Case: Document: Page: 1 Date Filed: 07/28/ UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

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1 Case: Document: Page: 1 Date Filed: 07/28/ UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT UNITED STATES OF AMERICA, Plaintiff-Appellee, v. JEFFREY K. SKILLING, Defendant-Appellant. JEFFREY K. SKILLING S MOTION FOR RELEASE ON BAIL PENDING FURTHER PROCEEDINGS ON REMAND FROM THE U.S. SUPREME COURT On Appeal From The United States District Court For The Southern District Of Texas, Houston Division Crim. No. H (Lake, J.) O MELVENY & MYERS LLP WALTER DELLINGER JONATHAN D. HACKER SRI SRINIVASAN 1625 Eye Street, N.W. Washington, D.C RONALD G. WOODS 5300 Memorial, Suite 1000 Houston, Texas O MELVENY & MYERS LLP DANIEL M. PETROCELLI M. RANDALL OPPENHEIMER MATTHEW T. KLINE DAVID J. MARROSO 1999 Avenue of the Stars, 7th Floor Los Angeles, California Telephone: (310) Facsimile: (310) ATTORNEYS FOR DEFENDANT-APPELLANT JEFFREY K. SKILLING

2 Case: Document: Page: 2 Date Filed: 07/28/2010 INTRODUCTION Jeffrey Skilling should immediately be released on bail pending this Court s ruling on his case on remand from the U.S. Supreme Court. The question presented on remand is whether the government can carry its heavy burden of excluding beyond a reasonable doubt any possibility that, for the 19 counts of conviction, the jury relied on the legally flawed honest services theory the government urged the jury to accept. To state the question is to answer it. Given the standards governing applications for bail pending appeal, and given the courts previous rulings on this issue, the government has no meritorious basis for opposing bail pending resolution of this remand proceeding. The district court six consecutive times found that Skilling is not a flight risk and is not a danger to the community and thus he satisfies the first of two criteria for seeking bail. The district court made these rulings before and after Skilling was tried, convicted, and sentenced to 24 years in prison, and the district court s assessments have always been borne out by Skilling s conduct. Despite his virtual life sentence, Skilling reported to federal prison in December 2006 without incident and has served the 44 months since with dignity and a good prison record. It is equally clear that Skilling satisfies the second part of the bail test whether he has presented a substantial question on appeal that impacts

3 Case: Document: Page: 3 Date Filed: 07/28/2010 his incarceration. U.S. v. Valera-Elizondo, 761 F.2d 1020, 1024 (5th Cir. 1985). After the Supreme Court s unanimous invalidation of the honestservices fraud theory the government vigorously pursued against Skilling at trial, the burden is now on the government to prove beyond a reasonable doubt that the jury did not rely on the theory to convict him. There is at least a substantial question whether the government will be able to carry that burden, given the record it made at trial when it believed erroneously that mere fiduciary breaches and poor business decisions sufficed to establish honest-services fraud. Judge Higginbotham ruled in December 2006, on Skilling s previous bail application, that if the honest services theory underlying Skilling s conviction were held to be invalid, then 14 of Skilling s 19 counts of conviction would suffer from serious frailties. Order, U.S. v. Skilling, No (5th Cir. Dec. 12, 2006). The Supreme Court s unanimous ruling that the honest-services theory pursued against Skilling was invalid cements this conclusion and on these 14 counts, there can be no serious doubt that Skilling has raised a substantial question for purposes of showing an entitlement to bail. As to the five remaining counts of false statements to auditors ( FSA ) on which Skilling was convicted and on which Judge Higginbotham 2

4 Case: Document: Page: 4 Date Filed: 07/28/2010 concluded that Skilling had not presented a substantial question two important facts have changed. First, Skilling has had the opportunity to make a full and complete record on appeal and in his concurrently filed remand briefing why these five counts were equally tainted by the honest services error and must be reversed. The government cannot meet its burden to overcome this showing. Second, even assuming these five counts of conviction are not infirm, Skilling has served the requisite sentence on these counts and thus is entitled to immediate release. Last week, the Seventh Circuit granted Conrad Black the same relief in similar circumstances. Black s case was a companion honest services case to Skilling s case before the Supreme Court. When the Supreme Court found that Skilling and Black s convictions were flawed and remanded Black s case to the Seventh Circuit to address the government s harmless-error arguments, Black moved to be released from prison on bail pending further appellate proceedings. See Exs. A, B. The court of appeals granted this request despite arguments from the government like those here that none of Black s counts of conviction was tainted by the flawed honest-services charge; that Black s separate conviction for obstruction of justice had nothing to do with his honest-services conviction; and that Black had not served his sentence on the obstruction count. See Ex. C. The 3

