06-20885

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

UNITED STATES OF AMERICA, Plaintiff-Appellee,

v.

JEFFREY K. SKILLING, Defendant-Appellant.

DEFENDANT-APPELLANT JEFFREY K. SKILLING’S PETITION FOR REHEARING EN BANC

On Appeal From The United States District Court For The Southern District Of Texas, Houston Division

Crim. No. H-04-25 (Lake, J.)

O’MELVENY & MYERS LLP WALTER DELLINGER JONATHAN D. HACKER MEAGHAN MCLAINE ANTON METLITSKY 1625 Eye Street, N.W. Washington, D.C. 20006 RONALD G. WOODS 5300 Memorial, Suite 1000 Houston, Texas 77007

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 90067 Telephone: (310) 553-6700 Facsimile: (310) 246-6779

ATTORNEYS FOR DEFENDANT-APPELLANT JEFFREY K. SKILLING

CERTIFICATE OF INTERESTED .PERSONS

Pursuant to S'^'^ C^^^. R. 28.2.1, the undersigned counsel for Defendant-

Appellant Jeffrey Skíllíng certifies that the following persos and entities have an

interest ín the outcome of this appeal, No. 0^-20885:

1. United Slates of America, Plaintiff Appellee;

2. Department of Justice, Counsel for PlaíntíffAppellee (Steven Tyrrell,

Joseph Douglas Wilson);

3. Jeffrey Skíllíng, Defendant-Appellant;

O'Melveny & Myers LLP, Counsel for Defendant-Appellant Jeffrey Skíllíng

(Daniel Petrocelli, Walter Dellinger, Randall Oppenheimer, Jonathan Hacker,

Matthew Kline, David Marroso, Meaghan McLaíne, and Anton Meditsky);

5. Ronald Woods, Counsel for Defendant-Appellant Jeffrey Skíllíng.

Respectfully submitted,

Daníel M. PetrocellíDefeиdánt-Appella ττ i Jeffrey Skíl Σing

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RULE 35(b)(1) STATEMENT

Pursuant to Federal Rule of Appellate Procedure 35(b)(1) and this Court’s

Rule 35.2.2, counsel states that the panel decision conflicts with decisions of this

Court, and consideration by the full Court is therefore necessary to secure and

maintain uniformity of its decisions. Moreover, as noted in the brief that follows,

the panel decision further conflicts with authoritative decisions of the Supreme

Court and other Circuits.

1. The panel decision’s holding that a defendant may be convicted of

honest-services fraud under 18 U.S.C. § 1346 when his acts were committed solely

to advance the stated interests of his employer, and not his personal interests,

conflicts with this Court’s precedents in U.S. v. Howard, 517 F.3d 731 (5th Cir.

2008); and U.S. v. Brown, 459 F.3d 509 (5th Cir. 2006). The decision also

conflicts with decisions of other Circuits holding that proof of “private gain” is

required for an honest-services fraud conviction, infra at 11 n.5, and with decisions

of the Supreme Court, this Court, and other Circuits holding that the boundaries of

criminal statutes must be clearly defined and not subject to uncertain, vague, and

evolving common-law standards, infra at 3-4, 10-11.

2. The panel decision’s holding that the district court erred in failing to

presume prejudice among the Houston venire generally, but that the Enron Task

Force nonetheless met its heavy burden of rebutting the presumption, despite

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numerous openly hostile comments made by many of the seated jurors toward

defendants, conflicts with, inter alia, Irvin v. Dowd, 366 U.S. 717 (1961); Pamplin

v. Mason, 364 F.2d 1 (5th Cir. 1966); U.S. v. Nell, 526 F.2d 1223 (5th Cir. 1976);

U.S. v. Davis, 583 F.2d 190 (5th Cir. 1978); Mayola v. Alabama, 623 F.2d 992 (5th

Cir. 1980); U.S. v. Hawkins, 658 F.2d 279 (5th Cir. 1981); U.S. v. Chagra, 669

F.2d 241, 252 (5th Cir. 1982); U.S. v. Harrellson, 754 F.2d 1153 (5th Cir. 1985);

and U.S. v. Beckner, 69 F.3d 1290 (5th Cir. 1995).

3. The panel decision’s holding that the jury could be allowed to determine

the materiality of certain alleged false statements (particularly on Counts 23 and

24), as well as its affirmance of the district court’s refusal to give a specific

instruction on materiality under the securities fraud laws, conflicts with this

Court’s decision in Rosenzweig v. Azurix Corp., 332 F.3d 854 (5th Cir. 2003), and

with decisions of many other Circuits, holding that statements of “puffery” are

immaterial as a matter of law. As has already been noted by commentators, the

panel’s materiality analysis casts the state of both criminal and civil securities law

into doubt.

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TABLE OF CONTENTS

Page

I. THE SCOPE OF THE “HONEST SERVICES” FRAUD

STATUTE.......................................................................................................2

II. SKILLING’S RIGHT TO AN IMPARTIAL JURY....................................12

A. Skilling Did Not Waive His Objections To Any Seated Juror ..........13

B. The Task Force Did Not Rebut The Presumption Of Prejudice ..........4

III. MATERIALITY INSTRUCTIONS AND

COUNTS 23 AND 24...................................................................................20

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TABLE OF AUTHORITIES Page(s)

CASES

City of Monroe Employees Ret. Sys. v. Bridgestone Corp., 399 F.3d 651 (6th Cir. 2005) ................................................................................22

Fields v. Brown, 503 F.3d 755 (9th Cir. 2007) ................................................................................20

Grossman v. Novell, Inc., 120 F.3d 1112 (10th Cir. 1997) ............................................................................22

Hillson Partners L.P. v. Adage, Inc., 42 F.3d 204 (4th Cir. 1994) ..................................................................................22

In re MCI WorldCom, Inc. Sec. Litig., 191 F.Supp.2d 778 (S.D. Miss. 2002) ..................................................................22

In re Splash Tech. Holdings Inc. Sec. Litig., 160 F.Supp.2d 1059 (N.D. Cal. 2001)..................................................................22

Irvin v. Dowd,, 366 U.S. 717 (1961) .............................................................................................20

Krim v. BancTexas Group, Inc., 989 F.2d 1435 (5th Cir. 1993) ..............................................................................24

Mayola v. Alabama, 623 F.2d 992 (5th Cir. 1980) ....................................................................12, 14, 18

McNamara v. Bre-X Minerals, Ltd., 57 F.Supp. 2d 396 (E.D. Tx. 1999) ......................................................................24

Nathenson v. Zonagen Inc., 267 F.3d 400 (5th Cir. 2001) ................................................................................22

