The US Supreme Court scaled back a favourite tool used by prosecutors in fraud cases, ruling in favour of Jeffrey Skilling on his conviction for leading the Enron Corp accounting fraud while stopping short of granting him a new trial.
The court also sided with former Hollinger International Chairman Conrad Black, telling a lower court to reconsider his corporate fraud conviction.
With both men, the effect on their convictions will be determined by lower courts. Skilling’s lawyers said before the ruling that a victory on the honest-services question would give them grounds to seek reversal of the rest of the conviction, along with his 24-year sentence. The government has said even the conspiracy verdict that was directly before the high court might not have to be overturned.
“We’re back in the game,” Daniel Petrocelli, Skilling’s lead lawyer, said in a telephone interview. He said today’s ruling would be “fatal to the government’s case.”
Black was convicted of mail fraud and obstruction of justice and sentenced to six and a half years in prison. As with Skilling, his lawyers will have a chance to seek invalidation of the entire verdict, while the government can argue that the entire conviction should stand.
Writing for the court, Justice Ruth Bader Ginsburg said the law, which covers fraud schemes to “deprive another of the intangible right to honest services,” was so vague it could be constitutionally applied only to cases involving bribery or kickbacks. The ruling raises questions about potentially hundreds of other convictions and pending prosecutions.
The justices were unanimous in saying the honest-services law couldn’t be applied to Skilling and Black. Three justices — Antonin Scalia, Clarence Thomas and Anthony Kennedy — would have gone further and struck down the law even for bribery and kickback cases.
Skilling, Enron’s former chief executive officer, was convicted on 19 counts. The honest-services ruling directly concerns only one of those: for conspiracy to commit fraud.
He was convicted in May 2006 alongside Kenneth Lay, the former Enron chairman who died less than two months later. A federal appeals court upheld the conviction. Skilling is serving his sentence in a federal prison in Colorado.
