Example Of Essay On Skilling V United States

Summary

That the United States often learns from its mistakes is evident in the Enron case. Indeed, after Enron and a few other scandals, all stakeholders including Congress have taken action. In Skilling v United States, we see some of the intrigues and reactions of institutions. In this particular case, the judiciary has its day in nailing Skilling.
In a summary, Skilling was the chief executive officer who saw Enron through the scandalous, fraudulent and creative reporting. It is imperative to note that four months after his departure as the chief executive officer, Enron went bankrupt in what would lead to an investigation that would reveal one of the world’s most fatal white collar crime. In brief, Skilling alongside others conspired to defraud Enron shareholders and the public at large by engineering a number of schemes including manipulation of Enron’s publicly reported financial results, propping up Enron’s short-run stockprices thereby overstating the companies’ financial wellbeing, unjust enrichment through the payment of salaries, bonuses, grants and profits, being the direct results of the fictitious and creative accounting and committing securities fraud and insider trading offences.
However, this particular case heard at the Supreme Court did not concentrate on Enron scandals and in particular Skilling’s misdoings. Instead, the case was an appeal by Skilling of the decision by the Fifth Circuit Court. In the appeal, Skilling challenged two main issues. One, that the lower case had not afforded him fair trial given the prejudice of the jurors and secondly, that he had not committed an honest services offence therefore holding him as being part of the conspiracy to defraud by denying Enron shareholders their intangible assets. The Supreme Court affirmed the Fifth Circuit holding in the first limb in relation to the fair trail argument and vacated the second limb in relation to the conspiracy conviction holding that the honest services ruling had been extended beyond what Congress had intended it to apply to.

Legal Issues before the Court

In the Skilling case, there were two main legal issues before the Court. One, was whether given the circumstances of the case, Skilling had been afforded a fair trial and secondly, whether Skilling was part of the conspiracy conviction based on the interpretation of the honest services provision. In this section, this paper shall discuss the legal issues in much detail.
Skilling argued that based on the pretrial publicity and the community prejudice, it was impossible to conclude that he had been afforded a fair trial. He argued that Houston, where his trial took place, and where the jurors were drawn from, had been adversely affected by the fall of Enron. He submitted that given the circumstances, the jurors and the community at large had been highly compromised. In fact, Skilling tended to suggest that the jurors would be out for blood. In other words, these jurors were compromised and it would not be expected of them to provide fair judgment. In illustrating his case further, Skilling submitted that the media coverage had been highly incriminating read together with the confession and plea of guilty by one of his co-conspirators. In total, Skilling, argued that Houston was not the right venue for his hearing and that the jurors were not of a free mindset. The court in rejecting his argument, conducted a number of tests on the jurors. The court also observed that the notwithstanding the immense media coverage, the risks had been covered and it was not proved that the jurors were compromised. In essence, the Court took the view that Skilling was afforded a fair hearing. However, it is imperative to note that three judges in a judgment read by Sotomayer were in agreement with Skilling that he had not been given a fair hearing given the hostility of Houston as the venue of the hearing of the case.
The second legal question was on whether Skilling was part of the conspiracy based on the reading of the honest services provision. The Court read the honest services provision has contemplating a scheme or artifice to defraud or obtain money by false pretense, fraudulent pretense, representations or promises. The Court read the honest service provision in a limited manner, holding that Congress did not contemplate the same to extend to intangible assets. As such, the Court vacated the holding by the Fifth Circuit Court convicting Skilling to the conspiracy.

Decision

Given the foregoing, the Court arrived at the decision to affirm the Fifth Circuit Court decision to the fair trial argument and vacated the decision on the conspiracy based on the interpretation of the honest services provision. In addition, the Court clarified that the honest services provision was not constitutionally vague as suggested by Skilling. The Court remanded the case for proceeding consistent with its opinion.
It is imperative to note that Skilling’s sentence has since been commuted from the previous twenty four years in prison to fourteen years in prison. He has since served over six years in prison. It is equally imperative to note that Congress has since reacted to the Enron scandal by enacting the Sarbanes Oxley Act 2002 which aims to contain corporate fraud and promote whistleblower reporting. The memory of the Enron scandal still leaves on offering a reminder to the people of the United States of the sanctity of honesty and fair financial reporting.

Ethical Analysis

The case of Skilling v United States in itself does not present many ethical issues. However, Skilling is the legal climax of the Enron scandal. In this section, we shall draw analysis both specifically from the Skilling case and generally from the Enron scandal. It is imperative to appreciate that Skilling was the chief executive officer of Enron during the commission of the crimes. In addition, after the death of the chairman of the board, Skilling, as the chief executive officer, remained the highest ranking official whom the Court could hold responsible for the fraud.
One ethical issue entails honesty and truth. From an auditing perspective, financial statements must reflect the true and fair position of the financial status or health of the company. By manipulating the financial statements through creative and fictitious accounting, Skilling and his co-conspirators violated this invaluable rule in auditing and financial reporting. It is noteworthy that Enron’s auditor, Arthur Henderson was equally found liable. It is an ethical as well as a legal obligation for auditors to ascertain the true and fair view of the statements of accounts. That Arthur Henderson was found to be complicit in this area was another regrettable ethical flaw.
Moving forth, another ethical issue entails the unjust and illegal enrichment. As stewards of the shareholders’ wealth, executive and high level managers are not to illegal enrich themselves. In this particular situation, it is clear that Skilling and his co-conspirators enriched themselves through increased and inflated salaries, bonuses, grants and profits. It is even worse for Skilling who attempted to evade the aftereffects by quitting just before the company collapsed. The unjust enrichment to the detriment of the shareholders who were deprived of their intangible assets is another ethical flaw. Further, the law requires that accounting standards of reporting are followed. The law equally prohibits insider trading and securities frauds. In this case, Skilling and his co-conspirators breached the law, which is in itself an ethical flaw.
Be that as it may, there are ethical issues resonating around the conviction and legal prosecution of Skilling. Foremost, is the pretrial publicity read together with the community prejudice Skilling complained about. Ethically, it would have been responsible for the authorities to afford Skilling a fair trial that is not only fair, but also appears fair. In light of the complaints submitted by Skilling and which the Supreme Court rejected, it is arguable that Skilling was not afforded fair trial. In fact, that he is the only one who was sentenced to more than ten years in prison has given fodder to critics who argue that Skilling was punished for exercising his right to trial as opposed to his contemporaries who opted to plead guilty. The ethical issues must be seen from the perspectives of both the accused and the prosecutor. While the public has a right to an opinion, the law ought to afford protection to both the oppressor and the oppressed. At the end of the day, the ends of justice must meet.

Works Cited

Li, Yuhao. "The Case Analysis of the Scandal of Enron." International Journal of Business and Management 5.10 (2010): 37-41.
Skilling v United States. No. 08-1394. Supreme Court. 24 June 2010. <http://www.supremecourt.gov/opinions/09pdf/08-1394.pdf>.
Watnick, Valerie. "Whistleblower Protections Under the Sarbanes Oxley Act: A Primer and a Critique." Fordham Journal of Financial and Corporate Law (2007): 831-879.