Tale of Two Sentencings

Tale of Two Sentencings - 4 a fi ‘ Enron The Tale of Two...

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Unformatted text preview: 4' a fi/ ‘ Enron: The Tale of Two Sentencings - WSJ.com Page i. of 3 a . ' i _ iFoamnT FOR llililltlttl‘lt ‘ ' - I 1k.1 l, 'I i ‘ _‘ ‘ ii. jspannored by m“ "‘ 0 N‘ L 'J N 5% I "T' October 19, 2006 Enron: The Tale of Two Sentencings {Rottwflfisfififflfifs - , . jg“) This copy is foryour If Shilling Gets 20 Years in Prison, 3 gefsogal. "don-commerctial gee d It'll Show It Hurts Not to Sing to Prosecutors ' ny' D or er press” a '0” '93 y j copies for distribution to your colleagues, clients or customers, f use the Order Reprints tool at the bottom of any article or visit: 5 wvmnjreprintscom. By JOHN R. EMSW’ILLER October I 5’, 2006; Page C 3 The surprisingly lenient prison sentence given recently to Enron . See a sample reprint m FDF Corp. former Chief Financial Officer Andrew Fastow highlights the j format, I . I benefits of cooperating with federal criminal authorities. The coming; ' orde’ a "Emmi “W's amde ”°W' sentencing of former Enron President Jeffrey Shilling is likely to 1 demonstrate the dangers of fighting them. Mr. Fastow‘s six-year prison sentence came after the disgraced executive helped federal prosecutors nab others at Enron, including Mr. Skilling -— who was convicted, along with former company chairman Kenneth Lay, on conspiracy and fraud charges this year. Mr. Fastow was one of the government's main witnesses in that four—month trial. Mr. Skilling, by contrast. fought the government with a defense effort that cost tens of millions of dollars. He has vowed to appeal his conviction on 19 counts and has asked the court to let him remain free pending his appeal. The 52-year—old Mr. Skilling is scheduled to be sentenced Monday by Judge Sim Lake and observers believe that he could get in the range of 20 years imprisonment. (Mr. Lav died several weeks after the trial 91' heart-related problems; this week his conviction was vacated, under esta is e aw at Wipes away convictions for defendants who die before WH— appeal.) The likely discrepancy in prison terms for Messrs. Fastow and Skilling, 7 V ' widely considered to be two of the central figures of the Enron scandal, Al’de Fasmw illustrates that there has never been a better time in the white-collarucrime world to rat on your colleagues. Over the past half-decade, prison terms for financial crimes have ratchcted up. Where a convicted corporate executive could once expect probation or a few years in prison, a first-time offender now faces as long as life behind bars. The surest way to avoid such a fate is to admit wrongdoing, out a deal with prosecutors and help them nab others. The sentencing system "has developed a huge gulf between those who go to trial and those who cooperate, " says Kirby Behre, a former federal prOSecutor and co-author of a treatise on federal sentencing practices. While Mr. Shilling faces "an astronomical sentencefl cooperators such as Mr. Fastow "are still getting sweet deals," says Mr. Behre, a partner in the http://online.wsj.comfarticle_print/SB116122489481697314htm1 ' ‘ 1072472006“ ‘ ——iale of Two Sentencings - WSJ.com Page 2! of 3 Washington law office of Paul, Hastings, Janofsky & Walker. One of the other giant corporate scandals of the past halfndecade, WorldCom Inc, saw a discrepancy in the sentences given to its two main figures. Former WorldCom Chief Financial Officer Scott Sullivan cut a deal and testified against his onetime boss, former Chief Executive Bernard Ebbers, who was convicted of conspiracy and securities fraud. Mr. Sullivan received a five~year sentence. Mr. Ebbers received a 25—year sentence. Both are in prison. (WorldCorn emerged firom bankruptcy as MCI Inc, which was later acquired by Verizon Communications Inc.) As a wave of possible corporate crime prosecutions looms -- this one involving the backdating of stock options —— the chasm between government cooperators and the people they testify against looms large. The outbreak of corporate scandals that began with Enron's December 2001 collapse into bankruptcy helped fiiel an existing trend toward ever-longer prison sentences for white~collar crime. Little of the rise in prison time has to do with protecting society from an Ebbers