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Court's weakening of 'honest services' anti-fraud law may affect Enron's Skilling, others

WASHINGTON — The U.S. Supreme Court on Thursday sharply curtailed prosecutors' use of an antifraud law that was central in convicting politicians and corporate executives in many of the nation's most prominent corruption cases. The ex-chief executive of disgraced energy giant Enron and a Canadian media mogul, both in prison, are among the figures who could benefit from the ruling.

The justices voted 6-3 to keep the law in force, even as they joined unanimously in weakening it, and left it to a lower court to decide whether Jeffrey Skilling, the former Enron boss, and Conrad Black, the former newspaper owner, should have their convictions stemming from "honest services" fraud overturned.

The "honest services" law has been criticized by defense lawyers as the last resort of prosecutors in corruption cases that lack the evidence to prove that money is changing hands. It also has been called vague, subjecting people to prosecution for mistakes and minor transgressions in the business and political worlds. But watchdogs consider it key to fighting white-collar and public fraud.

Melanie Sloan, executive director of the government watchdog group Citizens for Responsibility and Ethics in Washington, said the decision "deprives prosecutors of an important tool in their efforts to fight public corruption."

The court, in an opinion written by Justice Ruth Bader Ginsburg, said prosecutors may continue to seek honest services fraud convictions in cases where they put forward evidence that defendants accepted bribes or kickbacks.

"Because Skilling's misconduct entailed no bribe or kickback, he did not conspire to commit honest services fraud under our confined construction" of the law, Ginsburg said. Three justices, Anthony Kennedy, Antonin Scalia and Clarence Thomas, would have found the law unconstitutional.

Thursday's decision does not necessarily mean that any of the 19 counts against Skilling or four counts against Black will be thrown out, Ginsburg said.

It is unclear whether any convictions will be overturned or prison sentences reduced as a result of the decision, lawyers familiar with the fraud law said. Determinations will have to be made case by case.

Justice Department spokeswoman Tracy Schmaler said prosecutors would continue to urge that honest services convictions for Skilling, Black and others be upheld. "While we are disappointed that today's Supreme Court decisions narrowed the honest services statute, we are pleased that the court upheld many of the core provisions that have been used for decades to prosecute corrupt public officials and corporate executives who have breached their duties to their constituents, clients and investors," Schmaler said.

Lawyers for the two men say that the entire case against them should be thrown out.

Skilling was convicted in 2006 of conspiracy, securities fraud, insider trading and lying to auditors for his role in the downfall of the once-mighty Houston-based energy giant. The company collapsed into bankruptcy in 2001 under the weight of years of illicit business deals and accounting tricks. Skilling is serving a sentence of more than 24 years at a minimum security prison outside Denver, although a federal appeals court had ordered a re-sentencing even before Thursday's decision.

Black, serving a 6 1/2-year prison term, and two other former executives were convicted of depriving the Hollinger International media empire of their faithful services as corporate officers. The company once owned the Chicago Sun-Times, the Daily Telegraph of London, the Jerusalem Post and hundreds of community papers across the United States and Canada.

Court's weakening of 'honest services' anti-fraud law may affect Enron's Skilling, others 06/24/10 [Last modified: Thursday, June 24, 2010 8:31pm]
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