5 Case: Document: Page: 5 Date Filed: 07/28/2010 Seventh Circuit panel, led by Judge Posner, rejected these arguments, see Ex. D, and this Court should do the same here. ARGUMENT SKILLING MEETS ALL THE REQUIREMENTS FOR BEING GRANTED BAIL AND SHOULD BE RELEASED IMMEDIATELY Congress has directed that a person who has been found guilty of an offense and sentenced to a term of imprisonment, and who has filed an appeal, should be released on bail if a judicial officer finds: (A) that the person is not likely to flee or pose a danger to the safety of any other person or the community if released ; and (B) that the appeal is not for the purpose of delay and raises a substantial question of law or fact likely to result in (i) reversal, (ii) an order for a new trial, (iii) a sentence that does not include a term of imprisonment, or (iv) a reduced sentence to a term of imprisonment less than the total of the time already served plus the expected duration of the appeal process. 18 U.S.C. 3143(b)(1); see also U.S. v. Clark, 917 F.2d 177, 179 (5th Cir. 1990). Section 3143(b) applies to Skilling s request for release on remand from the Supreme Court pending further proceedings, e.g., U.S. v. Beckley, 136 F. App x 555, (4th Cir. 2005); Ex. D, and Skilling easily satisfies the two-part test set for the above. A. Skilling Does Not Pose A Flight Risk Or A Danger To Others The district court had six occasions to determine whether Skilling was a flight risk: when he was indicted in 2004; in three instances before trial (in March 4

6 Case: Document: Page: 6 Date Filed: 07/28/2010 and April 2004 and May 2005); when he was convicted in May 2006; and when it sentenced Skilling in October 2006 to over 24 years in prison. R:297, , 743, 6361, 37222, In each instance, the district court found that Skilling was neither likely to flee nor a danger to others. See id. The district court made these findings even though the government argued that once he was convicted and sentenced, Skilling posed a more significant flight risk. See U.S. Resp. to Skilling s Mot. for Bail Pending Appeal at 4-6 (Oct. 18, 2006) (sealed); see also R: As expected by the district court, Skilling never fled, and he timely self-reported to prison at FCI Waseca in Minnesota on December 13, 2006, without incident. He exhibited good behavior there and was transferred to FCI Englewood in Colorado, where he similarly has been a model inmate. The last time Skilling sought bail in this Court before he filed his direct appeal the government conceded that it could not dispute the district court s ruling in October 2006 that Skilling was not a flight risk. See U.S. Resp. to Appellant s Mot. for Bail Pending Appeal at 4 (5th Cir. Nov. 27, 2006). The government has now changed position, according to its counsel, even though it made no contention before the Seventh Circuit in Black that the defendant there posed a risk of flight. Cf. Ex. C. The government has no reasonable basis to challenge this element. Skilling is a non-violent offender, and these are his first alleged offenses. He has never 5

7 Case: Document: Page: 7 Date Filed: 07/28/2010 attempted to flee, never missed a court appearance, and timely reported to prison when ordered. He has served his time without incident, with a record that makes him eligible for early release. A decision to skip bail would be all the more irrational now that Skilling has won a landmark victory in the Supreme Court, completed close to four years of his sentence, and has every intention of continuing to pursue his legal rights to clear his good name as he has been doing for some nine years (e.g., testifying before Congress and government agencies when asked, testifying at his own trial, and continuing to work on his case). If the government has any legitimate flight-risk concerns, those concerns easily can be met by standard conditions of release, as the court of appeals asked the district court to do in Black. See Ex. D. Continued incarceration is a grossly disproportionate response to any putative flight risk even assuming such a risk of flight exists at all. See also Ex. E (Order, U.S. v. Wright, (3rd Cir. July 23, 2010) (granting bail order in honest-services case)). B. The Impact Of The Supreme Court s Decision On Skilling s Convictions Presents Substantial Questions That Will Compel Complete Reversal Or, At Minimum, A Sentence Shorter Than The Time Will Have Already Served 1. In its June 24 decision, the Supreme Court remanded Skilling s case to the Fifth Circuit so that it may decide how the legal infirmity in his Count 1 conspiracy conviction affects all of Skilling s convictions. As detailed in his contemporaneously filed merits brief, the government s honest-services theory 6

