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A Worthy Punishment: Justice for Kenneth Lay and Jeffrey Skilling

By Rachel King
June 08, 2006

A Houston jury convicted Kenneth Lay, 64, and Jeffrey Skilling, 52, of 25 counts of insider trading: six counts for Lay and 19 for Skilling. Their crimes helped destroy the multi-billion dollar corporation Enron, leading it into bankruptcy, which cost investors millions of dollars and caused the loss of jobs, investments and pensions for thousands of workers. The collapse of Enron scared Wall Street investors, caused a chill on the stock exchange, led to the collapse of the Arthur Andersen accounting firm and caused lawmakers to pass sweeping changes to corporate practices.    

On September 11, 2006, U.S. District Judge Simeon T. Lake III will sentence the two men for their crimes in what is, almost certainly, the most serious white-collar criminal case in U.S. history.    

In pondering the appropriate punishment for these two giants of business, it is useful to consider traditional sentencing goals in our justice system and to compare their crimes to crimes and punishments awarded to other offenders.    

The traditional goals of punishment are to incapacitate the offender, protect the community, rehabilitate the offender, affirm societal norms and seek retribution. Fines, community service, half-way houses, probation and parole are all possible types of punishment, but prison sentences have now become the norm for most felonies, with very little emphasis placed on rehabilitation. 

Typically, the most serious punishments are reserved for the most serious offenses.  The overwhelming majority of states require either the death penalty or life in prison without the possibility of parole for people convicted of first-degree murder. However, people convicted of drug crimes, which often do not involve direct harm to anyone besides the offender, are also severely punished. Many states have mandatory sentencing laws for drug offenders, which are sometimes modeled after federal law. For example, possession of five grams of crack cocaine or 100 grams of powder cocaine will get you a five-year prison sentence under federal law. 

Most states also have some type of “three-strikes” law, where persons convicted of a third felony are sentenced to either life in prison or extraordinarily long prison terms. This law can sometimes lead to very harsh punishments. Take, for example, the case of a California man who had been convicted of multiple minor thefts. California has two “three-strikes” laws. If you have two prior misdemeanor-theft charges and commit a third misdemeanor, that crime becomes a felony. When the man stole a few videotapes—a misdemeanor—this crime was treated as a felony because of his prior misdemeanor record. Since it was also his third “felony,” he was subjected to the three-strikes law and sentenced to 50 years in prison. He appealed his sentence on the grounds that a 50-year sentence for stealing a few videotapes violated the Eighth Amendment’s prohibition of cruel and unusual punishment. The Supreme Court denied his appeal and upheld the sentence. 

Most people would agree that Lay and Skilling’s crimes were more egregious than the possession of five grams of crack cocaine and more serious than those of a petty thief, even if he was a habitual offender. Indeed, if Lay and Skilling were to be sentenced in the manner that most poor criminal defendants are sentenced, they would likely be subjected to life sentences. 

What sentence will meet the sentencing goals listed above? Do Lay and Skilling need to be incapacitated to protect the rest of the community? Arguably yes, because they caused tremendous harm to many people. In order to reaffirm community norms, they must serve at least some jail time, or it would be grossly unfair to the thousands of people serving time in prison for much less serious offenses. 

Is it possible to rehabilitate Lay and Skilling and, if so, what form of punishment would achieve that goal? Lay and Skilling’s main problem seemed to be an excessive greediness that permeated every aspect of their lives, leading them to believe that they were above the law. The best way to overcome that form of greed is to require them to act on behalf of others. It is particularly important to try to restore what they took from their victims, to the extent that it is possible.

As tempting as it is to support a life sentence for the two men who were so wealthy that they spent $70 million on their defense, one has to wonder if such a sentence would really help the victims of their crime. What if we were to look at the crime through the lens of how these men could be punished in a way that would most restore order to society and benefit their victims?

Clearly, the men are brilliant businessmen. They amassed personal fortunes and lived lifestyles that most people cannot even imagine. How about requiring the two men to start a business or to work at a business and turn over all of their profits and salaries to their victims? In Texas, most prisoners work for pennies an hour. They would be allowed to keep the equivalent of the pennies an hour salary that other prisoners earn, and all of their remaining earnings would go to the victims. Once released from prison, they would be allowed to keep a small amount of their profits to allow them to live modestly (a determination to be made by the sentencing judge, not them), with the remainder of their earnings going to pay back the victims. Unless they were tremendously successful, they would presumably not live long enough to pay back all of the losses they created, but they would be forced to live the rest of their lives in a modest lifestyle, not enjoying the benefits of their wealth. 

Besides this economic restoration, Lay and Skilling should be forced to undergo psychological restoration as well. A sentencing circle is a traditional type of punishment where the entire community gathers together, including the victims and offenders, to discuss the crime and how it has harmed the community. The idea is to restore balance to the community. Therefore, Lay and Skilling should be required to take part in a series of sentencing circles where they sit down with their victims. They need to hear how their greed has harmed others. They need to hear from the parents who won’t be able to send their children to college, or the employee who has worked hard his whole life who won’t be able to retire, or the family members who couldn’t afford medical care—all because they were robbed of money that was rightly theirs. 

Like all criminal defendants, Lay and Skilling have understandably needed to focus their time and attention on defending themselves. Now that they have received the best legal defense that money can buy, they should turn their time and attention to making things right. Of course, they deserve the right to appeal their convictions, but perhaps they should take a lesson from Martha Stewart, another felon convicted of insider trading, and step up to the plate and take their punishment. After all, it is going to take a long time for them to make amends for their wrongdoing. 

Rachel King is a Professor of Law at Howard University School of Law in Washington, D.C.