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United States v. Skilling 554 F.3d 529 (5 th Cir. 2009) Filed Jan. 6, 2009 By: David Woosley

United States v. Skilling 554 F.3d 529 (5 th 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

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United States v. Skilling 554 F.3d 529 (5 th Cir. 2009) Filed Jan. 6, 2009 By: David Woosley

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  1. 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.)

  2. Parties Π:U.S. – GO with Global Reach Headquartered in North America Δ-Appellant: Jeffrey K. Skilling, Enron CEOFeb’01 8-14-01 Appealing May 2006 convictions for conspiracy, securities fraud, making falserepresentations 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

  3. 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

  4. 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.”

  5. 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-the-clock 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

  6. 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):mayreveal 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): mayreveal 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

  7. 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.

  8. 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?

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