High court sides with ex-Enron CEO Skilling
WASHINGTON
The justices voted 6-3 to keep the law in force, even as they
joined unanimously in weakening it, and left it to a lower court to
decide whether Jeffrey Skilling, the former Enron boss, and Conrad
Black, the former newspaper owner, should have their convictions
stemming from "honest services" fraud overturned.
The "honest services" law has been criticized by defense
lawyers as the last resort of prosecutors in corruption cases that
lack the evidence to prove that money is changing hands. It also
has been called vague, subjecting people to prosecution for
mistakes and minor transgressions in the business and political
worlds. But watchdogs consider it key to fighting white-collar and
public fraud.
Melanie Sloan, executive director of the government watchdog
group Citizens for Responsibility and Ethics in Washington, said
the decision "deprives prosecutors of an important tool in their
efforts to fight public corruption. Previous convictions may be
vacated and corrupt officials will have an easier time escaping
accountability for their misdeeds."
The court, in an opinion written by Justice Ruth Bader Ginsburg,
said prosecutors may continue to seek honest services fraud
convictions in cases where they put forward evidence that
defendants accepted bribes or kickbacks.
"Because Skilling's misconduct entailed no bribe or kickback,
he did not conspire to commit honest-services fraud under our
confined construction" of the law, Ginsburg said. Three justices,
Anthony Kennedy, Antonin Scalia and Clarence Thomas, would have
found the law unconstitutional.
Thursday's decision does not necessarily mean that any of the 19
counts against Skilling or four counts against Black will be thrown
out, Ginsburg said. At the same time, by a 6-3 vote, the court
rejected Skilling's claim that he did not get a fair trial in
Houston because of the harsh publicity surrounding the case in
Enron's hometown.
It is unclear whether any convictions will be overturned or
prison sentences reduced as a result of the decision, lawyers
familiar with the fraud law said. Determinations will have to be
made case by case.
But there is no doubt how important the law has been to
prosecutors. Supreme Court nominee Elena Kagan said recently that
the honest services cases at the high court were the ones that
mattered most to the Justice Department.
Justice Department spokeswoman Tracy Schmaler said prosecutors
would continue to urge that honest services convictions for
Skilling, Black and others be upheld. "While we are disappointed
that today's Supreme Court decisions narrowed the honest services
statute, we are pleased that the Court upheld many of the core
provisions that have been used for decades to prosecute corrupt
public officials and corporate executives who have breached their
duties to their constituents, clients, and investors," Schmaler
said.
Lawyers for the two men say that the entire case against them
should be thrown out.
Honest services charges have figured in convictions won against
former Govs. George Ryan of Illinois and Don Siegelman of Alabama,
and former Reps. Randy "Duke" Cunningham of California, William
Jefferson of Louisiana and Bob Ney of Ohio.
Former New York Senate leader Joseph Bruno is facing two years
in prison after being convicted under the same federal statute, and
the judge in his case said he is reviewing the court's decision.
Former Illinois Gov. Rod Blagojevich faces honest services charges
in his ongoing trial, although the judge in that case said Thursday
the high court ruling might not be of much help to Blagojevich.
Honest services charges also have been used regularly in public
corruption cases stemming from the Jack Abramoff lobbying scandal,
including in the pending retrial of former Abramoff associate Kevin
Ring.
The new limits will lead to another hearing for Black and could
mean the end of federal prosecutors' case against former Alaska
lawmaker Bruce Weyhrauch.
Donald Ayer, a Washington lawyer who represented Wehyrauch, said
the ruling will put the brakes on prosecutors' increasingly
aggressive and creative efforts to win convictions under the
28-word fraud law that makes it a crime "to deprive another of the
intangible right of honest services."
Skilling was convicted in 2006 of conspiracy, securities fraud,
insider trading and lying to auditors for his role in the downfall
of the once-mighty Houston-based energy giant. The company
collapsed into bankruptcy in 2001 under the weight of years of
illicit business deals and accounting tricks. Skilling is serving a
sentence of more than 24 years at a minimum security prison outside
Denver, although a federal appeals court had ordered a
re-sentencing even before Thursday's decision.
Justices Sonia Sotomayor, Stephen Breyer and John Paul Stevens
also would have held that Skilling did not get a fair trial in a
case in which "passions ran extremely high," Sotomayor said in
her dissent.
Black, serving a 6 1/2-year prison term, and two other former
executives were convicted of depriving the Hollinger International
media empire of their faithful services as corporate officers. The
company once owned the Chicago Sun-Times, The Daily Telegraph of
London, The Jerusalem Post and hundreds of community papers across
the United States and Canada.
Central to the case is $5.5 million that the defendants say were
management fees they were owed and were trying to collect in such a
way that they would not have to pay Canadian income tax. The
government says the money belonged to the company's shareholders.
Miguel Estrada, who represented Black at the Supreme Court,
said, "We are confident the lower courts will quickly conclude
that the errors that the Supreme Court has now conclusively found
tainted every aspect of this case. We look forward to helping Mr.
Black regain his freedom."
Weyhrauch wants charges against him dropped. Prosecutors allege
that he failed to disclose he was in job negotiations with an
oil-field operations company at the same time the state legislature
was also considering an oil bill. Weyhrauch says disclosure was not
required by Alaska law.