U.S. Supreme Court

Supreme Court Curtails Reach of Honest-Services Law in Case of Enron's Ex-CEO

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The U.S. Supreme Court has ruled in the case of former Enron CEO Jeffrey Skilling that the honest-services law covers only bribery and kickback schemes.

The court has unanimously vacated Skilling’s 2006 conviction for honest-services fraud in the collapse of Enron, SCOTUSblog reports in its live blog of today’s rulings. On a second issue, the court ruled 6-3 ruled that pretrial publicity did not prevent Skilling from receiving a fair trial.

The honest-services law bars schemes “to deprive another of the intangible right of honest services.” The statute was intended at least to reach schemes involving bribes and kickbacks, Justice Ruth Bader Ginsburg wrote in her majority opinion (PDF). But extending the statute to apply beyond that core meaning “would encounter a vagueness shoal,” she wrote.

According to the Houston Chronicle, the ruling means that some of the charges against Skilling could be retried or dismissed on remand, and his 24-year sentence could be further reduced. Skilling’s conspiracy conviction was based on honest-services fraud, money-or-property wire fraud, and securities fraud. The lower courts on remand will have to determine whether the conspiracy conviction should be reversed, and, if there is a reversal, whether it touches on other counts on which he was convicted.

Skilling had been accused of conspiring to defraud Enron shareholders by misrepresenting the company’s financial health. He has argued he did not intend to deprive Enron of honest services. Instead, he claimed he was acting in an effort to improve the company’s stock value. The government had argued Skilling benefited from the scheme, however, in the form of salary, bonuses and stock sales.

Ginsburg disagreed with the government, saying Skilling’s alleged misconduct did not entail a bribe or a kickback, so he did not commit a crime under the law.

Justices Antonin Scalia, Clarence Thomas and Anthony M. Kennedy would have gone further and found the statute to be unconstitutional, SCOTUSblog says.

The Supreme Court also issued rulings in two other cases challenging the law. One involved media baron Conrad Black, accused of scheming to defraud either by stealing corporate money or by depriving the company of honest services. The other involved former Alaska legislator Bruce Weyhrauch. Lawyers for Weyhrauch and Hollinger International general counsel Mark Kipnis participated in an ABA Journal Podcast after the rulings were announced.

In both cases, the Supreme Court cited the Skilling ruling in vacating the defendants’ honest-services convictions, SCOTUSblog says.

Last updated June 25 to remove mistakenly added information.

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