Exposing the extent to which criminal law has expanded, the Supreme Court today narrowed the scope of the federal “honest services” fraud statute and called into question the validity of Enron executive Jeffrey Skilling’s conviction. Justice Sonia Sotomayor and two other “liberal” justices would have gone even further than the majority and granted Skilling a new trial. All nine justices agreed, however, that the government’s “honest services” theory overreached.
Using astoundingly vague, overbroad language, the “honest services” statute makes it a federal crime, punishable by up to 20 years in prison, for anyone to engage in a “scheme or artifice to deprive another of the intangible right to honest services.” At best, such free-ranging criminalization operates as a trap for the unwary. At worst, it destroys lives.
Consider the 2006 conviction of Wisconsin civil servant Georgia Thompson. Thompson was in charge of procuring travel services for state employees. Her “honest services” violation was awarding a contract to the travel agency with the second-best service and lowest price. Neither Thompson nor anyone else was accused of taking a bribe, receiving a kickback, or having an interest in or connection with the winning bidder.
Instead, according to federal prosecutors the improper benefits Thompson derived from awarding the contract to the winning bidder was “mak[ing] her supervisors look good” and “improv[ing] her job security.” In short, Thompson was charged with doing a good job.
A three-judge appellate panel eventually ordered Thompson’s immediate release from prison. By that time, however, Thompson had already spent more than $100,000 in legal fees and lost her home, her job, and her reputation. She had also served four painful months in a federal penitentiary after prosecutors refused her request to remain free pending appeal.
The Court concluded in today’s decision that when Congress enacted the “honest services” statute it intended to limit the law to real crimes – bribery and kickbacks. The majority based this on judge-made law that the Court itself struck down in its 1987 decision in McNally v. United States. This result is a step in the right direction.
But as Justices Scalia, Thomas, and Kennedy explained in their concurrence, the pre-McNally cases really “provide no clear indication of what constitutes a denial of the right to honest services.” While the legal invention limiting the scope of the statute is welcome, it certainly is more creative than correct. And it fails to explain why the “honest services” statute should criminalize bribes and kickbacks when they are already – and far more clearly – defined as crimes under multiple federal and state laws.
Skilling also argued that the poisonous atmosphere that the Houston Chronicle and other media outlets created in Houston after Enron’s demise made it improper for the trial judge to deny his motion to move the trial to another city. As Justice Sotomayor pointed out in her dissent (joined by Justices Stevens and Breyer), when it came to Enron and Jeffrey Skilling, the media eschewed the restraint it often displays when describing accused terrorists, murderers, and rapists. Among many other imputations of guilt, the Chronicle characterized the indictment of Skilling as “long overdue,” referred to him as an “idiot,” and derided his attempts to fight the charges as “the doofus defense.” Only about five percent of the prospective jurors said they did not regularly read the Chronicle. Sotomayor and two other justices thus found it unsurprising that two-thirds of the prospective jurors freely used terms such as “greedy,” “deceitful,” “totally unethical and criminal,” “a crook,” and “guilty as sin” to describe Skilling.
The majority, however, rejected Skilling’s claim. The Court agreed that Enron’s demise and Skilling’s trial were “prominent,” but said that prominence “does not necessarily produce prejudice, and juror impartiality . . . does not require ignorance.” The majority emphasized that Houston is a large city with a “large, diverse pool of potential jurors,” that four years elapsed between Enron’s bankruptcy and Skilling’s trial, and that the jury acquitted Skilling of other counts against him. The Court did not find the evidence of actual prejudice among jury members to be conclusive.
The Court decided two other “honest services” fraud cases today. Canadian newspaperman Conrad Black was convicted because he allegedly did not provide enough detail to his corporate board of directors about how he chose, for tax purposes, to characterize payments to which he was entitled. It did not matter to the government or the lower courts that Black was entitled to every dollar he received, that his tax characterizations were perfectly legal, or that his companies lost nothing. Alaskan state legislator Bruce Weyhrauch was charged based on an alleged conflict of interest even though prosecutors have essentially admitted that Weyhrauch had not violated any conflict-of-interest or ethics law. Both cases were vacated and remanded to the lower federal courts for further consideration in light of the Supreme Court’s decision in the Skilling case.
