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Case 4:04-cr-00025 Document 1146 Filed in TXSD on 10/23/06 Page 1 of 18

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

UNITED STATES OF AMERICA
v.
JEFFREY K. SKILLING

§
§
§ CRIMINAL NUMBER H-04-025-02
§
§

MEMORANDUM OPINION AND ORDER

On October 10, 2006, Jeffrey K. Skilling filed a Motion for
Bail Pending Appeal (Docket Entry No. 1120). After carefully
considering the motion, the United State’s response in opposition
(Docket Entry No. 1128), and Skilling’s reply (Docket Entry
No. 1131), the court concludes that Skilling’s motion for bond
pending appeal should be denied.

I. Background

On May 25, 2006, a jury found Skilling guilty of nineteen
counts charged in the Second Superseding Indictment (SSI):
conspiracy to commit securities and wire fraud (count 1), Raptors-
related securities fraud (count 2), securities fraud involving
financial statements filed with the SEC on March 30, 2000 (count
14), August 14, 2000 (count 16), November 14, 2000 (count 17),
April 2, 2001 (count 18), May 15, 2001 (count 19), and August 14,
2001 (count 20)), securities fraud involving presentations made to
securities analysts and rating agency representatives on
January 22, 2001 (count 22), January 25, 2001 (count 23), March 23,

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2001 (count 24), April 17, 2001 (count 25), and July 12, 2001
(count 26), false statements made to auditors in annual
representation letters related to Enron’s 1999 Form 10-K on
March 13, 2000 (count 31), and Enron’s 2000 Form 10-K on
February 23, 2001 (count 32), false statements made to auditors in
quarterly representation letters related to Enron’s Form 10-Q for
the second quarter of 2000 on August 11, 2000 (count 34), for the
third quarter of 2000 on November 13, 2000 (count 35), and for the
first quarter of 2001 on May 15, 2001 (count 36), and insider
trading for the sale of 500,000 shares of Enron stock on
September 17, 2001 (count 51).

II. Standard of Review

“A convicted defendant has no constitutional right to bail.”
United States v. Olis, 450 F.3d 583, 585 (5th Cir. 2006) (citing
United States v. Williams, 822 F.2d 512, 517 (5th Cir. 1987)).
“[A]ny putative right to bail derives from 18 U.S.C. § 3143, which
‘establishes a presumption against’ its being granted.” Id. Title
18 U.S.C. § 3143(b) allows release pending appeal only if the
defendant can show by clear and convincing evidence that (1) the
defendant is not likely to flee or pose a danger to the community,
(2) the appeal is not for purposes of delay, (3) the appeal raises
a substantial question of law or fact, and (4) the substantial
question, if decided favorably to the defendant, is

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likely to result in – (i) a reversal, (ii) an order for
a new trial, (iii) a sentence that does not include a
term of imprisonment, or (iv) a reduced sentence to a
term of imprisonment less than the total of the time
already served plus the expected duration of the appeal
process.

18 U.S.C. § 3143(b)(1)(B). Although the court concludes that
Skilling is not likely to flee or pose a danger to the community
and that his appeal is not for purposes of delay, the court
concludes that Skilling has not satisfied the third and fourth
requirements for release pending appeal.

In United States v. Valera-Elizondo, 761 F.2d 1020 (5th Cir.
1985), the Fifth Circuit squarely addressed the correct
interpretation of “raises a substantial question of law or fact
likely to result in reversal or an order for a new trial.” See 18
U.S.C. § 3143(b)(2). Focusing upon what “substantial question”
means, the Fifth Circuit adopted the interpretation of § 3143(b)(2)
announced by the Third Circuit in United States v. Miller, 753 F.2d
19 (3d Cir. 1985), subject to its own additional observations and
those made by the Eleventh Circuit in United States v. Giancola,
754 F.2d 898 (11th Cir. 1985). Valera-Elizondo, 761 F.2d at 1025.
The Fifth Circuit agreed with the Miller court that

the proper interpretation of section 3143(b)(2) requires
the making of two determinations by the court. First,
the court must determine that the question raised on
appeal is substantial, that is to say a question that is
either novel, which has not been decided by controlling
precedent, or which is fairly doubtful. Secondly, the
court must determine whether that issue is sufficiently
important to the merits that a contrary appellate ruling
is likely to require reversal or a new trial.

