(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Reynolds Holding
NEW YORK, May 8 (Reuters Breakingviews) - Jeffrey Skilling's shorter sentence could put America's financial watchdogs in the hot seat. The former Enron chief executive may get a decade sliced from his 24-year prison term. But he'll still serve more time than just about anyone behind the financial crisis. Unlike Skilling's conduct, Wall Street's misdeeds may not have been criminal. That won't stop critics of the U.S. Justice Department from baying for banker blood.
The ex-CEO's punishment was probably excessive to begin with. Former Enron Chairman Kenneth Lay died before he could be sentenced for his ringmaster role in the energy-trading company's fraud and 2001 collapse. Finance chief Andrew Fastow got off with only six years in the slammer after helping the government to nail Lay and Skilling.
So it makes sense for prosecutors to recommend a reduction for Skilling, especially since at least two federal courts questioned his sentence's length. The punishment also suggested that he was four times worse than Fastow, who personally gained from Enron's shenanigans to an extent his superiors did not.
Even the shorter term, however, contrasts sharply with the absence of serious jail time for financial crisis rogues. The Enron debacle was unique, but it bears at least some resemblance to several recent scandals. Lehman Brothers [LEHMB.UL], for instance, papered over serious problems with dodgy accounting that temporarily shifted assets off the balance sheet. That sounds a lot like Enron's use of off-balance sheet partnerships. Despite a court investigator's finding that senior Lehman executives could be liable for fraud, former chief Dick Fuld and company haven't been charged.
Such cases are tough to win, requiring proof of intentional or reckless wrongdoing. And federal prosecutors haven't come up completely empty. For example, they recently extracted guilty pleas from three Credit Suisse (CSGN.VX) traders for artificially boosting the prices of subprime mortgage-backed bonds.
But that's about it for prosecutions related to the financial crisis. The Justice Department has instead focused on splashy insider-trading cases while the Securities and Exchange Commission has been busy losing trials against the founders of money market firm Reserve Primary Fund and middling Citigroup (C.N) banker Brian Stoker. It's a disappointing record that, after Skilling's likely resentencing, may look even less impressive.
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- Former Enron Chief Executive Jeffrey Skilling may have his 24-year prison term cut by a decade if a federal judge approves a deal proposed by prosecutors. That would mean that Skilling could be released as early as 2017. The arrangement calls for the ex-CEO to drop litigation over his conviction and pay more than $40 million to victims of the fraud that brought down the world's largest energy trader.
- Reuters: Enron's Skilling reaches deal for shortened sentence [ID:nL2N0DP2DP]
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(Editing by Rob Cox and Martin Langfield)
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