Enron’s Rex Shelby Sentenced

The last of the seven Enron prosecutions,

Shelby was one of seven former executives first indicted in 2003, all accused of scheming to exaggerate the capabilities of Enron’s broadband network in order to impress analysts and inflate company stock….

Enron, once the nation’s seventh-largest company, filed for bankruptcy protection in December 2001 after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable….

The collapse wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans….

Shelby is also forfeiting $2.6 million and is responsible for completing 230 hours of community service.  Does that make up the loss of retirement savings for suddenly jobless employees who worked for years, even decades, to end up with pennies on their retirement fund dollar?

Enron’s shareholders lost $74 billion in the four years before the company’s bankruptcy ($40 to $45 billion was attributed to fraud).

More than 20,000 of Enron’s former employees in May 2004 won a suit of $85 million for compensation of $2 billion that was lost from their pensions. From the settlement, the employees each received about $3,100.

Not even close.  How far does $3k go these days, anyway?

Of the six others who were also indicted in the case, three received prison sentences ranging from 16 months to 27 months, one was given one year’s probation as well as home confinement, one was acquitted at trial and one had charges dismissed.

Change the scenario.  It’s not corporate fraud anymore.  It’s straight up theft from the retirement fund and of money owed to creditors.  Exact same outcome.  And just for kicks, lets make the perpetrator black.

Do you think he would have gotten probation?  Me neither.

But Mr. Shelby isn’t responsible for the entire downfall of Enron.  And whatever the term, sending him to prison won’t fix anything that was broken by any of his actions or inaction.  On the other hand, that could be said of an awful lot of crimes, no?

I like the idea of a huge amount of community service, actually – and with the cuts to libraries, parks, schools and, well, everything, maybe community service could be used to pick up some of the slack.  No, I don’t want criminals at schools – I’m thinking more along the lines of fixing the playground or working on the landscaping on the weekends.  I know that people doing  community service are currently used to shelve books at the county libraries, which is fantastic.  Everyone benefits.

Plus, anything creative and effective we can do to keep nonviolent criminals out of prison is fine by me – and it saves a lot of money because housing people in prisons and jails is a spendy proposition.  It’s not just food and space, but medical care, building upkeep and overhead, and staffing that need to be taken into consideration.  And that way, offenders who have jobs wouldn’t be forced out of them by their incarceration as is so often the case.  Criminals with no jobs have less of a chance of abiding by the law that criminals with jobs.  That’s not scientific, it’s just common sense.

That said, some crimes, even nonviolent property crimes are so offensive to society and so damaging, that probation just isn’t enough.  Like Bernie Madoff, for example. I don’t know enough about Shelby to know how key he was to the fabricated build-up and violent implosion of Enron to know if he was more or less culpable that the others who went on trial, but I do know that what those executives did was morally shameful and affected tens of thousands of people who could not afford the losses forced on them by the downfall of Enron.  And for that, those responsible do deserve at least a token, symbolic, amount of incarceration.

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15 Comments

  1. Cara Ellison said,

    April 17, 2011 at 6:39 pm

    Well since you admit you don’t know much about Shelby, I forgive the desire to send him to prison. But in actual fact, he was innocent. He fought for eight years, and ran out of money. So he accepted a plea deal to make it go away.

    • April 17, 2011 at 8:49 pm

      I will grant you this – he has a fabulous sense of humor. I read the birthday motion he sent to his lawyer.

  2. Cara Ellison said,

    April 17, 2011 at 6:41 pm

    I’m sorry, I just had to add one thing: Seriously, did you just suggest that he and others serve a token/symbolic amount of incarceration?! How is that even moral?

    • April 17, 2011 at 8:47 pm

      I suggested that people who are guilty and who cause a great deal of damage (ie. far beyond the scope of your average crime) to others spend a small amount of time in the pokey, yes.

      I see on your blog you suggest that, “The people who lost money have nobody to blame but themselves.” I guess we’ll just have to disagree about that.

  3. Evan said,

    April 17, 2011 at 7:00 pm

    I agree with your belief that it is a waste of time for nonviolent criminals to spend time in prison. However, with Rex Shelby, there is a bigger point you could make — the DOJ should not be spending taxpayer money pursuing innocent people.

    Rex Shelby is about as non-Enron as you can get. He came to Enron because his software company was acquired by Enron Broadband Services (EBS). He was at EBS for only about 18 months. He is an engineer who was caught in the Enron witch hunt — he was actually accused of insider trading on the first stock trade of his life! He went to trial in 2005 and was acquitted of 14 of 20 counts — the jury hung on the remaining six. Shelby fought the DOJ for eight years until he ran out of money — he then did a plea deal in which the DOJ took the rest of Shelby’s life savings which they had frozen.

