Former Enron Chief Executive Officer (CEO) Jeffrey Skilling was sentenced last Monday to 24 years and four months in prison for his role in the corporate accounting scandal that gave its name to an era. The Securities and Exchange Commission (SEC) announced that it would begin distributions to WorldCom investors from the Fair Fund. And while the Enron and WorldCom corporate accounting scandals set the stage for congressional action and passage of the Sarbanes-Oxley Act (SOX) in 2004, criminal prosecutions in these cases have not lessened the SEC’s work load. The current stock options backdating scandal threatens to keep the SEC occupied for years.
U.S. District Court Judge Sim Lake denied bond while Skilling appeals his sentence and ordered him to home confinement with an ankle monitor, the Associated Press reports.
Judge Lake has recommended that Skilling be sent to a federal facility in Butner, North Carolina. There is no parole in federal sentencing, but like Bernie Ebbers, former Chief Executive Officer of WorldCom who is serving a 25-year sentence, Skilling could get two months a year taken off for good behavior.
About $45 million of Skilling’s $60 million in assets will be put in a restitution fund for victims, and the remaining money will go towards Skilling’s legal fees, said Lynn Sark, an attorney for the Enron Corp. Savings Plan and Stock Ownership Plan. Skilling is said to owe his attorneys $30 million, the AP reports.
WorldCom investors will soon receive initial distributions from the $750 million penalty paid by the company to the Securities and Exchange Commission, which was deposited to the Fair Fund under a provision of the Sarbanes-Oxley Act, CFO.com reports.
The distribution of funds to WorldCom investors was cleared when the United States District Court, that is overseeing the SEC litigation against WorldCom, determined a sufficient number of claims had been processed. Approximately 450,000 investors from 110 countries will receive initial distributions from $150 million of the Fair Fund’s assets, CFO.com says.
Allen Morgan, Mayfield Fund managing director and a self-described staunch opponent of Sarbanes-Oxley, thinks that the stock options scandal will get in the way of changes to the law. “Now I think it’s gone way down the list of things anyone running for election wants to talk about,” he said at the Reuters Venture Capital Summit, according to Reuters.
But Treasury Secretary Henry Paulson commented in an interview on Monday from Milwaukee on the burden the law imposes on companies. While the “net result" of stricter reporting standards for executives has been positive, Bloomberg.com reports, Sarbanes-Oxley has also contributed to “an atmosphere that has made it more burdensome for companies to operate. We're going to need to look at how we can address some of these issues," Paulson said. “This is something we're giving a lot of thought to."
All of the recent convictions of executives were made under existing securities laws, Morgan said, according to Reuters. “My point is Bernier Ebbers is going to jail not because of Senators Sarbanes and Oxley but because of Rule 10b (investor fraud), which has been in place for 40 or 50 years.”