Pamplin v. Mason, 364 F.2d 1 (5th Cir. 1966) ....................................................................................14

Presidio Enters., Inc. v. Warner Bros. Distrib. Corp., 784 F.2d 674 (5th Cir. 1986) ................................................................................25

Raab v. Gen. Physics Corp., 4 F.3d 286 (4th Cir. 1993) ....................................................................................22

Rosenzweig v. Azurix Corp., 332 F.3d 854 (5th Cir. 2003) ................................................................................21

vi

San Leandro Emergency Med. Group Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801 (2d Cir. 1996) ...................................................................................22

Smith v. Phillips, 455 U.S. 209 (1982) .............................................................................................18

Southland Sec. Corp. v. INSpire Ins. Solutions Inc., 365 F.3d 353 (5th Cir. 2004) ................................................................................22

U.S. v. Beckner, 69 F.3d 1290 (5th Cir. 1995) ................................................................................18

U.S. v. Black, 530 F.3d 596 (7th Cir. 2008) ................................................................................11

U.S. v. Bloom, 149 F.3d 649 (7th Cir. 1998) ................................................................................11

U.S. v. Brown, 459 F.3d 509 (5th Cir. 2006) ........................................................................3, 5, 11

U.S. v. Brumley, 116 F.3d 728 (5th Cir. 1997) ............................................................................3, 11

U.S. v. Chagra, 669 F.2d 241 (5th Cir. 1982) ..........................................................................15, 18

U.S. v. Colabella, 448 F.2d 1299 (2d Cir. 1971) ...............................................................................18

U.S. v. Davis, 583 F.2d 190 (5th Cir. 1978) ................................................................................17

U.S. v. DeVegter, 198 F.3d 1324 (11th Cir. 1999) ............................................................................11

U.S. v. Frost, 125 F.3d 346 (6th Cir. 1997) ................................................................................11

U.S. v. Gray, 96 F.3d 769 (5th Cir. 1996) ....................................................................................6

U.S. v. Harrellson, 754 F.2d 1153 (5th Cir. 1985) ........................................................................12, 15

U.S. v. Hawkins, 658 F.2d 279 (5th Cir. 1981) ................................................................................16

vii

U.S. v. Howard, 517 F.3d 731 (5th Cir. 2008) ..............................................................................5, 9

U.S. v. Lanier, 520 U.S. 259 (1997) .......................................................................................10, 11

U.S. v. McVeigh, 153 F.3d 1166 (10th Cir. 1998) ............................................................................14

U.S. v. Murphy, 323 F.3d 102 (3d Cir. 2003) .................................................................................11

U.S. v. Nell, 526 F.2d 1223 (5th Cir. 1976) ..............................................................................17

U.S. v. Nelson, 277 F.3d 164 (2d Cir. 2001) .................................................................................17

U.S. v. Panarella, 277 F.3d 678 (3d Cir. 2002) .................................................................................11

U.S. v. Peterson, 101 F.3d 375 (5th Cir. 1996) ................................................................................23

U.S. v. Polchemi, 219 F.3d 698 (7th Cir. 2000) ................................................................................17

U.S. v. Rybicki, 354 F.3d 124 (2d Cir. 2003) .......................................................................3, 10, 11

U.S. v. Santos, 128 S.Ct. 2020 (2008) ............................................................................................3

U.S. v. Sawyer, 239 F.3d 31 (1st Cir. 2001) ..................................................................................11

U.S. v. Skilling, Crim. No. H-04-025-02, 2006 WL 3030721 (S.D. Tex. Oct. 23, 2006)................5

U.S. v. Skilling, No. 06-20885 (5th Cir. Dec. 12, 2006) ..................................................................5

U.S. v. Sorich, 523 F.3d 702 (7th Cir. 2008) ................................................................................11

U.S. v. Turner, 465 F.3d 667 (6th Cir. 2006) ................................................................................11

U.S. v. Vinyard, 266 F.3d 320 (4th Cir. 2001) ................................................................................11

viii

U.S. v. Walker, 490 F.3d 1282 (11th Cir. 2007) ............................................................................12

U.S. v. Welch, 327 F.3d 1081 (10th Cir. 2003) ............................................................................11

Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083 (1991) ...........................................................................................23

STATUTES, RULES AND REGULATIONS

Anne M. Rodgers et al., Skilling and the Future of Securities Fraud Cases, LAW360 (Jan. 8, 2009).............................................................23, 25

ISSUES PRESENTED FOR REVIEW

I. Whether an “honest services” fraud conviction may be affirmed when the defendant acted to advance his employer’s objectives and not for his own personal gain.

II. Whether the panel’s conclusion that the trial court erred in failing to

presume prejudice among jurors in this case requires reversal of the convictions, especially given the openly hostile views expressed by jurors actually seated in the case.

III. Whether statements deemed immaterial puffery as a matter of law in the

civil fraud context may nonetheless be the predicate for a criminal fraud conviction, and whether a criminal jury must be given specific instructions on the meaning of materiality for purposes of securities fraud law.

STATEMENT OF THE CASE AND THE FACTS

This case is perhaps the most prominent white-collar action case ever

prosecuted. Jeffrey Skilling, the former CEO of Enron, was accused of taking part

in a conspiracy to overstate Enron’s financial health. Skilling was not accused of

self dealing or other acts of disloyalty, stealing money from Enron, causing

Enron’s bankruptcy, or engaging in a cover-up. Br.16-21.1 The Enron Task Force,

which prosecuted Skilling, admitted as much, arguing he “loved” Enron. Id.

Nonetheless, Skilling was convicted of one count of conspiracy, 12 counts of

securities fraud, five counts of false statements, and one count of insider trading,

1 All emphases in this brief have been added unless otherwise noted. Citations

to Skilling’s opening brief on appeal are to “Br.” Citations to his reply are to “Reply.” Citations to the panel slip opinion below are to “Op.” All other citation conventions are explained in footnote 1 of Skilling’s opening brief.

2

for making public statements about Enron and approving controversial business

transactions that government cooperators argued, in hindsight, were improper. Id.

Skilling is currently serving a 24-year prison sentence. A panel of this Court

affirmed Skilling’s convictions, but vacated his sentence because the district court

misapplied a sentencing guideline factor. As shown below, the affirmance of

Skilling’s convictions rests on several pivotal errors of law, as to which the opinion

is in direct conflict with multiple precedents of this Court and others. Additional

facts relevant to this petition are set forth in the argument as appropriate.