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Valera-Elizondo, 761 F.2d at 1023 (citing Miller, 753 F.2d at 23).
The Fifth Circuit also agreed with the Giancola court’s observation
“that ‘substantial question’ means that the issue presented must
raise a substantial doubt (not merely a fair doubt) as to the
outcome of its resolution.” Id. Finally, the Fifth Circuit held
that “likely” as used in § 3143(b)(2) should be assigned “its
ordinary meaning of ‘more likely than not,’” id., and explained
that the statutory requirement that the defendant demonstrate that
the substantial question, if determined favorably for him on
appeal, would likely result in a reversal or an order for a new
trial means “reversal or an order for new trial on all counts on
which imprisonment has been imposed.” Id. (citing Giancola, 754
F.2d at 901, and Miller, 753 F.2d at 24). See also Morison v.
United States, 108 S.Ct. 1837 (1988)(Rehnquist, Circuit Justice)
(denying bond application for appeal to Supreme Court because
petitioner had “not shown that his appeal is ‘likely to result in
reversal’ with respect to all the counts for which imprisonment was
imposed”); United States v. Bilanzich, 771 F.2d 292, 298 & n.6 (7th
Cir. 1985) (quoting United States v. Powell, 761 F.2d 1227, 1233
(8th Cir. 1985) (“The substantial question must be one that would
result in reversal or a new trial on all counts for which the
defendant has been sentenced to prison. Otherwise, ‘the reason for
allowing bail on appeal, that a defendant should not be imprisoned
under a legally erroneous sentence, disappears.’”)).

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III. Analysis

Skilling asserts that four appellate arguments raise
substantial questions likely to result in the reversal of his
convictions: (1) the impact of the Fifth Circuit’s recent decision
in United States v. Brown, 459 F.3d 509 (5th Cir. 2006), petition
for rehearing and for rehearing en banc denied, No. 05-20319 (5th
Cir. October 18, 2006); (2) the deliberate ignorance instruction;
(3) jury bias; and (4) discovery and witness access issues. Having
carefully reviewed all of Skilling’s arguments and the controlling
authorities on which he relies, for the reasons stated by the
United States in its response to Skilling’s motion for bail pending
appeal (Docket Entry No. 1128), the court is not persuaded that
Skilling’s deliberate ignorance, jury bias, or discovery and
witness access arguments raise substantial questions likely to
result in a reversal or an order for new trial on any of his
convictions. The court is persuaded, however, that the Fifth
Circuit’s recent decision in Brown, 459 F.3d at 509, raises a
substantial question of law within the meaning of § 3143(b) that is
likely to result in a reversal or an order for a new trial on
Skilling’s conviction for conspiracy charged in Count One. Because
Brown was decided after Skilling’s trial ended, and because
Skilling argues that the application of Brown to facts of this case
raises a substantial question likely to result in reversal or an
order for new trial on each of his convictions, the court discusses
each of Skilling’s Brown-based arguments.

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A.

United States v. Brown
In Brown the Fifth Circuit reviewed conspiracy and wire fraud
convictions returned against defendants who participated in Enron’s
Nigerian barge transaction. The Nigerian barge transaction
involved an agreement between executives at Enron and at Merrill
Lynch to engage in a bogus sale of an interest in power-generating
barges moored off the Nigerian coast. Andrew Fastow gave Merrill
Lynch executives an oral guarantee that Enron would take Merrill
Lynch out of the deal in six months and that Merrill Lynch would
not lose money. The deal allowed Enron to book $12 million in
earnings for the fourth quarter of 1999. The defendants were each
charged with one count of conspiracy (18 U.S.C. § 371) and two
counts of wire fraud (18 U.S.C. §§ 1343 and 1346). The indictment
alleged two objects of the conspiracy: (1) the commission of wire
fraud and (2) the commission of securities fraud by falsifying
Enron’s books and records. The alleged conspiracy to commit wire
fraud and the substantive wire fraud counts were all based on two
theories of wire fraud: (1) a scheme to deprive Enron of money or
property; and (2) a scheme to deprive Enron of its intangible right
to the defendants’ “honest services.”

