November 17, 2006
Enron sentencings and settlements

Been a rather busy week in Enronland. Let's catch up a bit:

- Jeff Skilling has reached a settlement on all remaining litigation against him by former employees who lost their pensions in the crash.

The ex-CEO, who is scheduled to begin serving more than 24 years in prison next month, has withdrawn his opposition to an $85 million settlement that plaintiffs reached with former company directors and other executives two years ago.

In exchange, plaintiffs resolved claims against Skilling - the last named defendant who hadn't settled - effectively bringing the litigation to a close.

"Yes, it's over. Our clients are thrilled," attorney Lynn Sarko, who represents ex-Enron employees, said. "While they are grateful that some of their retirement money was recovered, it will never make up for the destruction of their retirement nest egg."

The lawsuit, which recovered about $265 million in settlements - including the $85 million held up by a Skilling appeal - was filed on behalf of more than 20,000 employees after Enron went bankrupt in December 2001. The Labor Department later filed similar litigation, which was folded into the main lawsuit.

If Jeff Skilling has to work for a living and worry about his retirement like the rest of us once he's out of jail, then I'll feel like justice has been done.

- In response to the convictions against Kenny Boy Lay being vacated upon his death, two Senators have proposed legislation to make it easier for victims of crime to seek restitution in similar situations.

On Thursday, Sen. Dianne Feinstein, D-Calif., and Sen. Jeff Sessions, R-Ala., both members of the Senate Judiciary Committee, introduced legislation designed to clarify the legal procedures when a defendant dies in this way.

"We need to ensure that, in these types of cases, hard-won convictions are preserved and restitution remains available for the victims of crime," Feinstein said in a statement Thursday.

When convicted, a criminal defendant can be ordered to pay restitution to his victims, to try to make them whole. But since Lay's conviction was vacated, his estate cannot be ordered to pay restitution.

Instead, the Justice Department was forced to file a civil suit seeking to wrest control of $12.7 million worth of assets. If the government is successful, it could then turn over some or all of those proceeds to victims of the Enron debacle.

The Justice Department proposed legislation last summer that sought to preserve such convictions after a defendant dies pending sentencing and appeal - and wanted it to be retroactive to July 1, four days before Lay died. That proposal never garnered a sponsor.

The Justice Department helped Feinstein and Sessions craft the legislation introduced Thursday.

"We share Sen. Feinstein and Sen. Sessions' commitment to do away with the harmful and unwarranted effects of the abatement doctrine on crime victims," Justice Department spokeswoman Jaclyn Lesch said.

Feinstein and Sessions' bill would stipulate that a defendant's conviction cannot be vacated just because the person has died.

That would allow for the defendant's estate to be ordered to pay direct restitution to victims. However, the proposal would allow a representative for the estate to appeal the conviction.

The bill also would give the federal government an additional two years to file a civil complaint to try to force an estate to forfeit assets.

I didn't care for the prosecution's attempt to push through a bill like this with retroactivity earlier. I'm a little hesitant to endorse this scheme, even though I think it should be easier for the civil litigants to pursue their cases, on the basis of the Task Force's earlier actions in this matter. I'll reserve judgment for now; as I expect this bill to die before the Senate session ends, we'll see what happens next year.

- Former Enron chief accountant Rick Causey was sentenced to five and a half years in prison. As both Tom and Loren Steffy note, he caught a bit of a break when Andy Fastow wound up getting his sentence shaved down, but he might wind up serving more time than Fastow anyway. Which is a little weird.

- Finally, the last two top Enron executives to face the music, Michael Kopper (who was once Fastow's top assistant) and Mark Koenig (who was Enron's head of investor relations), received sentences of 37 months and 18 months, respectively. Tom has more on this, including some thoughts on who deserved it more.

Posted by Charles Kuffner on November 17, 2006 to Enronarama | TrackBack