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Supreme Court decision casts doubt on former Enron CEO's conviction

While former chairman Ken Lay has passed away, former chief executive Jeffrey Skilling and former financial officer Andrew Fastow are both in prison.

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Washington Post Staff Writer
Friday, June 25, 2010

The Supreme Court on Thursday gutted one of federal prosecutors' favorite tools for pursuing corrupt politicians and self-dealing corporate chiefs, casting doubt on the convictions of two prominent executives snared by the law: former Enron chief executive Jeffrey K. Skilling and newspaper magnate Conrad Black.

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All nine justices said prosecutors have stretched too far a federal statute that makes it a crime to deprive the public or a company of the "intangible right of honest services." Three justices thought the statute was so vague as to be unconstitutional. But six said it could be saved by limiting its use to those involving bribes or kickbacks, not the self-dealing or conflict-of-interest schemes previously prosecuted.

The decision did not overturn the convictions of Skilling and Black, but it said they can renew their arguments in lower courts.

The honest-services law has been praised by prosecutors and government watchdog groups as the best weapon for penetrating schemes hatched by corrupt politicians and dishonest corporate chiefs. Defense lawyers have denounced it as so vague that almost any activity could be labeled criminal.

Prosecutors relied on the law often in recent years, and legal experts and advocates said that Thursday's decision will reverberate widely. "Previous convictions may be vacated and corrupt officials will have an easier time escaping accountability for their misdeeds," said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington.

Tracy Schmaler, a spokeswoman for the Justice Department, said officials were glad that at least part of the law remained.

"The American people are entitled to the honest services of both public servants and corporate executives, and the Department will continue to bring all appropriate cases in order to hold corrupt officials accountable for their actions," she said in a statement. "We are studying the opinions to determine if the court's interpretation leaves us with all the tools we need to ferret out corruption"

Since it was passed in 1988, the honest-services fraud law has been used in the lobbying scandals involving Jack Abramoff, the charges against former Louisiana congressman William J. Jefferson (D-La.) and prosecution of state officials such as the current trial of former Illinois governor Rod Blagojevich (D).

Defense lawyers predicted a rash of litigation from those who have been convicted under the law.

Justice Ruth Bader Ginsburg, writing for the court majority, said that upholding the law meant excluding the "amorphous category of cases" involving conflict of interest and self-dealing. The legislation, she said, "criminalizes only schemes to defraud that involve bribes or kickbacks."

Washington lawyer Robert K. Kelner said that "for those of us who defend public corruption cases, today's Supreme Court decision is a major turning point." Even though Thursday's cases involve primarily corporate wrongdoing, he said "the real significance" of the decision will be to make it harder to prosecute federal lobbyists and members of Congress. Proving bribery requires a difficult showing of quid pro quo, he said.

Although Ginsburg wrote that Skilling could not be convicted of the honest-services charges, she noted that other charges remain.


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