On appeal the defendants argued that “honest services” wire
fraud does not extend to the type of conduct with which they were
charged, and the Fifth Circuit agreed. After reviewing the history
of the wire fraud statute and prior case law, the Fifth Circuit

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held that “honest services” fraud did not apply to the Nigerian
barge transaction because

where an employer intentionally aligns the interest of
the employee with a specified corporate goal, where the
employee perceives his pursuit of that goal as mutually
benefitting him and his employer, and where 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 . . .

Brown, 459 F.3d at 522. In other words, the Brown court held that
an employee deprives his employer of “honest services” when the
employee seeks to promote his own self-interest instead of his
employer’s interest. Because the barge transaction was intended to
benefit Enron and not to secretly enrich the defendants at Enron’s
expense, the court held that it was outside the boundaries of 18
U.S.C. § 1346 even if it was dishonest, fraudulent, or wrongful.
Skilling argues that

[i]n the aftermath of Brown, there is no doubt that the
‘honest services’ issues in this case pose a ‘substantial
question’ for appellate review . . . [and that]
resolution of that question in Skilling’s favor is . . .
likely to result in reversal, thereby satisfying the
requirements for a grant of bail pending appeal.1

B.

Conspiracy Conviction (Count One)
Skilling argues that
[f]irst and foremost, the conspiracy count (Count One) is
certain to be reversed on appeal, as it is virtually
identical to the conspiracy count reversed by Brown. As
in Brown, the indictment alleged three possible objects

1Defendant Jeffrey Skilling’s Motion for Bail Pending Appeal,

Docket Entry No. 1120, p. 32.

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underlying the conspiracy: “honest services wire fraud,
“money or property” wire fraud, or securities fraud. The
Court’s jury instructions allowed the jury to convict on
any one of these three theories.

Citing Yates v. United States, 77 S.Ct. 1064 (1957), overruled on
other grounds by Burks v. United States, 98 S.Ct. 2141 (1978),
Skilling argues that

because a general verdict form was used . . . all three
theories to prove the conspiracy must be legally
defensible for the conviction to stand on appeal. . .
Because the “honest services” theory was plainly
erroneous under Brown, the Count One conviction cannot
stand.2
In Yates the Supreme Court considered a general verdict of
guilt on a Smith Act conspiracy with two objects: (1) advocating
the overthrow of the United States government and (2) organizing a
society of persons to so advocate. The Court ruled that because
the Smith Act’s prohibition against organization referred only to
the creation of the Communist Party, an event that occurred outside
the applicable statute of limitations, the conspiracy conviction
could not rest on that objective. Id. at 1067-1073. Rejecting the
government’s argument that the conviction could be affirmed on the
advocacy objective, the Court held that a general verdict must be
set aside where it “is supportable on one ground, but not on
another, and it is impossible to tell which ground the jury
selected.” Id. at 1073. In Griffin v. United States, 112 S.Ct.
466 (1991), however, the Court clarified that Yates’s broad

2Id. at p. 33 (citing Brown, 459 F.3d at 523).

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pronouncement applies only when there is legal error in one of the
bases for conviction. The Court explained that “legal error” means
“a mistake about the law,” not “a mistake concerning the weight or
the factual import of the evidence.” Id. at 474. Thus, where the
error in a verdict is factual, as where one basis for conviction is
unsupported by sufficient evidence, a guilty verdict “‘stands if
the evidence is sufficient with respect to any one of the acts
charged.’” Id. at 473 (quoting Turner v. United States, 90 S.Ct.
642, 654 (1970)).

The United States argues that Brown does not require a
reversal of Skilling’s conspiracy conviction because the two cases
are factually distinct.3 As in Brown, the court instructed the
jury in this case that it could convict Skilling of conspiracy by
finding that he conspired, inter alia, to deprive Enron of its
intangible right to honest services. Likewise, the jury returned
only a general verdict making it impossible to tell on which of the
various objects of the conspiracy the jury based Skilling’s
conviction. The court is persuaded therefore that application of
Brown to Skilling’s conspiracy conviction raises a substantial
question that if resolved in his favor is likely to result in a
reversal or an order for a new trial. See United States v.
Pettigrew, 77 F.3d 1500, & n.2 (5th Cir. 1996) (distinguishing
between general verdicts that rest on legally inadequate grounds

3United States’ Response to Jeffrey K. Skilling’s Motion for

Bail Pending Appeal, Docket Entry No. 1128, pp. 14-15.

