Wholesale told Richard Causey (Enrons Chief Accounting Officer at the time), who then told Skilling, that Wholesale had extra reserves available. Skilling, through Causey, communicated to Wholesale that it should shift as much reserves to earnings as was necessary to report 41 cents per share, which was 7 cents more than the fourth quarter earnings target of 34 cents per share. Wholesale shifted the money from a gas and power valuation contingentliabilities reserve account, even though there had been no changes in the circumstances associated with the reserve account. Enron then produced a document for its outside auditors that falsely stated other reasons for the reserve transfer. Enrons stock price went up after Enron reported earnings for that quarter. In response, Skilling argues that there was extensive evidence at trial that the final reserve amount accurately reflected contingent liabilities and that any differences were immaterial from an accounting perspective. We
disagree that the record shows this. A Wholesale accountant testified that, on Skillings command, he released money from the reserve account in order to make earnings go up, without consideration of the correct reserve amount.
14
No. 06-20885 Such an act is fraudulent: when a company establishes reserves based on the earnings it wants, its investors do not know if the reserve accounts accurately reflect the contingent liabilities facing the company, and they do not know that the company is meeting or exceeding its earnings targets only by moving reserves from one bucket to another.5 Further, the amount transferred from reserves to earnings was not immaterial, since the transfer allowed Enron to exceed its earnings targets and caused Enrons stock price to increase. Lastly, we note that we do not rely on the Governments allegation that Enron fraudulently misstated earnings for the fourth quarter of 1999 and fraudulently transferred contingent-liability reserves to beat the consensus estimate for the second quarter of 2000. Although there is strong evidence for a conviction on these allegations, there is not sufficient evidence to find harmlessness. Nonetheless, both allegations show that Enron executives had a pattern of manipulating earnings targets. These five fraudulent schemes, which formed a large part of the basis for the Governments proof at trial, all represent efforts by Skilling and his coconspirators to manipulate Enrons reported earnings or conceal Enrons losses from the investing public with the intent and result of affecting Enrons stock
In fact, the testimony at trial showed that Enrons outside auditor told Skilling that it was inappropriate to transfer reserves to earnings after the end of the accounting period. Moreover, although at least one accounting expert (who testified on Skillings behalf) said that it was permissible to pick a reserve number based on an earnings target so long as the reserve number is a reasonable estimate of the contingent liability, he admitted that this rule (which we find dubious) only applied before the accounting period was complete. Here, the change was made after the end of the quarter. Further, Skillings own accounting expert at trial admitted that the release of reserves to achieve an earnings target would be wrong, as did another auditor who testified.
15
No. 06-20885 price. Because they are supported by overwhelming evidence, we find that the honest-services instruction was harmless error beyond a reasonable doubt. B. The Other Convictions Skilling also challenges his other convictions for securities fraud, making false statements to auditors, and insider trading. He argues that because the district court gave the jury a Pinkerton instructionwhich permitted the jury to hold Skilling vicariously liable for the securities-fraud charges if they found him guilty of the conspiracy chargethe alternative-instruction error on the conspiracy charge also taints the other convictions. At oral argument, however, counsel for Skilling conceded that this challenge is predicated on the existence of a harmful error that invalidates the conspiracy conviction. Because we find that the alternative-instruction error in this case was harmless with respect to the conspiracy conviction, it follows that Skilling has no basis on which to challenge the remaining convictions.6 IV. CONCLUSION The alternative-instruction error in this case was harmless beyond a reasonable doubt. Accordingly, we AFFIRM the convictions on all counts, and, for the reasons set forth in our previous opinion, we VACATE the sentence and REMAND for resentencing.
Even if the alternative-instruction error in this case was not harmless with respect to the conspiracy conviction, we would still find that the error was harmless with respect to most of the other charges. The evidence presented at trial proved beyond a reasonable doubt that Skilling personally committed many of the fraudulent acts that form the basis for the other charges. Thus, mostif not allof the other convictions rest on Skillings own conduct, not on the Pinkerton instruction.
16

Petition For en Banc Review and Hrg2

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Petition For en Banc Review and Hrg2

Hochgeladen von

Copyright:

Verfügbare Formate

Case: 06-20885

Date Filed: 07/14/2011

06-20885 UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

ATTORNEYS FOR DEFENDANT-APPELLANT JEFFREY K. SKILLING

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

Date Filed: 07/14/2011

UNITED STATES OF AMERICA, PlaintiffAppellee v. JEFFREY K SKILLING, DefendantAppellant

District Judge of the Western District of Texas, sitting by designation.

Das könnte Ihnen auch gefallen