Supreme Court weakens key anti-corruption law

By Agence France-Presse
Thursday, June 24, 2010 11:09 EDT
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Two high-profile prosecutions criticized; Conrad Black’s fraud conviction vacated; Part of Enron boss’s conviction vacated

WASHINGTON — The US Supreme Court Thursday set aside part of Enron boss Jeffrey Skilling’s fraud conviction, saying it was “flawed” and unconstitutional.

“Because the indictment alleged three objects of the conspiracy, honest-services wire fraud, money-or-property wire fraud, and securities fraud,” Skilling’s conviction “is flawed,” the ruling said.

Also, the US Supreme Court on Thursday set aside the corporate fraud conviction of Anglo-Canadian media mogul Conrad Black and sent the case back to a lower court.

“We vacate the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion,” the Supreme Court ruled.

Black, 64, who once headed the world’s third-largest media empire, was convicted in July 2007 of stealing millions of dollars from the sales of newspapers being off-loaded by Hollinger International.

The Baltimore Sun notes,

The Supreme Court weakened a key anticorruption law Thursday, ruling that the law against “honest services” fraud is too vague to constitute a crime unless a bribe or kickback was involved.

The decision is likely to have a wide impact and could affect recent convictions of public figures and corporate executives.

The Wall Street Journal adds,

In ruling for Skilling and Black, the high court, in opinions by Justice Ruth Bader Ginsburg, found fault with a federal law that gives prosecutors the authority to bring cases against executives who deprive companies of their honest services.

The ruling could have a significant impact on some white-collar crime prosecutions. The honest-services law has been a darling of government lawyers because it is broadly worded and gives them room to prosecute a wide range of conduct.

Ginsburg said the honest-services law should be confined only to cover fraud schemes involving bribery and kickbacks. Ginsburg said parts of Skilling’s conviction were flawed, but said the flaws did not necessarily require reversal of his conviction on conspiracy charges.

Citizens for Responsibility and Ethics in Washington (CREW) released the following statement sent to RAW STORY:

Today, in Skilling v. U.S., the Supreme Court invalidated the use of the honest services fraud statute except in cases involving bribery and kickbacks.

Citizens for Responsibility and Ethics in Washington (CREW) had filed an amicus brief on behalf of the United States in the related case of Black v. U.S. urging the Court to uphold the honest services fraud statute in cases in which the public has been deprived of the intangible right of government officials’ honest services. The Court rejected this argument, finding that such an application of the statute is unconstitutionally vague.

CREW executive director Melanie Sloan said, “Today’s 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.” Sloan continued, “Anticipating this ruling, CREW has been advocating a legislative fix. Federal law currently prohibits executive branch employees from taking any official action that affects their personal financial interest. This statute could easily be extended to cover members of Congress and state and local officials to ensure Americans are protected from government officials who sacrifice the public interest for their own private gain.”

Skilling and Enron Founder Kenneth Lay hid company losses and hyped the stock’s value while selling their own shares on the sly as the massive energy empire crumbled.

Thousands of people lost their jobs and life savings when Enron collapsed. The ensuing scandal undermined faith in corporate America and led to a massive stock market sell-off.

Followed by other mega scandals — the collapse of WorldCom, excesses at Tyco — Enron led to significant regulatory changes.

The case was also one of the most complex involving corporate crime in US legal history and represented a high-profile test for the government’s crackdown on corporate wrongdoing.

Lay died of heart failure in July 2006 before he could be sentenced and his conviction on 10 counts of fraud, conspiracy and banking violations was thrown out because his death prevented him from appealing the verdict.

Skilling, who became the poster child for corporate malfeasance, appealed his May 2006 conviction by challenging the federal law that punishes executives who fail to provide “honest services.”

His lawyers argued that the statute is “vague and unenforceable” and does not require proof that the accused received a personal gain from the alleged fraud.

Agence France-Presse
Agence France-Presse
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