I. THE SCOPE OF THE “HONEST SERVICES” FRAUD STATUTE

The panel’s opinion, which affirmed Skilling’s conviction for conspiracy to

commit honest-services wire-fraud, suggests, but does not fully expose, the

significant conflict—not only within this Circuit, but among the Circuits

generally—over what it means to commit this crime. This case presents the

compelling need to clarify the scope of 18 U.S.C. § 1346, at least as it applies

within this Circuit, because Skilling is not accused of bribery, self-dealing, or any

conduct contrary to his employer’s stated objectives. Br.17-18, 68-71. Thus, the

case purely presents the fundamental question at the heart of the honest-services

statute and controversy surrounding it, viz., whether a conviction for the crime

requires an instruction and proof that the defendant committed wrongful acts for

his own personal gain and not to further his employer’s objectives. As explained

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below, the answer to that question is yes, as many precedents of this Court

recognize, in conflict with the panel opinion.

1. In U.S. v. Brown, 459 F.3d 509 (5th Cir. 2006), a panel of this Court

clarified the scope of “honest services” fraud under § 1346, in a case involving one

of the same Enron-related transactions for which Skilling was convicted (the

“Nigerian Barges” deal). Like many other courts, Brown recognized that § 1346 is

a “facially vague criminal statute” because “honest services fraud” is a “vague and

amorphous phrase” with “not a hint of ... definition” in the statute’s text, 459 F.3d

at 520-21 & n.10; see U.S. v. Brumley, 116 F.3d 728, 733 (5th Cir. 1997) (en

banc); U.S. v. Rybicki, 354 F.3d 124, 155-65 (2d Cir. 2003) (Jacobs, J., dissenting).

To avoid running afoul of the constitutional requirement that criminal statutes

clearly demarcate the line between legal and illegal conduct, U.S. v. Santos, 128

S.Ct. 2020, 2025 (2008), Brown sought to identify, from prior honest-services case

law, a clear limit to the reach of honest-services fraud cognizable under the statute,

459 F.3d at 523. Reviewing precedents such as Brumley, Rybicki, and others,

Brown held that the essence of honest-services fraud is the intentional commission

of a self-dealing or similar act that puts the employee’s interests ahead of the

employer’s. 459 F.3d at 521-22. Prior cases, Brown emphasized, “can generally

be characterized in terms of either bribery and kickbacks or self-dealing,” as

opposed to conduct that may be “dishonest” but is nevertheless “associated with

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and concomitant to the employer’s own immediate interest.” Id. Synthesizing the

case law, Brown set forth a clear rule defining the limits of honest-services fraud:

[W]here [1] an employer intentionally aligns the interests of the employee with a specified corporate goal, where [2] the employee perceives his pursuit of that goal as mutually benefitting him and his employer, and where [3] the employee’s conduct is consistent with that perception of the mutual interest, such conduct is beyond the reach of the honest-services theory of fraud as it has been hitherto applied.

Id. at 522. Applying that rule, Brown reversed convictions based on the theory that

the defendants engaged in the alleged unlawful acts—and thereby breached their

fiduciary duties—“in pursuit of what they understood to be a corporate goal.” Id.

Brown’s specification of this clear line between illegal and legal conduct

under § 1346 rests on two crucial premises. The first is the constitutional rule that

a federal criminal statute must be defined by a clear and comprehensible boundary,

not by vague, evolving common-law principles. Id. at 523. That is why Brown

rejected the Task Force’s submission that a “knowing fiduciary breach,” i.e., any

unlawful conduct, alone suffices to show the “divergence” between the employee’s

acts and the employer’s interests. Id. at 522. The second premise is that

application of the honest-services fraud statute is not necessary to punish criminal

behavior by corporate employees; other criminal statutes, including “accounting

fraud and securities fraud” laws, already exist to address such behavior. Id. at 522-

23 & n.13. Brown holds only that criminal conduct, when committed to further a

corporate objective, “is not a federal crime under the honest-services theory of

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fraud specifically.” Id. at 523 (emphasis in original). Rather, honest-services

fraud is limited to those illegal acts intended “to promote [the employee’s] own

interests instead of those of his employer.” U.S. v. Howard, 517 F.3d 731, 735

(5th Cir. 2008) (relying on Brown to reverse convictions in another Enron case).

2. The result the panel opinion reached here conflicts directly with Brown,

as recognized by the district court and Judge Higginbotham, in their rulings on bail

pending appeal.2 Like the employees in Brown, and as the Task Force concedes,

Br.71, Skilling at worst “breached a fiduciary duty in pursuit of what [he]

understood to be a corporate goal,” Brown, 459 F.3d at 522. The panel opinion

does not suggest otherwise. In other words, all agree that if Skilling were subject

to Brown’s rule—i.e., that § 1346 does not apply to criminal acts committed solely

in pursuit of the employer’s interest—then he could not be convicted under § 1346.

The panel only avoids that result by holding that Brown does not apply to

executives who direct subordinates to act unlawfully. According to the panel,

Brown does nothing more than establish a narrow “following orders” exception to

§ 1346 for junior employees. Op.20-21. Because Skilling was not a junior

employee “specifically” directed to commit fraud, he was not entitled to the limited

Brown defense, and his conviction could be affirmed merely because he committed

2 U.S. v. Skilling, No. 06-20885 (5th Cir. Dec. 12, 2006) (“serious frailty” with

14 of 19 counts in light of Brown); U.S. v. Skilling, Crim. No. H-04-025-02, 2006 WL 3030721, at *2 (S.D. Tex. Oct. 23, 2006) (conspiracy count likely infirm).

6

a “material breach of a fiduciary duty imposed under state law.” Op.22-23.

That holding misreads and conflicts with Brown. In construing Brown as

merely establishing a limited § 1346 defense for employees directed to commit

fraud, the panel opinion relies entirely on one phrase within a single footnote in

Brown. After exhaustively reviewing honest-services case law and drawing from it

the clear liability definition stated above, the Brown footnote explains why U.S. v.

Gray, 96 F.3d 769 (5th Cir. 1996)—the “one precedent that lies outside the bulk of

honest-services case law,” 459 F.3d at 522 n.13—does not affect that definition.

Gray sustained convictions for honest-services fraud by college basketball

coaches who fraudulently established the academic eligibility of basketball recruits.

Although Gray was “arguably similar” to Brown in that the coaches “belie[ved]

that their scheme benefitted the university,” Brown explained that Gray was

“distinguishable both factually and legally.” Id. It was distinguishable factually,

because the coaches had only their “own belief” that they were benefitting the

university; nobody gave them any indication their fraud was good for the school.

In Brown, the employees had two reasons for “understanding that Enron had a

corporate interest in, and was a willing beneficiary of, the scheme”: Enron’s

“corporate incentive policy” rewarded efforts to promote Enron’s stock value; and

there was “senior executive support for the deal,” which was “sanctioned by”

Enron CFO Andrew Fastow. Id. Gray was distinguishable legally, Brown

7

emphasized, because “the Gray court did not appear to have before it the limiting

arguments presented here based on Rybicki (decided years after Gray).” Id.