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that require reversal, and those that rest on factually inadequate
grounds that do not require reversal).

C.

Securities Fraud Convictions (Counts 2, 14, 16-20, and 22-26)
Skilling argues that his convictions for substantive
securities fraud offenses charged in Counts 2, 14, 16-20, and 22-
26, are likely to be reversed on appeal because

[f]or those counts, the jury was again permitted to
convict on one of two different theories. First, it
could have found Skilling guilty by his own conduct, if
it concluded that he personally committed securities
fraud. Or, because the Court gave a Pinkerton
instruction, it could have found Skilling vicariously
liable because of the conduct of a coconspirator. . .
Again, given the general verdict, we do not know which
theory the jury actually convicted on. However, because
Brown invalidates the conspiracy conviction, it also
“precludes the imposition of vicarious liability upon
[Skilling] for the acts of [his] alleged co-
conspirators.” Thus, with the Pinkerton theory foreclosed
as legally invalid, the rule in Yates compels the
reversal of Counts 2, 14, 16-20, and 22-26.4
The United States responds that
[e]ven if Brown required reversal of Skilling’s
conviction on the conspiracy count, it does not require
reversal of all his remaining convictions. Unlike the
defendants in Brown, Skilling was not convicted of any
substantive mail or wire fraud counts that relied on the
honest services provision, and Brown therefore does not
directly apply to any of the substantive counts.5

4Defendant Jeffrey Skilling’s Motion for Bail Pending Appeal,
Docket Entry No. 1120, pp. 33-34 (citing Yates, 77 S.Ct. at 1064,
Brown, 459 F.3d at 518, and United States v. Kaiser, 660 F.2d 724,
732 (9th Cir. 1981) (“[b]ecause we cannot now be certain that the
jury did not rely upon the vicarious liability theory, we must
reverse”)).

5United States’ Response to Jeffrey K. Skilling’s Motion for

Bail Pending Appeal, Docket Entry No. 1128, p. 15.

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Citing United States v. Olano, 62 F.3d 1180, 1199 (9th Cir. 1995),
cert. denied, 117 S.Ct. 303 (1996), the United States argues that
Skilling is wrong in asserting that the court’s Pinkerton
instruction casts doubt on the validity of the substantive counts
referenced in the instruction because “[s]ubstantial evidence at
trial showed that Skilling affirmatively participated in the
fraudulent acts that formed the basis for the securities fraud
counts; thus, his convictions on those counts rested on his own
conduct and not solely on the Pinkerton instruction.”6 The court
agrees.

The jury was instructed that Counts 2, 14, 16-20, and 22-26
charged Skilling, and only Skilling, with securities fraud. The
jury was instructed that in order to find Skilling guilty on any of
these counts

you must find that the government has proved the
following elements beyond a reasonable doubt.
First: that the defendant knowingly did any one or more
of the following . . .
Second: that the defendant did so in connection with the
purchase or sale of the securities of Enron Corporation;
Third: that the defendant acted willfully and with the
intent to defraud; and
Fourth: that the defendant used or caused to be used,
any means or instruments of transportation or
communication in interstate commerce, or the mails, or
the facilities of a national securities exchange, in
furtherance of the fraudulent conduct.7

6Id. at pp. 15-16.
7Jury Instructions, Docket Entry No. 960, pp. 28-29.

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Because the Brown court held that the honest services theory of
wire fraud does not extend to the circumstances at issue in that
case, and because the substantive charges at issue in Brown were
charges for wire fraud that were based, inter alia, on the honest
services theory, the Brown court reversed not only the defendants’
convictions for conspiracy, but also their convictions for the
substantive wire fraud offenses. 459 F.3d at 517 (“Because we hold
that the honest-services theory of wire fraud does not extend to
the circumstances as contended by the Government, we vacate the
conspiracy and wire-fraud convictions.”). Because Counts 2, 14,
16-20, and 22-26 charge Skilling with securities fraud, and because
deprivation of honest services was never offered as a basis for
conviction on these or any other securities fraud counts, the Brown
holding does not by itself raise a substantial question likely to
require reversal or an order for new trial on Skilling’s
convictions for these counts. Nor is the court persuaded that the
inclusion of these securities fraud counts in its Pinkerton
instruction raises a substantial question likely to result in
reversal or an order for a new trial.

