Undercutting convictions against Enron CEO Jeffrey Skilling and media magnate Conrad Black, a Supreme Court ruling Thursday narrowing the “honest services” fraud statute could also affect other high-profile corruption cases against key political and business leaders - including former Illinois Gov. Rod R. Blagojevich and the panoply of characters who comprise l’affaire Abramoff.
The charge has been used as a catch-all to prosecute a wide variety of criminal allegations - virtually anytime the public has been denied what the court deemed “the intangible rights of honest services.”
The high court ruled unanimously in three separate cases that the Justice Department went too far in its use of the statute, saying prosecutors can now lodge the charge only in cases that involve bribery and kickbacks.
The Supreme Court sent the Skilling and Black cases back to lower appeals courts to determine whether their convictions on multiple corruption charges should be vacated.
In the third case, the court ruled that the “honest-services fraud” charge cannot be used in the pending case against former Alaska state Rep. Bruce Weyhrauch.
A Justice Department spokeswoman said the department was “disappointed” with the narrowing of the honest-services fraud statute, but was pleased the court did not strike down the law entirely, which is what Skilling and the others had wanted.
Had the court struck down the statute, numerous public corruption cases could have been jeopardized.
But after the court’s ruling, New York lawyer Terrence Oved said the decision will not have any effect on the cases emanating from lobbyist Jack Abramoff’s conviction and cooperation, as those cases involved bribes and kickbacks. Similarly, he said, the Blagojevich trial is unlikely to be affected as his case also involves bribery and the jury will be able to receive instructions that take the decision into account. The judge in the case had previously said the Skilling decision was unlikely to help Mr. Blagojevich.
“The real effect of today’s three Supreme Court decisions will be determined over the next few years, when defendants convicted under the “honest-services fraud” statute file suits claiming that the Skilling decision should have retroactive effect,” Mr. Oved said. “If the Skilling holding is found to apply retroactively, there will be a great deal of vacated convictions and retrials.”
As the Justice Department remained pensive, the defense bar cheered the ruling.
White-collar defense lawyer Jack Falvey said that “it effectively takes a bludgeon out of the hands of aggressive federal prosecutors who viewed every conflict of interest as a theft of honest services.”
While all nine justices agreed prosecutors use the “honest-services fraud” charge too much, three of them said the entire law should be declared unconstitutional.
Justice Antonin Scalia wrote in a concurring opinion that the law is unconstitutionally vague. Justice Scalia also disagreed with the court’s decision to limit honest-services fraud to cases involving bribery and kickbacks.
“I know of no precedent for such ‘paring down,’ and it seems to me clearly beyond judicial power,” wrote Justice Scalia, who was joined by Justices Anthony M. Kennedy and Clarence Thomas.
Lawyers for Skilling, who is serving a 24-year prison sentence, had made similar arguments.
Skilling was indicted after Enron went belly up and its stock value crashed. Prosecutors said Skilling and others engaged in an elaborate conspiracy to lie about the financial health of Enron in order to keep the value of its stock high.
Skilling was convicted of 19 corruption charges, including “honest-services fraud,” because the jury decided his actions had deprived shareholders of their “intangible right of his honest services.”
The court acknowledged Skilling’s arguments regarding the law being vague had some merit, but Justice Ruth Bader Ginsburg wrote in the majority opinion that it “has long been the court’s practice” before striking down a law as impermissibly vague to try to correct it by limiting its scope.
Justice Ginsburg wrote the court’s new limits on the law do not “necessarily require” that Skilling’s conviction be overturned. She wrote it will be up to the lower court to decide whether the Supreme Court’s ruling invalidates the convictions on the other counts.
The court left it to an appeals court to determine Black’s future. He was convicted in 2007 of “honest-services fraud,” but acquitted of most of the charges lodged against him. He was convicted along with others of “honest-services fraud” for stealing millions from his company by paying themselves bogus “noncompetition fees.” He is serving a 6 1/2-year prison sentence.
“Given that the jury already decisively rejected the government’s attempt to convict Mr. Black for ‘traditional’ fraud, 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,” his attorneys said in a statement. “We look forward to helping Mr. Black regain his freedom.”
The high court’s ruling overturned only the convictions on the “honest-services fraud” charges. Skilling and Black were each convicted of multiple charges.
In the case of Mr. Weyhrauch, the court issued a one-page ruling sending the case back to the appeals court in light of the Skilling case. A lawyer, Mr. Weyhrauch is accused of “honest-services fraud” for seeking legal work from an oil company that had business with the Alaska state Legislature.