8 Case: Document: Page: 8 Date Filed: 07/28/2010 infected his entire case requiring a reversal and new trial on all counts, entitling Skilling to immediate release on bail under 18 U.S.C. sections 3143(b)(1)(B)(i) and/or (ii). Indeed, Skilling s convictions are currently presumptively invalid, and the government bears the burden of proving harmless error beyond a reasonable doubt as to each count. The burden of this bail submission, moreover, is not to establish that the government will fail to prove harmlessness. Rather, the questions here are whether Skilling s application is not for the purpose of delay and whether his remand arguments raise[] a substantial question of law or fact likely to impact his incarceration. Clark, 917 F.2d at 179. Skilling s bail application is not for the purpose of delay, and the government cannot seriously dispute that the Skilling s merits submission raises no substantial questions concerning the government s harmless-error arguments. Judge Higginbotham has already concluded that 14 of Skilling s 19 counts of conviction are likely rendered infirm by the tainted honest-services conspiracy count, see Order, U.S. v. Skilling, No (5th Cir. Dec. 12, 2006), and Skilling s remand papers elaborate the reasons why the government cannot show harmless error as to these 14 counts, see Jeffrey K. Skilling s Opening Br. On Remand From The U.S. Supreme Ct. at (July 28, 2010). 7

9 Case: Document: Page: 9 Date Filed: 07/28/2010 Skilling s remand brief also shows why the remaining five counts cannot stand in light of the Supreme Court s decision. See id. at Given the emergency filing in late 2006 (as well as Skilling s inability to gain access to key closing argument slides, which the government used to illustrate the honestservices theory, including with respect to these five FSA counts), Skilling s arguments as to these five counts were not fully addressed then. Now that the arguments have been fully developed on these five counts, Skilling clearly has raised a substantial question whether the government can show that the legally erroneous honest-services theory did not infect the FSA counts. See id. Skilling is thus entitled to bail under sections 3143(b)(1)(B)(i) or (ii) his appeal is not for the purpose of delay and raises a substantial question of law or fact likely to result in (i) reversal, (ii) an order for a new trial. 2. Even if the Court determines in ruling on this motion that Skilling s five FSA counts might remain unaffected, Skilling has already served enough time in prison as to be released on bail under 18 U.S.C. 3143(b)(1)(B)(iii) or (iv) his appeal is not for the purpose of delay and raises a substantial question of law or fact likely to result in (iii) a sentence that does not include a term of imprisonment, or (iv) a reduced sentence to a term of imprisonment less than the total of the time already served plus the expected duration of the appeal process. 8

10 Case: Document: Page: 10 Date Filed: 07/28/2010 The district court sentenced Skilling to 52 months imprisonment on the five FSA counts with the sentence to run concurrently with one another and consecutively to the other counts of convictions. R: Skilling reported to prison on December 13, 2006, some 44 months ago. On September 22, 2010 just five days after Skilling and the government agree he will file his reply brief on remand in this case Skilling will have served all the time he is required to serve on these five counts. When the time Skilling will have served by that date is combined with the amount of good-time credit he has accrued under the statute, Skilling will have served all 52 months. See 18 U.S.C. 3624(b)(1); Barber v. Thomas, No , Slip Op. at 5 (S. Ct. June 7, 2010). 1 Therefore, even if this Court were to conclude that the five FSA counts were not likely to be reversed, Skilling would still be entitled to bail pending appeal at this time. Judge Higginbotham denied bail in 2006 because any resulting sentence [on those five counts] will likely exceed the expected duration of his appeal. Order, U.S. v. Skilling, No (5th Cir. Dec. 12, 2006). That is no 1 At the end of Skilling s third year of incarceration (December 13, 2009), he had served 1,095 days in prison and accumulated 162 days of good-time credit (54 days per year). At that point, [b]ecause the difference between the time remaining in his sentence and the amount of accumulated credit (i.e., [ ]) is less than a year ([303] days), [2010] is the last year he will spend in prison. Barber, Slip Op. at 18. Further, [2010] will be a partial year of [303] days (the other [62] days of the year being offset by the remainder of the accumulated credit). Under the Barber ratio used to calculate good time in the final, partial year 1.148y = [303] Skilling will have to serve 264 days in See id. September 22, 2010 is the 264th day of

11 Case: Document: Page: 11 Date Filed: 07/28/2010 longer true. At present, Skilling s extant and remaining sentence on the five FSA counts is less than the total of the time already served plus the expected duration of the appeal process. 18 U.S.C. 3143(b)(1)(iv). Conrad Black s successful application for bail captured the reason why the interests at stake unambiguously favor release pending resolution of the remand: Society s interests in seeing Mr. Black complete his sentence will not be frustrated in the least if, after being released on bail, he does not prevail on remand. But the additional time he spends in prison between now and then can never be returned to him. Ex. A at 20. The same is true for Jeffrey Skilling. There is every reason to release him, and no reason not to. We respectfully urge that Skilling be released on bail pending resolution of the remand proceeding. 2 2 Not only can Skilling establish that he will have served his sentence on the five counts at issue before his appeal is decided (something Black could not do), he has additional arguments for release. These additional arguments are not necessary to grant him bail, but as was the case in Black, are other sufficient reasons to do so: Skilling has been a model prisoner, and because his sentence on these five counts would run on September 22, 2010, he would have been entitled as far back as September 2009, to be transferred from federal prison to a halfway house to serve the remainder of his sentence. See 18 U.S.C. 3624(c)(1). Even without halfway-house placement, Skilling would have been allowed to finish the remainder of his term in home confinement beginning in late April See id. 3624(c)(2). According to a specific ruling made by the district court, Skilling was entitled to reduce his sentence by up to one year if he completed a drug-andalcohol counseling program. See R:42177; 28 CFR On Skilling s appeal, this Court reversed the district court s imposition of a four-point financial institution enhancement. See U.S. v. Skilling,