    Rex Shelby is not an example of a “criminal” who got off easy, but an innocent man who fought the DOJ and lost his life savings doing so. For background on this man, check out, for example: http://caraellison.wordpress.com/2011/04/08/the-example-of-rex-shelby/#respond

    • April 17, 2011 at 8:51 pm

      Hi Evan – nice to meet you. I assume you know Cara? Nice to meet you too, Cara. Thanks for your perspective – comment anytime you like.

      You may also note that I edited about three words – it still says exactly what I meant, but perhaps in a less judgmental way.

      • Evan said,

        April 17, 2011 at 9:29 pm

        Hi, I’m new to your blog — I’m glad to see you commenting on Enron. I know Cara Ellison’s blog — she seems to be one of the few who have been skeptical of the Enron prosecutions from the beginning. Tom Kirkendall of Houston’s Clear Thinkers has done a good job also — not much about Shelby, but a lot about other Enron topics, for example: http://blog.kir.com/archives/2011/04/the_fifth_circu_2.asp#comments.

        I followed the EBS trial and prosecutions. It strikes me as a particularly depressing example of DOJ over-reach (to be kind). I encourage you to research it a bit — you will find it interesting, and I bet it will generate some more good topics for blog posts!

      • Evan said,

        April 17, 2011 at 10:06 pm

        Spinny Liberal shows why posts like yours are (or, at least, can be) important. The people who comment on your posts are likely going to do less research than you. If you attach the “criminal” label to someone like Shelby, a person who most people, including even prosecution witnesses, say is innocent and should not have been indicted, then you invite crack-pot comments. Everybody has a right to their opinion, of course — however, a statement without factual backup is not an opinion — it is simply noise.

  4. April 17, 2011 at 9:54 pm

    I personally would like to see him do home care for some of the retirees he screwed out of their life savings.

    • Cara Ellison said,

      April 17, 2011 at 9:58 pm

      He didn’t screw over any retirees. If you disagree, give me a name. Tell me who he screwed over. And do you even have a clue what he was accused of?

      As someone who has “liberal” in their name, you’d think you’d be a little more openminded about him and indeed all of Enron.

      • April 17, 2011 at 11:06 pm

        I’m not sure they were retirees so much as employees hoping to retire at one point.

        KENNETH LAY and Jeffrey Skilling, the former chairman and chief executive of Enron, face losing their combined personal wealth in a $2 billion lawsuit after a surprise legal victory for more than 20,000 of their former employees.

        Enron staff were yesterday awarded $85 million to compensate them partly for some $2 billion that was wiped out of their share accounts and pension funds when the energy company collapsed in 2001.

        The award was made as a partial settlement of a class action lawsuit on behalf of the employees. The workers will receive about $65 million, or just $3,100 each, however, once lawyer’s fees of about 20 per cent of the award are paid and other costs are taken into account.

        It appears that you believe there was no wrongdoing from any executives at Enron at all (correct me if I am wrong – that’s the impression I got from <2 minutes of blog skimming), so there's probably nothing anyone can say to convince you otherwise. I have no doubt that these guys are quite personable and very very intelligent, but (and I say this generally because frankly I’m just not that interested in the specifics of who did what) the Enron Empire simply did not fall as the result of too much honesty and fair dealing. Good luck with your book, though – I’m sure it will be an interesting read.

      • Evan said,

        April 18, 2011 at 9:11 am

        Runaway Lawyer, I like your writing! But, darn, I just wish you were more skeptical of the DOJ version of events. Nobody claims that Enron went bankrupt because of an excess of honesty, but even the DOJ does not claim that Enron went bankrupt because of criminal activity!

        If you are not interested in exploring “who did what”, then that implicitly means that you accept the DOJ version of Enron. But if our bloggers cannot be curious and skeptical, then who will be?

        So far the comments on your blog have not been as anti-Enron rabid as most. This is a good start! I suspect that the free lunch that the DOJ’s Enron Task Force has been given in the history of the Enron prosecutions is slowly coming to an end.

  5. April 17, 2011 at 11:28 pm

    Enron Retirees Criticize Cash-Outs

    Wasn’t too hard to find.

    • Leo said,

      April 18, 2011 at 8:19 am

      Good start, but now continue digging. You will find that not a single count against any of the Enron executives relates to the specific issue in that article. You will also discover that Rex Shelby is one of the people who lost all the money he had put in an Enron-managed retirement account when Enron went bankrupt. I am simply suggesting that you might find it worthwhile to be more skeptical of articles written during the height of the anti-Enron paranoia.

  6. lbwoodgate said,

    April 18, 2011 at 8:39 am

    “It’s not corporate fraud anymore. It’s straight up theft from the retirement fund and of money owed to creditors.”

    Based on the comments of some on this blog I’m not sure this fits Ron Shelby but it most certainly does for others, especially those at Goldman-Sachs and other financial giants who risked people’s money on bogus financial products, bringing this economy to its knees two years ago and creating the 10% unemployment and massive home foreclosures.


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