The court’s Pinkerton instruction informed the jury that if it
found a defendant guilty of the conspiracy charged in Count One and
if it found

beyond a reasonable doubt that during the time the
defendant was a member of that conspiracy, other
conspirators committed the [securities fraud] offenses
[charged] in Counts 2 and 14, 16-20, and 22-29 in

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furtherance of or as a foreseeable consequence of that
conspiracy, then you may find the defendant guilty of
Counts 2 and 14, 16-20, and 22-29, even though the
defendant may not have participated in any of the acts
which constitute the offenses described in those Counts
of the Indictment.8

See Pinkerton v. United States, 66 S.Ct. 1180, 1184 (1946). See
also United States v. Thomas, 348 F.3d 78, 84-85 (5th Cir. 2003),
cert. denied, 124 S.Ct. 1481 (2004). While it is axiomatic that a
defendant who is acquitted of conspiracy, or whose conspiracy
conviction is reversed on appeal, cannot be held vicariously liable
for substantive offenses committed by an alleged co-conspirator,
see United States v. Rosas-Fuentes, 970 F.2d 1379, 1383 (5th Cir.
1992), Skilling has failed either to argue or to cite any evidence
showing that his convictions for the offenses charged in Counts 2,
14, 16-20, and 22-26 were based on the conduct of an alleged co-
conspirator as allowed by the court’s Pinkerton instruction instead
of on his own conduct. Consequently, the court is not persuaded
that Skilling has made a showing that the general verdicts on these
counts of conviction must be set aside because they rest on two
grounds, one that is legally supportable and one that is not, “and
it is impossible to tell which ground the jury selected.” Yates,
77 S.Ct. at 1073.

Because Skilling has failed to cite any evidence from which
the court could conclude that the jury convicted him of any

8Id. at pp. 20-21.

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substantive offense based on the United States’ deprivation of
honest services theory, or that his convictions for the securities
fraud offenses charged in Counts 2, 14, 16-20, and 22-26 were based
not on his own conduct but, instead, on the conduct of a co-
conspirator, the court is not persuaded that application of the
Fifth Circuit’s holding in Brown or the Supreme Court’s holding in
Yates to these convictions is capable of raising a substantial
question that if resolved in his favor is likely to result in a
reversal or an order for a new trial on any of these counts of
conviction. See Yates, 77 S.Ct. at 1073 (requiring reversal only
where it is impossible to tell on which of two conflicting grounds
the jury based its decision to convict). Accord Olano, 62 F.3d at
1199 (stating that when faced with a Pinkerton instruction
precluded by an erroneous conspiracy charge, a conviction can
nevertheless be affirmed if the court finds beyond a reasonable
doubt that the jury convicted the defendant based on his own
conduct and not on the conduct of an alleged co-conspirator). See
also United States v. Castaneda-Cantu, 20 F.3d 1325, 1335 (5th Cir.
1994) (recognizing that a Pinkerton charge can be superfluous).

D.

False Statement Convictions (Counts 31-32, 34-36)
Skilling argues that the false statements to auditors
convictions in Counts 31-32 and 34-36 are also likely to be
reversed because

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although the Court’s Pinkerton instruction did not apply
to these counts, the Court gave a related instruction on
aiding and abetting . . . Given the close similarities
between this instruction and the Pinkerton instruction,
and given that the broad conspiracy allegation was the
over-arching factual foundation of the Task Force’s case,
there is a strong likelihood that the invalid conspiracy
count had a prejudicial spillover effect on Counts 31-32
and 34-36.9

Skilling cites no authority for this argument.

As noted in United States v. Bullock, 451 F.2d 884 (5th Cir.

1971), the aiding and abetting statute, 18 U.S.C. § 2,

is an alternative charge in every count, whether explicit
or implicit, and the rule is well-established, both in
this circuit and others, that one who has been indicted
as a principal may be convicted on evidence showing that
he merely aided and abetted the commission of the
offense.

