May 25, 2006
A Puzzle from the Enron Verdict
Posted by Gordon Smith

In the early reports on the Enron verdict, one fact leaped out to me: Jeff Skilling was found guilty of fraud, but not of insider trading. What's up this that? (Larry Ribstein wonders, too.)

As it turns out, Skilling was convicted of one count of insider trading, which relates to a trade on September 17, 2001 (after his resignation as CEO of Enron). All of the other counts related to trades in 2000.

All of the counts against Lay related to actions taken after August 2001, when Skilling resigned.

But many of the fraud counts against Skilling relate to the filing of fraudulent financial statements in 2000, as well as statements to analysts in 2000.

So the question remains: how could he have been engaged in fraud during 2000, but not been engaged in insider trading?

More interesting thoughts on the verdict from Steve Bainbridge.

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ยป Skilling's Insider Trading Charge: "On the Basis of" versus "Possession of" from ProfessorBainbridge.com ...
"Gordon Smith joins Larry Ribstein in wondering why Jeffrey Skilling was convicted on all the fraud a ..." [more] (Tracked on May 25, 2006 @ 15:07)
Comments (6)

1. Posted by Doug B. on May 25, 2006 @ 12:41 | Permalink

You do not have to worry too much about this, Gordon, since Skilling can still be sentenced on this conduct despite the acquittals under the federal sentencing guidelines:
http://sentencing.typepad.com/sentencing_law_and_policy/2006/05/now_enron_prose.html


2. Posted by Gordon Smith on May 25, 2006 @ 13:01 | Permalink

Interesting, Doug. I didn't know that. (This only scratches the surface of what I don't know about criminal law!)

Still, it seems sort of an odd result from the jury.


3. Posted by Bill Sjostrom on May 25, 2006 @ 14:04 | Permalink

I'm thinking the jury instructions would shed some light on question (but maybe I'm wrong b/c I don't know much about criminal law either). Google, however, has failed me in tracking them down. Are they available somewhere on the net?


4. Posted by Marie on May 25, 2006 @ 14:13 | Permalink

Jury instructions at www.chron.com/news/specials/enron (Houston Chronical full Enron coverage under Court documents - Jury Instructions 1 and Jury Instructions 2).


5. Posted by Gordon Smith on May 25, 2006 @ 15:27 | Permalink

Steve Bainbridge has some excellent ideas on this question. Follow the TrackBack link.


6. Posted by Eric on May 26, 2006 @ 8:01 | Permalink

I heard a discussion of this exact point on NPR this morning and apparently the jurors in their post-verdict interview wanted to make clear they thought he committed insider trading, but that the government had not proved it beyond a reasonable doubt. It may be that the elements of each crime are just different enough that even though one set of facts could support a conviction under both, lack of proof on one particular fact didn't doom a conviction for fraud, but did for insider trading.

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