United States v. Skilling
554 F.3d 529 (5th Cir. 2009)
Filed Jan. 6, 2009
By: David Woosley
Note: This case and its progeny are not in our casebook!
(Review sought in a higher Court, which granted and remanded.)
Parties
Π:
U.S. – GO with Global Reach
Headquartered in North America
Δ-Appellant: Jeffrey K. Skilling, Enron CEO Feb’01 8-14-01
Appealing May 2006 convictions for conspiracy, securities fraud,
making false representations to auditors, and insider trading.
- Harvard MBA; Founded ENRON’s Wholesale business in 1990
- In 1997, became President and COO and joined the BOD.
- CEO in Feb 2001; unexp. resigned from ENRON on Aug 14, 2001
- currently in an incarceration program (292-month sentence)
- Younger brother of Tommy ‘Skillethead’, famous WGN weatherman
- 4-9-04 arrested for PI; harassed passersby, crying undercover FBI
Facts
• Fortune, 6 years running, named ENRON “America’s Most
Innovative Company”; visit ENRON.com
• Skilling v. U.S. (decided 6-24-2010) indicates ENRON was the 7th
highest-revenue-grossing company in America ($101B in 2000);
blue chip from $90 in Aug 2000 to pennies per share late 2001
• Approximately 22,000 local employees lost jobs; butterfly effects
• Largest BK until Worldcom 2002; surpassed by Lehman Brothers
• Systematic, institutionalized, creatively-planned accounting fraud
• Skilling says acts weren’t designed to enrich himself, but to help E
• Convicted on 19/28 counts; lead lawyer Daniel Petrocelli (1st crim)
• “Jeff Skilling Defense” – “Deliberate Ignorance” of malfeasance
that transpired (half-step between knowledge and negligence)
• 24-year sentence one shy of Bernie Ebbers record 25 for White C
• Cheek Commission; Aug. 2003 added MR 1.6(b)(2),(3); changed
MR 1.13; SOX enacted 7-30-2002; Arthur Andersen disintegrated
eDiscovery Legal Framework
• This is a criminal case, Fed. R. Crim. P. 16(a)(1)(E):
– Upon a defendant’s request, the government must
permit the defendant to inspect and to copy or
photograph books, papers, documents, data . . . if
the item is within the government’s possession,
custody, or control . . . [and if material]
• The “government may not hide Brady material . . . in
a huge open file in the hope that” Δ will never find it.
– Brady cop; Brady v. Maryland (1963)—withholding
exculpatory evidence violates Due Process
– “As a general rule, the government is under no
duty to direct a defendant to exculpatory evidence
within a larger mass of disclosed evidence.”
Analysis of Case from eDiscovery Perspective
• Skilling argues that government’s voluminous open file
suppressed exculpatory evidence
– “it would have taken scores of attorneys working around-theclock for several years to complete the job”
• “government did much more than drop several hundred
million pages on Skilling’s doorstep. The open file was
electronic and searchable.”
– Gov produced a set of “hot documents” it thought
were important to its case or relevant to defense
– Gov created indices to these and other documents
– Gov also provided access to various databases
concerning prior ENRON litigation.
– If something exculpatory, gov. doesn’t know about it
Issues Regarding eDiscovery
• Should the government be required to scour open files in
search of exculpatory information for Δ?
• Cheek amendments (Aug 2003) to Model Rules
[Why didn’t lawyers/auditors stop all these frauds?]
– Added MR 1.6(b)(2): may reveal to prevent the client from
committing a crime or fraud that is reasonably certain to result in
substantial injury to the financial . . .
– Added MR 1.6(b)(3): may reveal to prevent, mitigate, or rectify . . .
from the client’s commission of a crime or fraud
– Changed MR 1.13 Organization as Client
• Old rule: work within entity; or resign (don’t trash stock)
• Now an independent basis for disclosure; may reveal to prevent .
• If fired or withdraw, shall go to org’s highest authority
• SOX: lawyers may report credible violations directly to SEC
Conclusion / Outcome
• Given the equal access that Skilling and the
government had to the open file, the complexity of
the case, and the absence of evidence that the open
file was used to hide potentially exculpatory evidence,
the 5th Circuit held that the government’s use of the
open file did not violate Brady.
• Convictions affirmed; sentence vacated (remanded since no
enhancement for jeopardizing a “financial institution”)
• Supreme Court said conspiracy conviction flawed (no
“honest services” fraud); remand to decide if conspiracy
reversed; if so, whether would touch other convictions
• If someone says “well, first we’re going to have to
shade the truth a little bit”, the eventual outcome may
be unpleasant.
Questions for Class Discussion
• May a defendant’s lawyer, in a silk-stocking firm, pad
a voluminous open file with pointless or superfluous
information in an attempt to hide unfavorable
information or to frustrate plaintiff’s review?
• The ABA had long-resisted a push to liberalize its
confidentiality rules. Did the Aug 2003 Cheek
amendment changes, or the Sarbanes-Oxley Act,
go too far? Not far enough?