Skilling to pay Lay's share too

HOUSTON: Federal prosecutors want former Enron Corp chief executive officer Jeffrey Skilling to turn over nearly $183m for helping perpetuate one of the biggest business frauds in US history — his alleged share and that of his late co-defendant, company founder Kenneth Lay.

The government had originally split that amount between the two former corporate titans, who were convicted in May of charges including fraud and conspiracy at the close of a four-month trial.

In late June, prosecutors asked US district judge Sim Lake to issue a money judgement ordering Skilling to pay $139.3m, and Lay $43.5m in proceeds the government contends they pocketed by conspiring to present an optimistic picture of Enron’s health when they knew it was an illusion propped up by cooked books.

However, Lay died on July 5 of heart disease. His lawyers have since filed court papers noting their intention to ask Lake to wipe Lay’s record clean because he hadn’t yet appealed his conviction or been sentenced. That would thwart the government’s bid for a money judgement against him, but his assets could remain targets in civil litigation.

In a filing, prosecutors responded to Skilling’s opposition to the pricey proposed judgement by asking Lake to require the ex-CEO to pony up the entire $182.8m. Prosecutors said that with his conspiracy conviction, Skilling is “liable for all the proceeds attributable to all co-conspirators, indicted or unindicted, including Lay,” because they participated in the same scheme.


In a money judgement, a judge sets an amount a defendant has to pay and the defendant comes up with the cash through asset sales and other means. That differs from a traditional forfeiture, which could involve seizure of cash as well as assets directly tied to the defendant’s crimes that the government later sells.

Skilling was convicted of 19 of 28 counts of fraud, conspiracy, insider trading and lying to auditors for his actions from 1999 through late summer 2001.

Jurors acquitted him of nine counts of insider trading that stemmed from stock trades in 2000, but convicted him of a single insider trading count related to his sale of half his Enron holdings three weeks after he abruptly resigned as CEO in mid-August 2001.

Skilling insisted no fraud occurred at Enron and his optimism about the company was genuine. He faces decades in prison upon his October 23 sentencing, and aims to appeal.

Enron, once the nation’s seventh-largest company, went bankrupt in December 2001 amid revelations of hidden debt and inflated profits. Thousands of jobs and the company’s $60bn market value evaporated.

Skilling’s lead lawyer, Daniel Petrocelli, contends that only $12.5m could arguably be tied to crimes in a money judgement because the rest stems from insider trading counts of which Skilling was acquitted. Similar issues should shave a forfeiture of frozen cash and property to $4.1m.

The government had already intended to seize about $60m in Skilling’s cash and assets — including his $5.1m mansion — that have been frozen since the ex-CEO was indicted in February 2004. Prosecutors say those assets and Skilling’s $5m bond can help pay the tab.
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