Former Enron executive Paula Rieker received a sentence of 2 years probation for her guilty plea to a charge of insider trading for reaping nearly $500,000 from sales of stock when she knew the company was facing severe financial problems.  Rieker was among the eight former Enron officials who entered guilty pleas and later testified against former CEOs Ken Lay and Jeffrey Skilling in the conspiracy and securities fraud prosecution.  The government moved for a downward departure in the sentencing of Rieker, noting that she provided valuable evidence implicating Lay in givingmisleading information to analysts during 2001 about the prospects of Enron’s broadband unit, a centerpiece of the government’s case that Lay committed securities fraud.  Rieker was an executive in the investor relations department and then became corporate secretary, reporting directly to Lay.  Under the Sentencing Guidelines applicable to Rieker’s offense, she was looking at an 18-24 month term, so the probation term means U.S. District Judge Melinda Harmon gave a substantial downward departure for her cooperation.  A Houston Chronicle story (here) discusses the sentencing. (ph)

Richard Causey, former Chief Accounting Officer at Enron, has had his sentencing hearing moved from October 19, 2006 to November 15th. This means that Causey would be sentenced after Jeffrey Skilling who is presently set to be sentenced on October 23, 2006.

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After watching Andrew Fastow’s sentence be reduced to six (6) years, despite a clear plea agreement that called for ten (10) years, one has to wonder what sentence will be imposed on Richard Causey.  Tom Kirkendall at Houston ClearThinkers has a discussion of the plea here and the plea agreement can be found here. 

The language in the plea agreement is clear.  It states, "Defendant cannot and will not be sentenced to a period of incarceration of less than 60 months.  Defendant further agrees that he will not move for a downward departure on any grounds and that no such grounds are applicable."

According to the agreement, Richard Causey faces a minimum sentence of five years.  Will the court place Causey’s sentence on the lower end of the range in light of the new circumstance – the reduction of Fastow’s sentence.  Or will the court go below the 60 months despite the agreement, as occurred in the Fastow sentencing? Stay tuned – October 19th is the day.   

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Some more thoughts on the Fastow sentence:

1.  Some may argue that this sentence is another example of why we need strict sentencing guidelines that do not allow for judicial discretion. This is inaccurate.  Even with strict guidelines in a pre-Booker world, the court would have had the discretion to give this sentence to Fastow.  Sentences premised upon cooperation, that is sentences where the accused receives a 5K1.1 cooperation benefit, are allowed to be outside the guidelines.  Thus, even with strict guidelines – Fastow’s sentence could have been the same.

2. Are the sentences proportional here?  There may be room for argument here in that clearly those who plead are receiving substantially less for the same crime than those who risk a trial. Some may argue that saving the government time and money warrants this disparity.  But on the other side, does this diminish the constitutional right to a jury trial?

3. Peter Lattman at the Wall Street Jrl here asks the question, "Did Plaintiffs’ Lawyers Win Andy Fastow a Lighter Sentence?"  As noted here, it was the University of California system that was asking for leniency for Fastow. It is rare that one finds a victim asking for leniency for the convicted defendant.  But when they personally receive a benefit, it is understandable that they will come forward and be there at the sentencing.  This is somewhat bothersome, however, in that poorer individuals, those with no information to offer the government, and those who are last in the prosecution line are individuals who have nothing left to offer in cooperation and are just plain out of luck. 

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Tom Kirkendall’s Houston ClearThinkers has a tremendous post here that includes portions of Fastow’s testimony during the Lay/Skilling trial. One of the pieces of testimony he presents is a part of the re-direct examination by Hueston on March 13th, when Fastow testified as follows:

"Q. And as a result of your pledge to cooperate, did you agree to plead guilty to a 10-year minimum sentence of imprisonment?

A. A 10-year maximum imprisonment.

Q. And what is the minimum amount of time that that plea agreement calls for?

A. It calls for a 10-year sentence.

Q. So after January 14th, can your cooperation lower that 10 years?

A. My understanding is that I will be sentenced to 10 years. The Judge ultimately has a discretion; but in my plea agreement, I agreed to the 10-year sentence."

Was it proper for the jury in the Lay/Skilling trial to hear that Fastow would do 10 years in prison and then have him receive a significantly lesser sentence?   This may provide another issue for Jeffrey Skilling on his appeal.  Check out the other segments that Tom Kirkendall’s Houston ClearThinkers provides – here.

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