Notable Enron insider trading sentencing outcome and reasoning

This Bloomberg report, headlined "Ex-Enron Broadband Executive Sentenced for Insider Trading," caught my attention for a number of reasons.  Here are the details:

Former Enron Broadband Services executive Rex Shelby was sentenced today on an insider trading charge linked to the investment fraud that destroyed the world’s largest energy trader 10 years ago.  Shelby, 59, pleaded guilty to one count of insider trading and was sentenced to three months in a federal halfway house and three months of house arrest. Shelby will also forfeit about $2.6 million in profits from the illicit trade.

Shelby’s lawyer Ed Tomko told a judge that Shelby has also agreed to forfeit another $1 million to resolve related Securities and Exchange Commission charges. He faced a maximum of 10 years and a fine of $1 million on the one count before reaching his plea deal. He’ll be in probation for two years, including the six months of combined confinement....

U.S. District Judge Vanessa Gilmore sentenced Shelby to half the number of months confinement that he’d agreed to in a plea deal.  “Mr. Shelby’s actions ultimately did not cause the downfall of Enron,” she said.  “Only a few individuals at the pinnacle of Enron knew of the fraud.”

Gilmore said she moderated the sentence to fit Shelby’s role and the punishments given to others in the Enron fraud scheme.  She said the fact Shelby has for the last eight years devoted himself exclusively to working on his defense, in “self-imposed home confinement"”, was also a consideration in her decision....

Shelby and six other EBS executives were indicted in 2003 on charges they helped the parent company’s senior management, including Enron’s former Chairman Kenneth Lay and Chief Executive Officer Jeffrey Skilling, deceive analysts and investors about the unit’s capabilities and financial performance.

The executives were accused of misrepresenting EBS at a January 2000 analysts’ conference, where they portrayed it as one of Enron’s “core’’ units, worth about $50 billion. In reality, the division struggled to launch products and never earned a profit.

Enron’s stock soared from $54 a share the day of the analysts’ conference to $72 a share the following day. Shelby sold 150,000 shares on the price increase, reaping gross proceeds of just under $10.7 million, according to his plea.

Shelby had long maintained he sold the shares to diversify his portfolio and not based on any inside knowledge of an alleged conspiracy to inflate Enron’s stock price. To avoid a trial on broader conspiracy and fraud charges, which had been set to begin this past January, Shelby pleaded guilty to one count of insider trading in November....

Shelby’s sentencing marks the end of the Enron Broadband case, which yielded mixed results for the government. Two of the seven originally indicted EBS executives -- Kenneth Rice and Kevin Hannon, who each served as president of the division at one time -- pleaded guilty before trial and testified against former colleagues.

The remaining five executives, including Shelby, were tried together in Houston federal court in 2005. That trial ended with no convictions and a smattering of acquittals, as jurors failed to reach verdicts on scores of counts. None of the men were completely exonerated at that trial, and the government vowed to streamline its case and retry them all on narrower charges.

To avoid that retrial, former CEO Joseph Hirko pleaded guilty to a reduced charge in late 2008 and served about 16 months in prison, forfeiting $7 million. Ex-strategy chief F. Scott Yeager appealed the government’s retrial attempts and in 2009, the U.S. Supreme Court ruled he couldn’t be retried based on his partial acquittal by the first jury.

I have highlighted above one particular passage of this account of the sentencing because I cannot recall hearing of another case in which a judge expressly identified that the time/energy spent by the defendant defending himself as a mitigating sentencing factor.  I do not mean to critique the use of this factor, as much as just to note it here and to welcome comments about whether others have a strong view, concerning in this case or others, as to whether the time/energy spent by a defendant defending himself ought to be viewed as a mitigating sentencing factor.