or a Shilling, observers say. Neither of those men is likely to be connected to a public company ever again. Rather, a long white-collar sentence is. done for punishment and "the message it sends to others about the consequences of serious fraud," says Samuel Buell, a former prosecutor in the Justice Department's specially created Enron Task Force and now a law professor at Washington University in St. Louis, who acknowledges that he would have difficulty determining a proper sentence for Mr. Skilling. Corning up with an appropriate sentence for the 44-year-old Mr. Fastow also proved complicated. His six-year sentence appears particularly sweet, given that he had agr :ed to accept a 10-year sentence when he made his plea deal with prosecutors in early 2004. The deal resolved a pending 98—count indictment that could have sent him to prison for 20 years. However, the sentence still had to be reviewed by a judge. Last year, a Supreme Court decision gave federal judges more leeway in setting sentences. Previously, prison terms had largely been determined by a formula that took into account such factors as a defendant's role in the crime, his acceptance of responsibility, and, in cases of fraud, the dollar loss. At Mr. Fastow‘s recent sentencing hearing, prosecutor John Hueston said the former finance chief's help had been. "critical" in unraveling the Enron fraud. He added that without Mr. Fastow " we would not have convicted Mr. Lay." The prosecutor also said the defendant "appeared truly , repentant," and he didn‘t object when a Fastow lawyer recommended a Je ffrey Skating five-year prison term. Int ' 1 four rears off the agreed—upon sentence, Judge Kenneth Hoyt said he was showing "mercy." Given the severity of Mr, Fastow‘s crimes, any reduction from 10 years was “overly generous," said Leslie Caldwell, the original director of the Enron Task Force and now a partner at the Morgan, Lewis & Bockius iaw firm in New York. A Justice Department spokesman said the government is looking at an appeal. Nobody expects prosecutors to say nice things about Mr. Skilling at his sentencing hearing in http://onlinewsjcom/ article _print/SB 1 1612248948 1 6973 l4.htrnl 10/242006 tale of Two Sentencmgs - \X‘Slcom \ ,V . .‘L;__Y‘Page 3 of 3 douston. The government and Mr. Skilling's attorneys are battling over a host of issues that could affect the former Enron president's sentence. One battle involves which set of sentencing guidelines to use, since amendments over the past half-decade have made corporate-fraud penalties steadily stiffer. The government is arguing for guideline amendments that went into effect Nov. 1, 2001, claiming that the criminal conspiracy continued until Enron's bankruptcy filing a month later. Eefense attorneys argue for using the previous set of guidelines, since Mr. Skilling resigned from Enron in August 2001. The choice of guidelines could make a difference of several years or more in his sentence calculation, sentencing experts say. Estimates of the prison term Judge Lake will give to Mr. Shilling range from about 15 years to about 30 years. Such numbers are a far cry from two decades ago when the federal sentencing guidelines first went into effect. (Before that, sentencing was left pretty much up to individual judges.) If Mr. Skilling were being sentenced under the original guidelines from the 1980s sa. 3 one sentencin expert, he would be facing about six to seven years in prison. WWW Write to John R. Emshwiller at joln‘i.e:[email protected] URL for this article: httpzl/ontinewsjcomfarticiefSB‘i16122489481697314.htmi Hyperlinks in this Article: (1) [email protected] Copyright 2006 Dow Jones E: Company, Inc. Ali Rights Reserved This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright iaw For itoit~parsonal use or to order moiiipie copies. please contact Dow Jones Reprints at 1-800-843—0008 or visit wwwojreprintscom. http://online.wsj.com/article_print/SB116122489481697314html 10/24/2006 ...
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This note was uploaded on 10/16/2010 for the course B&E BADM 622 taught by Professor Schaupp during the Spring '10 term at WVU.

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Tale of Two Sentencings - 4 a fi ‘ Enron The Tale of Two...

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