Brown “limit[ed Gray to] its facts,” because if Gray were to apply to uphold the

convictions in Brown, it “would expand honest-services fraud”:

to reach all manner of accounting fraud and securities fraud, which have not generally been prosecuted as honest-services fraud and are heavily regulated under other statutes…. The Government’s desire to build on Gray crystallizes the danger we face of defining an ever-expanding and ever-evolving federal common-law crime. Id.

The Skilling panel’s treatment of Gray effectively overrides and rewrites

Brown. Whereas Brown draws from all the § 1346 precedents a clear and

generally applicable limitation on the statute, and then treats Gray as outside the

mainstream of § 1346 case law and thus limited to its facts, the panel relies on

Gray as establishing the generally governing rule, then treats Brown as a very

limited defense for certain employees based entirely on one factual observation in

Brown’s footnote discussing Gray.

Nor is the panel’s heavy emphasis on that footnote—that Fastow supported

the deal—consistent with Brown’s analysis. The panel, in fact, literally rewrites

the holding of Brown, treating its cursory reference to Fastow’s approval as if that

approval were actually an essential requirement of the rule:

Given the gloss this passage places on Gray, we can distill the holding in Brown to be the following: when an employer (1) creates a particular goal, (2) aligns the employee’s interest with the employer’s interest in achieving that goal, and (3) has higher-level management sanction

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improper conduct to reach that goal, then lower level employees following their boss’s direction are not liable for honest-service fraud.

Op.20-21. Comparing element (3) in this description of Brown to element (3) in

Brown’s description of its holding—“the employee’s conduct is consistent with

that perception of the mutual interest”—exposes the conflict. The panel treats

supervisory sanction as if it were a necessary component of Brown and the central

factor that led to reversal there, when it was not. If it had been, the opinion would

have been much simpler, and Fastow’s approval would have been emphasized

throughout the analysis. Instead it is mentioned only once in a sentence fragment

buried in a footnote, in the course of distinguishing an inapposite and outdated case.

Plainly, the point of that fragmentary reference to Fastow’s approval was not

to specify a general holding that acts of securities fraud will fall outside § 1346

only when sanctioned by senior management. It was instead to show—along with

Enron’s stock-performance-based compensation—why the Enron executive in

Brown had a concrete basis to believe his alleged unlawful acts were consistent

with Enron’s objectives. (A concrete basis that Skilling had as well, as he was

subject to the same compensation incentives, Br.69, and most of the transactions

for which the Task Force argued he was liable, were “sanctioned” by Enron’s

Board, e.g., id. at 26, 32, 45.) These two factors were simply part of what made

the Brown employees unlike the Gray coaches, who had no indication from their

employer that academic fraud was consistent with the university’s mission.

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The panel opinion conflicts with Brown in other material respects. It ignores

Brown’s legal distinction of Gray—i.e., Gray was decided before Rybicki and its

holding that honest-services fraud prosecutions require self-dealing. In addition,

the panel’s holding that honest-services fraud is established merely by any

common-law fiduciary breach (except in cases of “following orders”), Op.23, is in

direct conflict with two of Brown’s square holdings: not all fiduciary breaches are

honest-services fraud; and criminal liability under § 1346 cannot be defined solely

by vague and evolving common-law standards, 459 F.3d at 522-23.

3. The panel opinion also conflicts with this Court’s decision in Howard,

which the panel opinion ignores, despite its reliance on the rule that panel opinions

may not conflict. Op.21. A jury convicted Howard of honest-services fraud before

Brown was decided. As in Brown, the “Braveheart” transaction at issue was part

of the case against Skilling. Unlike in Brown, however, Howard was not a “junior

employee” taking orders, but the CFO of Enron Broadband Services. Howard, 517

F.3d at 731. The indictment emphasized that Howard was the “the senior EBS

executive who supervised all aspects” of the transaction. Sixth Superseding Indict.

¶ 4. Even though Howard allegedly ordered “Enron employees who reported to

him to” engage in fraud, id. ¶ 13, his convictions were vacated in light of Brown.

Citing Brown, this Court held his convictions were invalid because § 1346 applies

only when “the employee seeks to promote his own interests instead of the

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interests of the employer.” 517 F.3d at 735. Howard did not suggest that Brown

established a narrow “following orders” defense for junior employees; nor did it

suggest Howard was liable because he directed the fraud, or was a CFO. Howard

and Skilling cannot be squared: if Skilling is correct, Howard is not and vice versa.3

4. After Skilling, the only “rule” one can discern from reading this Court’s

conflicting opinions is that an employee cannot be convicted for honest-services

fraud if the conduct charged was in furtherance of the corporate interest (Brown),

unless the employee is a senior executive (Skilling), except, apparently, in certain

unspecified circumstances (Howard). On top of the uncertainty these three cases

engender (how senior must the order-giver be?, how specific must the order be?,

etc.), defendants are faced with the even more difficult task (that Brown had

mitigated) of determining what acts constitute fiduciary breaches under state law,

which in turn begs the threshold question of which state’s laws apply. In short, it

is impossible for any employee to know under existing circuit precedent what

conduct will subject him to prosecution for honest-services fraud. This uncertainty

is untenable in all events, but it is especially so given the fundamental due process

rule “that no man shall be held criminally responsible for conduct which he could

not reasonably understand to be proscribed.” U.S. v. Lanier, 520 U.S. 259, 265

3 The panel opinion in Skilling also conflicts with Rybicki, which Brown

followed. Rybicki held that § 1346 does not apply to acts committed to advance the corporate interest. Following orders had nothing to do with the analysis; indeed, the Rybicki defendants were a law firm’s named partners. 354 F.3d at 127.

11

(1997). Indeed, if Brown, Howard, and Skilling all remain standing, then § 1346

gives no meaningful notice of the conduct it criminalizes and must be invalidated

as unconstitutionally vague. Rybicki, 354 F.3d at 156 (Jacobs, J., dissenting).4

5. Finally, Brown is not the only case to recognize the grave need to

determine “the outer boundary of this facially vague criminal statute.” 459 F.3d at

520. To save the statute from invalidation for vagueness, courts “have felt the

need to find limiting principles” to govern its scope. U.S. v. Sorich, 523 F.3d 702,

707 (7th Cir. 2008). This effort has resulted in a cacophony of approaches. The

circuits have split, for example, on whether a showing of “private gain” is required

for conviction,5 whether economic harm is required,6 and whether a prerequisite

for honest-services fraud is “breach of a state-owed fiduciary duty.”7 These

4 At a minimum, the Task Force should have sought an instruction requiring the

jury to find that Skilling was giving orders, not following or ignorant of them. The panel assumes Skilling gave orders, but if Skilling had fair notice of what the panel now says § 1346 means, he could have shown his acts were subject to direction by Enron’s Board. Skilling also could have relied on the Task Force’s trial theory that he deliberately blinded himself to the criminal acts in question, which would be inconsistent with a theory that he specifically directed the acts. Reply 27 n.6.