12 Case: Document: Page: 12 Date Filed: 07/28/2010 CONCLUSION For the foregoing reasons, this motion for bail should be granted. As in Black, the case should be remanded to the district court for the limited purpose of immediately determining the conditions of release. See Ex. D. Dated: July 28, 2010 Respectfully submitted, By: /s/ Daniel M. Petrocelli O MELVENY & MYERS LLP WALTER DELLINGER JONATHAN D. HACKER SRI SRINIVASAN 1625 Eye Street, N.W. Washington, D.C RONALD G. WOODS 5300 Memorial, Suite 1000 Houston, Texas O MELVENY & MYERS LLP DANIEL M. PETROCELLI M. RANDALL OPPENHEIMER MATTHEW T. KLINE DAVID J. MARROSO 1999 Avenue of the Stars, 7th Floor Los Angeles, California Telephone: (310) Facsimile: (310) Attorneys for Defendant-Appellant Jeffrey Skilling F.3d 529, 595 (2009). Without considering any other facts, Skilling s adjusted offense level under the Guidelines would decrease from 40 to 36, and the corresponding sentencing range would decrease by 35.6%. If the Court were to apply a proportionate reduction to the 52-month sentence on the FSA counts, Skilling s sentence would be 33.8 months 10 months fewer than the 43-plus months he has already served. The financial-institution-enhancement ground would be only one ground, among many including all new loss calculations under the Guidelines for Skilling to seek a lower sentence on the five FSA counts. Cf. Ex. B at 9. 11

13 Case: Document: Page: 13 Date Filed: 07/28/2010 CERTIFICATE OF CONFERENCE Pursuant to Fifth Circuit Rule 27.4, counsel for Defendant-Appellant Jeffrey Skilling has conferred with counsel for the United States regarding this motion. The government opposes the relief Skilling seeks. Dated: July 28, 2010 Respectfully submitted, By: : /s/ Matthew T. Kline O MELVENY & MYERS LLP WALTER DELLINGER JONATHAN D. HACKER SRI SRINIVASAN 1625 Eye Street, N.W. Washington, D.C RONALD G. WOODS 5300 Memorial, Suite 1000 Houston, Texas O MELVENY & MYERS LLP DANIEL M. PETROCELLI M. RANDALL OPPENHEIMER MATTHEW T. KLINE DAVID J. MARROSO 1999 Avenue of the Stars, 7th Floor Los Angeles, California Telephone: (310) Facsimile: (310) Attorneys for Defendant-Appellant Jeffrey Skilling

14 Case: Document: Page: 14 Date Filed: 07/28/ UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT UNITED STATES OF AMERICA, Plaintiff-Appellee, v. JEFFREY K. SKILLING, Defendant-Appellant. [PROPOSED] ORDER ON JEFFREY K. SKILLING S MOTION FOR RELEASE ON BAIL PENDING FURTHER PROCEEDINGS ON REMAND FROM THE U.S. SUPREME COURT On Appeal From The United States District Court For The Southern District Of Texas, Houston Division Crim. No. H (Lake, J.) Before : Having considered the above-captioned motion, the Court hereby orders that Jeffrey Skilling s motion is GRANTED and he shall be released on bail pending the disposition of his appeal in this Court. This matter shall be REMANDED to the district court for the limited purpose of permitting the district court to determine the conditions of release. SO ORDERED.

15 Case: Document: Page: 15 Date Filed: 07/28/2010 CERTIFICATE OF SERVICE This is to verify that true and correct copies of the following document (Jeffrey K. Skilling s Motion For Release On Bail Pending Further Proceedings On Remand From The U.S. Supreme Court) has been filed electronically and served by both Federal Express and electronic mail on this 28th day of July, 2010 on counsel listed below. J. Douglas Wilson U.S. Attorney s Office 450 Golden Gate Avenue, 11th Floor San Francisco, CA Facsimile: (415) Counsel for Appellee /s/ Matthew T. Kline Matthew T. Kline