Today the Supreme Court of the United States announced an opinion that may effect not only the petitioner in the case before it, Jeffery Skilling, but moguls under indictment everywhere. On June 24, the Court's opinion in Skilling v. United States severely narrows the reach of one of the government's favorite tools for prosecuting white collar fraud and crime, the honest services statute. The majority of the Court found that the honest services statue applies only in cases where bribery and kickbacks can be shown. Other applications are simply too vague to be constitutional.
Today's opinion will not spring Skilling from his 24 year stint in a minimum security federal prison. However, at least part of his original conviction has been vacated and other parts may have to be retried, according to the ABA Law Journal. The Court also ruled the pre-trial publicity did not prevent Skilling from receiving a fair trial. The ruling might finally result in a somewhat lessened sentence for a man who, until relieved by Bernard Madoff, was the face of greed and fraud in this country.
According to the Law Journal, Skilling's original conviction was for defrauding the shareholders of Enron by conspiring to artificially raise the stock price based on a misrepresentation of the true financial state of the company. Specifically, the honest services statute prohibits acts which "... deprive another of the intangible right of honest services." The government argued that the personal benefit to Skilling in the form of an increase in the value of his own shares of stock, as well as his compensation package, amounted to a denial of honest services under the statute. The Court, in the opinion written by Justice Ruth Bader-Ginsberg, disagreed. "There is no doubt that Congress intended (the statute) to reach at least bribes and kickbacks. Reading the statute to proscribe a wider range of offensive conduct, we acknowledge, would raise the due process concerns underlying the vagueness doctrine,"
The result for Jeffery Skilling is that his conspiracy conviction may well be dismissed, but convictions based on other charges remain. According to the Houston Chronicle, it will be up to the 5th Circuit Court of Appeals to decide what the effect on the remaining charges will be. "Another big 5th Circuit battle awaits. The court concludes by saying the 5th Circuit has to sort out effect on conspiracy count, which may still survive; and effect, if any, on other convictions," Seth Buell, a law professor and former Enron prosecutor, told the Chronicle.
And what of other high profile cases brought under the honest services statute such as that of Conrad Black, media mogul, Alaska lawmaker Bruce Weyhrach, or even Rod Blagojevich, infamous former Governor of Illinois? As for Conrad Black and Bruce Weyhrauch, their cases have been vacated and sent back to the lower courts for reconsideration. However, the Chronicle thinks that Blagojevich will not be so lucky. His acts likely still fall within the Court's new, clearer definition of what exactly "honest services" are and are not.
- Supreme Court Curtails Reach of Honest Services Law in Case of Enron's Ex-CEO (ABA Law Journal)
- Supreme Court sides with Skilling's appeal (Houston Chronicle)
- The Ensign Affair, Lobbying Laws & Honest Services Fraud (FindLaw's Blotter)
- Honest Services Statute: 18 U.S.C. § 1346 (FindLaw)