5 Compare, e.g., U.S. v. Bloom, 149 F.3d 649, 655 (7th Cir. 1998) (required); U.S. v. Turner, 465 F.3d 667, 676 (6th Cir. 2006); U.S. v. DeVegter, 198 F.3d 1324, 1327-28 (11th Cir. 1999), with U.S. v. Welch, 327 F.3d 1081, 1107 (10th Cir. 2003) (not required); U.S. v. Panarella, 277 F.3d 678, 691-92 (3d Cir. 2002).

6 Compare, e.g., U.S. v. Vinyard, 266 F.3d 320, 326-27 (4th Cir. 2001) (required); with U.S. v. Black, 530 F.3d 596, 600 (7th Cir. 2008) (not required); U.S. v. Welch, 327 F.3d 1081, 1104-05 (10th Cir. 2003).

7 Compare, e.g., U.S. v. Murphy, 323 F.3d 102, 116-17 & n.5 (3d Cir. 2003) (required); Brumley, 116 F.3d at 734, with U.S. v. Sawyer, 239 F.3d 31, 41-42 (1st Cir. 2001) (not required); U.S. v. Walker, 490 F.3d 1282, 1299 (11th Cir. 2007).

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conflicts make clear that defining the scope of honest-services fraud is a question

of exceptional and ongoing importance. FED. R. APP. P. 35(a)(2).

II. SKILLING’S RIGHT TO AN IMPARTIAL JURY

After examining the “unique circumstances of this case,” “pervasive bias,”

“inflammatory pre-trial publicity,” and “non-media prejudice” that the district

court “failed to account for,” the panel reached the “rare[],” and yet profoundly

correct, conclusion that Skilling was entitled to the “presumption” that jurors in

Houston had prejudged his guilt. Op.43-46. This finding means that bias “so

saturated” Houston “as to render it virtually impossible to obtain an impartial

jury.” Mayola v. Alabama, 623 F.2d 992, 997 (5th Cir. 1980). Given this ruling,

Skilling’s convictions only could be affirmed if the Task Force met its “very

difficult” burden of proving that each seated juror was “impartial.” Id. at 1001.

The Task Force was not required to meet this burden, nor could it on this record.

The panel nevertheless affirmed Skilling’s convictions, making two critical

errors. First, it erroneously held that Skilling waived his challenge to all but one of

the seated jurors (Juror 11), then compounded this error by holding that Juror 11

was impartial. Second, it turned the law of presumed prejudice on its head, forcing

Skilling to prove that each juror was prejudiced, when it was the Task Force’s

burden to show that the trial court had conducted a “searching” voir dire, U.S. v.

Harrellson, 754 F.2d 1153, 1160 (5th Cir. 1985), that yielded 12 unbiased jurors.

13

A. Skilling Did Not Waive His Objections To Any Seated Juror.

Despite the Task Force’s claim that Houston had “4.7 million” citizens from

which to draw 12 fair jurors, the district court imposed a voir dire that took five

hours and screened 46 veniremen: only eight more than the minimum. Br.158.

From these 46 came the actual 12, only one of whose views the panel would

consider (Juror 11), even though of the 12: nine were familiar with the case; nine

had connections to Enron’s collapse; three were “angry”; and three had prejudged

defendants and doubted their ability to be fair.

In evaluating whether the Task Force met its burden of showing that all 12

jurors were impartial, the panel held that Skilling “failed to challenge for cause all

but one of the jurors” and, therefore, “waived most of his argument.” Op.49-50, 42.

As the record shows, however, Skilling challenged the entire panel of 12; made

additional objections to seven; sought, but was wrongly denied, additional

peremptory challenges; and objected to not being able to voir dire each juror fully.

Reply 119 n.63; Trial Tr. 3 (Jan. 30, 2006; 4:48 p.m.); R:14686-99; see Skilling’s

Pet. for Panel Rehearing 2. These objections were made while these jurors were in

the jury box; before the district court dismissed them for the day; before it swore

them in; before it instructed them; and before counsel made opening statements. Id.

Whether or not it merely overlooked this portion of the record, the panel

erroneously asserted that Skilling kept “an ace up his … sleeve by acquiescing to

14

jurors at trial and then arguing error on appeal,” thereby depriving the Task Force

of “the opportunity to respond” and the district court of the ability “to correct any

possible errors.” Op.50 n.53. Skilling did no such thing. He objected to every

juror on the panel, and said each should be questioned further. The Task Force and

district court chose not to do so, and the panel erred in declining to consider these

11 jurors’ biases (addressed infra in Section III.B).

The panel’s waiver analysis is even more deeply flawed, in that it relieved

the Task Force of its burden to show that each juror was impartial—instead,

requiring Skilling to show (at trial and on appeal) that each juror was, in fact,

biased. This conflates an actual prejudice claim (in which Skilling bears the

burden of affirmatively proving prejudice), with a case in which presumed

prejudice has been established (in which the government bears a “very difficult”

burden of proving complete impartiality, voir dire is subject to heightened scrutiny,

and appellate review is de novo). Mayola, 623 F.2d at 1001; U.S. v. McVeigh, 153

F.3d 1166, 1179 (10th Cir. 1998); Pamplin v. Mason, 364 F.2d 1, 6-7 (5th Cir.

1966). The panel’s approach rendered the presumption it found a dead letter.

B. The Task Force Did Not Rebut The Presumption Of Prejudice.

1. This Court has guidelines for how presumed prejudice may be rebutted:

In Mayola, 623 F.2d at 1001, the Court said “a showing that none of the

twelve jurors impanelled had ever been exposed, first or second hand, to

the inflammatory publicity, would probably suffice….”

15

In U.S. v. Chagra, 669 F.2d 241, 252 (5th Cir. 1982), the Court held the

burden had been met because 11 “jurors knew nothing about this case”

and the twelfth had only “minimal contact,” having read one article that

did not draw “any connection between [the crime and] appellant’s case.”

In Harrelson, 754 F.2d at 1160, the Court said any prejudice had been

addressed because voir dire “was searching and sensitive, covering seven

court days and more than two thousand pages of transcript.”

