Lay and Skilling Convicted – Now What?

Lay and Skilling have been found guilty of multiple crimes that contributed to the fall of Enron and the loss of hundreds of millions of dollars of shareholder value.

How much time should these men spend in prison?

I know little about the federal sentencing guidelines. But I think back to Anna Ayala, who got nine years for saying that she found a finger in the chili she purchased at Wendy’s when in fact she planted the finger. (Prior posts.) If that sentence was fair – and I don’t think that it was – then each of these men deserve to spend the rest of their lives in prison.

In the last 24 months Wendy’s stock price has increased 50%. It has materially outperformed its peer group. (See table on page 26 of proxy statement.) While undoubtedly the false report by Alaya cost the company some sales, the harm caused by her conduct was but a blip on the Wendy’s radar screen and did not cause the company any long term harm. And while it is important that consumers have confidence in the integrity of our nation’s food chain, the report of finding a finger in chili is less of the threat to the public’s sense of security than a false allegation that an entire shipment of a certain substance has been contaminated.

What Lay and Skilling did was much, much worse. Their actions contributed to put 5600 employees out of work (many of whom lost significant money from their investment in Enron stock), cost American pension funds over $2.0 billion, and eviserated a company with a market value of $60 billion. Their conduct also threatened the public’s view of the entire stock market. If the criminal justice system is perceived to be fair they must pay a heavy price for their conduct.

Please don’t give me that crap that Lay and Skilling have already paid a heavy price. To be sure, they have been embarrassed around the world and will be forever known as leaders in the Corporate Crooks Hall of Shame. It is the loss of liberty that is the real punishment – just like it was for Alaya.

The judge must set an example – an example that will ring through every walnut-paneled board room in the country and inside every corporate jet. A failure to do so sends a clear message that there are two classes of justice in this country even in the the area of economic crimes – one for poor individuals who extort money, and another for executives who lie, cheat and steal for personal gain. As a nation we cannot afford to send that message.

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