As noted earlier here, the Fifth Circuit Court of Appeals panel decision in former Enron CEO Jeff Skilling’s appeal of his criminal conviction was unusual in several respects.

For example, even though the three-judge panel reversed Skilling’s sentence and remanded that part of the case to the U.S. District Judge Sim Lake for re-sentencing, the part of the panel’s decision affirming the conviction was oddly superficial in a number of key respects.

In particular, the panel’s decision failed to reconcile its reasoning in upholding Skilling’s conviction for honest services wire-fraud under 18 U.S.C. § 1346 with the Fifth Circuit’s earlier decisions on the same issue in the Nigerian Barge and Kevin Howard cases.

Similarly, despite finding that Judge Lake had improperly failed to grant Skilling a presumption of community prejudice for purposes of establishing the correct venue and in selecting jurors, the panel turned around and affirmed the conviction anyway by reasoning that Skilling had waived his juror argument by failing to object to the seated jurors (except one) and by finding that Judge Lake had overcome the presumption of prejudice against Skilling by conducting an "exemplary" voir dire.

Now it’s time for Skilling’s team to fire back at the Fifth Circuit panel’s decision.

Yesterday, Skilling’s lawyers zeroed in on the unusual aspects of the panel’s decision by filing this Petition for Panel Rehearing and this Petition for Rehearing En Banc in front of the entire Fifth Circuit Court of Appeals (Kristen Hays’ Chronicle article is here). As with the panel’s earlier decision, the copies of Skillings’ petitions provided in this post are bookmarked, key arguments are highlighted, and a few of my comments are included.

The Petition for Rehearing En Banc is the meatier of the two pleadings in analyzing the alleged defects in the panel’s decision.

First, Skilling hammers the panel’s creation of a "following orders" exception to rationalize affirming Skilling’s conviction on the honest services wire-fraud charge even though that decision is inconsistent with the Fifth Circuit’s previous decisions in the Nigerian Barge and Kevin Howard cases and other appellate decisions on the same issue. In short, Skilling argues that the only discernable “rule” that can be gleaned from the Fifth Circuit’s conflicting decisions on the issue is that an employee cannot be convicted for honest services wire fraud if the conduct charged was in furtherance of the corporate interest (Nigerian Barge decision) unless the employee is a senior executive (Skilling decision) except in certain unspecified circumstances (Howard decision).

Skilling rightly asks: How could "any employee .  .  . know under existing circuit precedent what conduct will subject him to prosecution for honest-services fraud?"

Heck, maybe we all ought to be signing up for this.

Moreover, Skilling argues that the panel simply misread the trial record in finding that Skilling had "failed to challenge for cause all but one of the jurors." The panel used that key finding to conclude that Skilling had "waived most of his argument" regarding improper venue and juror bias.

This is important because of the panel’s finding that the District Court committed error in failing to find presumed community prejudice against Skilling. In effect, the panel’s waiver analysis relieved the Enron Task Force of its burden to show that each juror was impartial. Instead, the panel required Skilling to show that each juror was biased, which confuses an actual prejudice case (in which Skilling would bear the burden of proving bias) with a presumed prejudice case, where the prosecution is required to fulfill the tough burden of proving that each juror is impartial.

Inasmuch as Skilling’s appellate petitions specify in the trial record where he challenged the entire jury and objected specifically to at least seven seated jurors, Skilling’s request for rehearing on this ground appears to be solid. Frankly, if it is not clear error for the District Court to have denied Skilling’s motion to change the venue of his trial because of the unprecedented community bias against him, then there is simply no longer a legal basis to change the venue of a trial on that basis within the Fifth Circuit.

Finally, Skilling argues that the panel was wrong to affirm the District Court’s (i) jury charge on the definition of “materiality” for purposes of securities fraud, and (ii) its refusal to dismiss “puffing” statements that are normally dismissed as immaterial in civil securities fraud cases.

It is well-settled in securities law generally that reasonable investors rely on facts in assessing the value of a company’s stock and not mere expressions of optimism from company spokespeople. Consequently, Skilling argues that the panel was wrong to affirm the District Court’s decision that Skilling’s misstatements had to be submitted to the jury even though they were indistinguishable from misstatements that the Fifth Circuit has routinely ruled could not sustain a securities fraud claim. In fact, Skilling relies on a Fifth Circuit decision in a recent Enron-related civil case as support for his argument.

So, where does all this leave Skilling?

Well, on one hand, it’s never easy winning a case on appeal in the best of circumstances, and it’s hard to imagine a worse political climate than the present one for a formerly wealthy businessman to be pursuing sympathy from an appellate court in regard to the way in which he was prosecuted for alleged business crimes.

On the other hand, the prosecution of Skilling stinks to high-Heaven. Moreover, there are a number of Fifth Circuit judges with first-rate business law experience who could very well be uncomfortable with the way in which the Department of Justice is attempting to convict businesspeople such as Skilling by placing the square peg of the honest services wire-fraud charge in the round hole of a non-kickback, non-bribery business crime case.

My bet is that Skilling has a better than normal chance of the full Fifth Circuit taking a good, hard look at his appeal.
Stay tuned.