Here, no such facts exists: 86% of prospective jurors knew about the case;

80% had negative views about Skilling or Ken Lay; 60% had an unfavorable

opinion about the cause of Enron’s bankruptcy; and 40% were openly angry about

Enron and doubted their ability to be fair. Br.134. Of the 12 seated jurors:

nine knew about the case (Jurors 10, 11, 13, 20, 38, 50, 63, 67, 87); nine expressed sympathy for Enron’s employees or had a personal

connection with the company (10, 11, 13, 20, 38, 50, 64, 78, 84, 87); four had a negative opinion concerning the cause of Enron’s bankruptcy

(10, 11, 20, 87); four knew former Enron employees who lost savings (10, 11, 50, 64); three had negative views about Skilling or Lay and doubted their ability

to be fair (10, 11, 63); three said they were angry (20, 38, 53); one got laid off just before Enron’s bankruptcy, and was forced to cash

out her 401(k), and thus felt special empathy for Enron’s employees (20); one worked across the street from Enron at the time of its collapse (11); one believed he might own Enron stock (10). Br.168-71; Reply 104-05.

Here is a sampling of comments made by these jurors (10, 11, 20, 38, 63, 64, 87):

“I think they probably knew they were breaking the law.” “Collapse was due to greed and mismanagement.” “Greed on Enron’s part… A lot of people were hurt financially.”

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“It makes me angry that so many people lost their jobs and their retirement savings.”

“It was sad. People lost jobs and money—lots of money.” “I feel bad for those that worked hard and invested in the corp.—only to have it all taken away.”

“Poor management and bad judgment. Greed.” “[S]omething went wrong.” “[S]omebody there [was greedy].” Greed and mismanagement by the “head people” caused bankruptcy. “[S]omebody wasn’t running the ship.” JQ-10, 11, 20, 38, 63, 64, 87;

R:14452-54, 14457-61.

These 12 jurors come nowhere close to those deemed fair in Mayola and Chagra—

or any other presumed prejudice case, ever. Although the panel asserts its ruling is

in line with these precedents, Op.52 n.55, it is a glaring, dangerous departure.

2. In addition, unlike Harrelson, the district court’s voir dire was far from

“exemplary.” Op.48. As in U.S. v. Hawkins, 658 F.2d 279, 282-85 (5th Cir. 1981),

the court’s voir dire departed from established guidelines, Reply 107; lasted only

five hours,8 and was superficial, at best, Br.157-67.

As an example: Juror 10 (who served on the jury) lost money because of

Enron’s collapse, worked with former Enron employees, attributed Enron’s

collapse to “greed and mismanagement,” thought defendants were “suspect”

because of “what I see on television,” and said he would not tell others if he voted

8 The panel suggests, Op.48 n.51, the district court’s jury questionnaire made up for its unusually brief voir dire, Reply 109-10. The opposite is true. The questionnaire told the jury that Rick Causey was Skilling’s co-defendant, probed their opinions about both men, and when Causey pled guilty on the eve of trial and the Houston Chronicle opined his plea was the “lynchpin” to Skilling’s conviction, the court refused to send new questionnaires to a new pool of jurors. Br.137-38.

17

to acquit. The district court cut him off: “Can you conscientiously follow my

instruction that they’re presumed to be innocent?” The response, which the district

court erroneously accepted, was: “I think so.” Reply 121-22. Such “pallid”

responses are not “good enough”—even where prejudice is not presumed. U.S. v.

Nell, 526 F.2d 1223, 1230 (5th Cir. 1976); U.S. v. Nelson, 277 F.3d 164, 202 (2d

Cir. 2001). The court also denied defense challenges for cause to jurors who stated

they lost money as a result of Enron’s collapse (Jurors 29, R:14491, and 101, JQ-

101). “[A] court must excuse a juror for cause ... if the juror has even a tiny

financial interest in the case.” U.S. v. Polchemi, 219 F.3d 698, 704 (7th Cir. 2000).9

The only way the trial court justified not striking such jurors was to violate

the rule that voir dire is meant to explore a juror’s attitudes—“not to convince him

that he would be derelict in his duty if he could not cast aside any preconceptions.”

U.S. v. Davis, 583 F.2d 190, 197 n.7 (5th Cir. 1978). As with Juror 10, when Juror

101 said she was “unsure” she could be fair, the court said: “What we want are

people who can base their decision on the facts that they hear in the courtroom….

[W]ill you be able to base your decision on what you hear in court?” Her answer:

9 Juror 101, on whom Skilling had to waste a peremptory challenge (as he did

with No. 29), also said: I am “[a]ngry.” “The top folks [at Enron] got too greedy.” Defendants “knew what was going on, sold their shares.” “[Given] the amount of money involved and the amount of people that were affected and for nobody to know what was going on, it just doesn’t seem possible that somebody didn’t know something.” Skilling is guilty because “everything I’d seen on TV and a lot of stuff that was in the ‘Wall Street Journal.’” “I was surprised” that venue had not been changed in this case. JQ-101; R:14653-57.

18

“probably.” The court pressed again: “[C]an you in your heart of hearts assure us

that you will base your decision on what you hear in this courtroom?” Her answer:

“It will be based on what I hear in the courtroom.” Br.164-65. By signaling the

correct answer, the court improperly led the juror. Chagra, 669 F.2d at 254 n.14.

Worse still, even though district courts may not rely on such self-

assessments of impartiality, that is exactly what the district court did here—as the

Task Force not only admitted, but openly advocated:

TASK FORCE: Your Honor, we have to take her at her word. When she had previously said earlier what her opinions were, and she said earlier what her opinions were, and that based upon the law, they’ve changed. That’s what we ask of our jurors. COURT: I agree. [The defense motion for cause] is denied. R:14498-99. TASK FORCE: Again, Your Honor, we have to take them at the word, and that’s the way we’ve been doing it. And she said she could. COURT: The [defense motion for cause] is denied. R:14566.10

Where, as here—prejudice had to be presumed of every juror, there was likely

subconscious bias even among those who did not admit it, and there were

significant risks of “stealth” jurors looking to campaign their way on to the jury—it

was the district court’s obligation to distrust such assurances.11 It did the opposite.

10 Compare U.S. v. Beckner, 69 F.3d 1290, 1292-93 (5th Cir. 1995) (reversing

conviction where district court “allow[ed] jurors to decide their own impartiality”); Mayola, 623 F.2d at 1001 (burden to rebut presumed prejudice may “not be satisfied merely by the jurors’ assurances on voir dire of their own impartiality”); see also U.S. v. Colabella, 448 F.2d 1299, 1304 (2d Cir. 1971).

