Thousands of workers who lost their employment and retirement pensions in the massive Enron fraud scheme more than a decade ago may soon see some relief. A U.S. District in Houston has resentenced former Enron CEO Jeffrey Skilling to 14 years (168 months) in prison on multiple conspiracy, securities fraud, and other charges that led to the company’s collapse, and ordered him to forfeit approximately $42 million, which will be applied toward restitution of the victims of the giant fraud scheme.
Skilling’s convictions stemmed from an elaborate scheme to deceive investors, the U.S. Securities and Exchange Commission (SEC), and others about the true performance of Enron’s businesses. Skilling, 59, crafted the scheme to make Enron appear to be growing at healthy and predictable rates consistent with market expectations in order to artificially inflate the company’s stock price.
Other parts of the hoax involved leading the public to believe the company was comprised of a number of small business units, that it did not have any significant debts, and that these operations contributed to a healthy cash flow. As a result, Enron’s stock price swelled $30 per share in 1998 to more than $80 per share in January 2001. The company also artificially stemmed declines in stock prices in the first three quarters of 2001.
Skilling’s intricate fraud scheme started to unravel in 2001 and the company declared bankruptcy in December of that year, making its stock effectively worthless.
In May 2006, a federal jury in Houston found Skilling guilty of one count of conspiracy, 12 counts of securities fraud, one count of insider trading, and five counts of making false statements to auditors. Judge Sim Lake initially sentenced Skilling to a 24-year prison term in October 2006.
In January 2009, an appeals court affirmed Skilling’s convictions but vacated his sentence and sent the case back to the district court for a new sentencing hearing, saying that it had erred when it increased Skilling’s sentence for jeopardizing the safety and soundness of a financial institution (Enron’s pension plan). As a result, Skilling’s sentence was reduced by about nine years.
Skilling’s fraud collapsed Enron, leaving 5,000 employees without work and evaporating more than $2 billion in employee pensions. The company’s collapse also turned $60 billion in Enron stock worthless and generated aftershocks that rippled through Houston, the U.S. energy industry, and the national economy.