Id. at 888. See also United States v. Walker, 621 F.2d 163, 166-
167 (5th Cir. 1980), cert. denied, 101 S.Ct. 1707 (1981).
Moreover, in Nye & Nissen v. United States, 69 S.Ct. 766 (1949),
the Supreme Court held that aiding and abetting had a broader
application than the rule announced in Pinkerton, 66 S.Ct. at 1180.
In Nye and Nissan Justice Douglas found that although there was not
enough evidence to convict the defendant of the substantive counts,
there was circumstantial evidence wholly adequate to support the
jury’s finding that the defendant aided and abetted in the
commission of the offenses:

9Defendant Jeffrey Skilling’s Motion for Bail Pending Appeal,

Docket Entry No. 1120, p. 34.

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We see therefore no reason to exculpate him as an aider
and abettor. There was no inadequacy in the charge to
the jury on that theory. Nor was the submission in
conflict with Pinkerton . . . The rule of that case does
service where the conspiracy was one to commit offenses
of the character described in the substantive counts.
Aiding and abetting has a broader application. It makes
a defendant a principal when he consciously shares in any
criminal act whether or not there is a conspiracy. And
if a conspiracy is also charged, it makes no difference
so far as aiding and abetting is concerned whether the
substantive offense is done pursuant to the conspiracy.
Pinkerton . . . is narrow in its scope. Aiding and
abetting rests on a broader base; it states a rule of
criminal responsibility for acts which one assists
another in performing. The fact that a particular case
might conceivably be submitted to the jury on either
theory is irrelevant. It is sufficient if the proof
adduced and the basis on which it was submitted were
sufficient to support the verdict.

69 S.Ct. at 770. For these reasons the court is not persuaded that
Skilling’s argument that the “close similarities” between the
aiding and abetting and the Pinkerton instructions10 raises a
substantial question likely to result in a reversal or an order for
a new trial on these counts.

E.

Insider Trading Conviction (Count 51)
Asserting that the conspiracy charged in Count One was the
inside information on which Skilling allegedly traded the 500,000
shares of Enron stock on September 17, 2001, Skilling argues that
“the insider trading conviction in Count 51 is also infirm in light

10Reply in Support of Defendant Jeffrey Skilling’s Motion for

Bail Pending Appeal, Docket Entry No. 1131, p. 22.

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of Brown.”11 Asserting that the United States made this explicit
by telling the jury in closing argument “you can conclude, based on
the evidence of the conspiracy that’s been presented to you, at key
periods in time whether Mr. Skilling had information that he used
to sell his stock,”12 Skilling argues that “the failure of Count One
also undermines the jury’s conviction on Count 51.”13 Because
Skilling does not argue that the jury was improperly instructed on
the insider trading counts, and because Yates requires a general
verdict to be set aside only where it “is supportable on one
ground, but not on another, and it is impossible to tell which
ground the jury selected,” 77 S.Ct. at 1073, the court is not
persuaded that the United States’ reference to the conspiracy in
closing argument raises a substantial question likely to result in
a reversal or an order for new trial on his conviction for insider
trading charged in Count 51. Even assuming without deciding that
the United States’ reference to the conspiracy in closing argument
presented the jury an impermissible basis for convicting Skilling
of insider trading charged in Count 51, in light of the jury’s
decision to convict Skilling for securities fraud charged in Counts
2, 14, 16-20, and 22-26 and for making false statements to auditors

11Defendant Jeffrey Skilling’s Motion for Bail Pending Appeal,

Docket Entry No. 1120, p. 35.

12Id. at p. 36 (quoting Trial Tr. 18,253:9-15).
13Id.

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charged in Counts 31-32 and 34-36, the court is not persuaded that
the jury could possibly have based its decision to convict him on
Count 51 solely on the United States’ reference to the infirm
conspiracy in its closing argument.

IV. Conclusions and Order

For the reasons explained above, the court concludes that
Skilling has failed to satisfy the statutory requirements for
release pending appeal. Accordingly, Jeffrey K. Skilling’s Motion
for Bail Pending Appeal (Docket Entry No. 1120) is DENIED.

SIGNED at Houston, Texas, on this 23rd day of October, 2006.



SIM LAKE
UNITED STATES DISTRICT JUDGE

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