11 E,g., Smith v. Phillips, 455 U.S. 209, 221-22 (1982) (O’Connor, J., concurring) (“Determining whether a juror is biased or has prejudged a case is difficult, partly because the juror may have an interest in concealing his own bias

19

3. Finally, even assuming Skilling waived his right to challenge all but Juror

11 and that the rest of voir dire was exemplary, the seating of Juror 11 requires

reversal. Although voir dire was only a few hours in process and there were scores

of veniremen remaining, the district court refused to strike Juror 11, who:

Said CEOs are motivated by “pure greed,” “historically” they “stretch[] the legal limits,” and “some get caught and some don’t”;

Said “I’m not going to say they’re all crooks, but you know”; Likened this case to that of Billy Sol Estes—one of Texas’ most

notorious swindlers—and said, “it’s all greed. All the way up”; Admitted knowledge of allegations about energy price manipulation that

had been excluded from the trial as inadmissible and prejudicial; and Said Lay was greedy and “I don’t hardly know how you could [change

my mind of] that.” Br.170-71; Reply 120-21.

USA Today even said: “If Juror No. 11 is any indication: Look out, defense.” Id.

Rather than strike this juror, the district court asked him if he could decide

the case on a “clean slate,” and denied Skilling’s cause challenge when he claimed

he could. Id. The panel found that the Task Force had met its burden of rebutting

the presumption of prejudice, because it could not upset the district court’s

credibility determination, its having looked “‘looked [Juror 11] in the eye.’” Op.52.

This was error. Not only has no court ever concluded that such a juror was

impartial under the heightened standards that must be applied in a presumed

prejudice case, the district court’s determination was obviously colored by its

and partly because the juror may be unaware of it.”); Br.150-53, 167-68 (court clerk reports unprecedented fact that potential jurors call asking to serve on Skilling’s case); id. 170 (actual juror (No. 64) “repeatedly made comments” to co-workers that “she was very interested in serving on the Enron jury”); Reply 114.

20

erroneous view that prejudice should not be presumed here. Furthermore, it was

legal error to permit a juror with such obvious biases against a class of defendants,

CEOs, to sit on Skilling’s jury. Fields v. Brown, 503 F.3d 755, 767 (9th Cir. 2007)

(juror with bias against labor unions could not sit on case involving labor leader).

What the district court asked Juror 11 to do was to be superhuman—i.e., to put

aside bias and community pressure that not even the U.S. Attorney’s office in

Houston could overcome when it recused itself from all Enron cases. Br.152.

In short, Skilling ended up with a jury eerily like the one deemed unfair in

Irvin v. Dowd, 366 U.S. 717 (1961), where eight of 12 jurors admitted they thought

defendant was guilty, but said they could be fair. As in Irvin, “[w]here so many, so

many times, admitted prejudice, such a statement of impartiality can be given little

weight.” Id. at 727-28. Here, it wrongly made all the difference. Op.52.

III. MATERIALITY INSTRUCTIONS AND COUNTS 23 AND 24

The panel further erred in affirming the district court’s jury charge on the

definition of “materiality” for purposes of securities fraud, and its decision not to

dismiss, as a matter of law, “puffing” statements that this same district court, this

appellate court, and many others have held are immaterial and non-actionable.

Civil securities fraud cases are routinely dismissed at the pleading and

summary judgment stages when they are predicated on “generalized, positive

statements about [a] company’s competitive strengths … and future prospects”—

21

both of which “are not actionable because they are immaterial.” Rosenzweig v.

Azurix Corp., 332 F.3d 854, 869 (5th Cir. 2003). Indeed, this Court affirmed

dismissal of a securities fraud action brought against Enron senior management

(including Skilling), because the alleged misstatements touting Enron’s now-

bankrupt water business were immaterial as a matter of law. Id.

Despite Azurix, the district court and panel held that all of Skilling’s alleged

misstatements had to go to the jury, even though many were indistinguishable from

those in Azurix. Worse still, the district court refused to dismiss two counts based

solely on puffing statements (Counts 23 and 24), and refused provide the jury with

specific guidance that “puffing,” and other similar, non-actionable statements, may

not serve as a basis for finding securities fraud liability. Br.94-105; Reply 63-72.

Statement Deemed Puffing in Azurix Statement Submitted to Skilling Jury “‘Our fundamentals are strong,’ is obviously immaterial puffery.” 332 F.3d at 869.

“Business fundamentals remain strong.” DX20605:7.

“[Azurix is] making steady progress toward the Company’s objectives….” 198 F.Supp.2d 862, 873 (S.D. Tex. 2002).

“In our Bandwidth Intermediation Business, we are making excellent progress in creating a commodity market for bandwidth.” DX20603:7.

“[Azurix has] assembled the core assets and capabilities for strong growth in our key markets.” 198 F.Supp.2d at 873.

“[E]ssentially strong growth on the intermediation side, strong growth on the content services side.” DX20602:33-34.

Touting “Azurix’s ability to become a successful player in…the industry,” as well as growth opportunities that “will distinguish the company as a leading player.” 198 F.Supp.2d at 881, 886.

“[W]e have an enormous lead over several other players in this industry.” DX20602:5.

22

It was error to submit such statements, as well as Counts 23 and 24, to the

Skilling jury, especially without thorough, explanatory jury instructions.

Statements held to constitute puffery as a matter of law include claims that a

company is “strong,” “healthy,” “robust,” or “on target” to achieve projections.12

Reasonable investors “rely on facts in determining the value of a security, not mere

expressions of optimism from company spokesmen.” Raab, 4 F.3d at 290. Thus,

characterizations that are “squishy” and “untethered to anything measurable” do

not “communicate anything that a reasonable person would deem important to a

securities investment decision.” City of Monroe Employees Ret. Sys. v. Bridgestone

Corp., 399 F.3d 651, 671 (6th Cir. 2005).

The panel upended these rules, holding that “‘statements of reasons,

opinions, or beliefs’ … cannot, as a matter of law, be deemed immaterial puffery,”

12 E.g., Southland Sec. Corp. v. INSpire Ins. Solutions Inc., 365 F.3d 353, 377

(5th Cir. 2004) (“[T]he first quarter of 1998 was extremely significant for INSpire Insurance Solutions”); Nathenson v. Zonagen Inc., 267 F.3d 400, 419 (5th Cir. 2001) (test results “positive”); Grossman v. Novell, Inc., 120 F.3d 1112, 1121-22 (10th Cir. 1997) (“substantial success” in integrating sales forces); San Leandro Emergency Med. Group Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801, 807, 811 (2d Cir. 1996) (“[w]e expect 1993 to mark another year of strong growth in earnings per share”); Hillson Partners L.P. v. Adage, Inc., 42 F.3d 204, 212 (4th Cir. 1994) (company “on target toward achieving the most profitable year in its history”); Raab v. Gen. Physics Corp., 4 F.3d 286, 290 (4th Cir. 1993) (25% growth prediction immaterial, as it “will almost always prove to be wrong in hindsight,” and “[i]f growth proves less than predicted, buyers will sue; if growth proves greater, sellers will sue”); In re MCI WorldCom, Inc. Sec. Litig., 191 F.Supp.2d 778, 785-86 (S.D. Miss. 2002) (“outstanding year”); In re Splash Tech. Holdings Inc. Sec. Litig., 160 F.Supp.2d 1059, 1077 (N.D. Cal. 2001) (“strong,” “healthy,” “robust,” “well positioned”).

23

even when they are generalized. Op.35. Commentators quickly seized on this

decision, noting that the panel’s “potentially far-reaching [holding] could have

implications for defendants in civil securities fraud cases at the dismissal and

summary judgment phases.” Anne M. Rodgers et al., Skilling and the Future of

Securities Fraud Cases, LAW360 (Jan. 8, 2009). Indeed, given that the same

materiality principles apply in civil and criminal cases, U.S. v. Peterson, 101 F.3d

375, 380 (5th Cir. 1996), the panel’s opinion creates an irreconcilable conflict with

cases like Azurix—and the scores of others like it. It also injects confusion into this

frequently litigated and highly costly area of the law.

In reaching its holding, the panel made no effort to reconcile Azurix or cases

like it. Instead, it relied exclusively on Virginia Bankshares, Inc. v. Sandberg, 501

U.S. 1083 (1991), disregarding the 17 years of case law construing that precedent.

In Virginia Bankshares, the Supreme Court held that the conclusory statements at

issue could go to the jury, because the company’s directors told shareholders that

they approved a merger proposal based on the specific price that they had been

offered, which they said was “fair” and “high.” Id. at 1088, 1095.

Courts, including this one, do not read Virginia Bankshares to mean that all

such statements may go to jury, let alone that far less specific statements, such as

“we have an enormous lead” or “business fundamentals remain strong,” may be

submitted. Rather, as courts have explained, the directors’ statements in Virginia

24

Bankshares were “tied to a specific dollar figure, the accuracy of which was

subject to quantitative verification.” McNamara v. Bre-X Minerals, Ltd., 57 F.

Supp. 2d 396, 414 (E.D. Tx. 1999); see Krim v. BancTexas Group, Inc., 989 F.2d

1435, 1447 (5th Cir. 1993) (“in Virginia Bankshares the defendant company had

offered an opinion as to the dollar value of its stock, when it had reason to know

that opinion was false”). Where statements are “vague and unquantified,”

McNamara, 57 F. Supp. 2d at 414, or “offer no opinion, promise or guarantee of

any particular present or future dollar value or rate of return for investment,” Krim,

989 F.2d at 1447, they are, by definition, immaterial.

The panel grappled with neither these cases nor the uncontested fact that

many of Skilling’s alleged false statements were “vague and unquantified.” The

panel’s error creates a direct circuit conflict, because most of Skilling’s statements

were “generalized, positive statements about the company’s competitive

strengths … and future prospects”—i.e., statements that this Court, evaluating

virtually identical statements about another bankrupt Enron business, specifically

held to be legally non-actionable. Azurix, 332 F.3d at 869.

The ramifications of the panel’s ruling cannot be overstated. Not only will it

upset the normal ebb and flow of pretrial motion practice in civil securities fraud

cases, it also calls into question longstanding advice given to clients about what

statements risk exposure to legal liability. An inherent problem with rewriting the

law in this way is that words of "hope or expectation" expressed by executives are

easily "converted by an interested memory into statements of quality aid value,

when the expectation has been disappointed.." Presidío Enters., Inc. v. Wart^e^

Bros. Distf°i^. Corp., 784 F.2d 674, 684 (5th Cir. 1986). Commentators rightly fear

that, íf the panel opinion stands, "Plaintiffs and federal prosecutors will likely rely

on the Fifth Circuit's Skilling decision to argue that immateriality, and particularly

puffery, are fact questions that should be left to a jury." Rodgers et al., s^^p^^a.

Dated: January 20, 2009

O'MELVENУ &MYÉRS LLPWALTER DELLINGER

JONA'HAN D. НACKER

MEAGHAN MCLAINE

ANTON METLITSKY*^ X25 Eye Street, N.W.Washington, D.C. 20006

RONALD G. WOODS5300 Memorial , Suite 1000Houston , Texas 77007

*Admitted ín New York only;s^гΡpervised ^y principals at the firm

Respectfully submitted,

By:

O'MELVENY & MYÉRS LLl'DANIEL M. PETROCEL^^I

11!1. RANVAiJ^ OPPENI-IEIMI?R.

MATTHEW T. K^.IN^^DAVID J. MARROSO1999 Avenue of the Stars, 7th FloorLos Angeles, California 90067Telephone: (^ 10) 553-6700Facsimile: (310) 246-779

Attorneys for Defeпdпзг^-^Appellaп tJeffrey Skilling

?$

CERTIFICATE OF S^^RVIC^

This is to verify that true and correct copies of the foregoing Petition for

Rehearing En Banc have been filed by hand and served. by both Federal Express

and electronic .mail on January 20, 2009 an counsel listed below.

Matthew T. Kline

1. Douglas WilsonEnron Task ForceU.S. Attorney's Office450 Golden Gate Avenue, 11th FloorSan Francisco, CA 94102Facsimile: (41 S) 435-7234

CERTIFICATE OF COMP FIANCE WITH RULE 35(b)(2)

4n January 12, 2009, Defendant-Appellant Jeffrey K. Skilling filed a ^notío^

seeking this Court's permission to extend the page length requirement for this

Petition for Rehearing En Banc from 15 to 25 pages, pursuant to FED. R. AE'P. P.

^S{b)(2). This Court granted the motion on January 14, 2009. Undersigned

counsel certíf es that this petition does not exceed 2S pages, excluding material not

counted under FAD. R. AI's. P. 32. FED. R A^^. P. 3S(ó)(2).

Undersigned counsel further certifies that this petítíon complies with the

typeface requirements of FAD. R. AI^I^. P. 32(a){S} and the type style requirements

of F^v. R. A^^. P. 32{a)(^), as required by FAD. R AFF. P. 32{c)(2) and 3S(ó)(2},

because this bríei+has been. prepared ín a proportionally spaced 14--paint Times

New Roman typeface using Vlícrosoft Word 2003. ^--^

Matthew T. Kline

CC3 :74ЧΠ53.4

2