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“Honest services” law pared down


For nearly a quarter of a century, federal prosecutors pursuing corruption cases — involving public officials and those in private life — have had a broadly worded criminal law available, and they have used it both creatively and expansively.  On Thursday, the Supreme Court, while refusing to strike down the law under the Constitution, pared it down to what the majority called its “solid core”: the law may be used only to prosecute bribery or kickbacks.  The Court suggested that Congress may want to try to expand the law’s reach, but warned the lawmakers to approach that prospect with constitutional hesitation.

In a separate ruling, also quite significant, the Court made it far harder for defense lawyers in high-profile criminal cases to try to undo guilty verdicts that were reached in a community that was saturated, for months on end, with highly inflammatory publicity and detectable local hostility.   The Court indicated it would find verdicts impaired by those conditions only in “the extreme case.”

Three separate rulings, threatening (though not quite nullifying) convictions or prosecutions in three different criminal  corruption cases, put an exclamation point on the defeat for government prosecutors in their efforts to salvage wide discretion in employing the so-called “honest services fraud” law, enacted in 1988 in an attempt to overturn a 1987 Supreme Court ruling.  The lead ruling — producing 105 pages of often deeply conflicting views — came in the case of a former Enron Corp. official convicted in one of the government’s biggest corruption cases ever. That case, Skilling v. U.S. (08-1394), involved former Enron CEO Jeffrey K. Skilling.  Based largely on the Skilling decision, the Court also questioned convictions in the case of Black v. U.S. (09-876).  It also summarily disposed of a third case, Weyhrauch v. U.S. (09-1196).  Each case must now return to a lower court for another look.   (It was in Skilling’s case, alone, that the Court raised significantly the barrier to contesting guilty verdicts based on unfavorable publicity surrounding a high-profile criminal trial.)

Almost from the day Congress enacted the law specifying that fraud can be committed by denying someone the ‘intangible right” to one’s “honest services,” lower courts have struggled to define just what kind of wrongdoing would fit within that concept.   Perhaps to illustrate just how uncertain the meaning of the law is, the Justices themselves could not agree on Thursday on how to read the string of lower court decisions that have interpreted the law; six Justices thought the pattern of those rulings was quite clear and definite, but three other Justices said the rulings were a hodgepodge.

The three Justices who read those rulings as varying widely would have struck down the law as unconstitutionally vague.  But the other six Justices proceeded on the premise that the Court’s duty was “to construe, not condemn, Congress’ enactments.”  And the construction those Justices put on the law was that it criminalizes “bribes and kickbacks — and nothing more.”

The majority thus rejected Justice Department arguments that the law should also be available for prosecuting for “self-dealing” — that is, taking some action that gives one personal gain, without disclosing that fact — or going after conflicts-of-interest.  Reading the law as covering anything but bribes and kickbacks, the Court ruled, would raise constitutional questions about enacting a vague law that did not give people clear warning of what was forbidden.   (Near the end of the main opinion, the Court in a footnote suggested that, if Congress were to try to add new crimes under the “honest services” law, it would “leave many questions unanswered,” so the lawmakers should proceed with “particular care.”)

Those parts of the ruling, in the main opinion written by Justice Ruth Bader Ginsburg, had the support of Chief Justice John G. Roberts, Jr., and Justices Samuel A. Alito, Jr., Stephen G. Breyer, Sonia Sotomayor and John Paul Stevens.   Justices Antonin Scalia — a long-time critic of the “honest services” law — would have struck down the law as too vague to satisfy the Constitution.  His opinion had the support of Justices Anthony M. Kennedy and Clarence Thomas.

The dissenters argued that the majority had not simply reinterpreted the “honest services” law, but had actually enacted a new law as if it were doing a legislative task.  Of all of the lower court rulings applying that law in specific cases, Justice Scalia wrote for the dissenters, “not one is limited to bribery and kickbacks.  That is a dish the Court has cooked up all on its own.”  Because the law’s meaning is so unclear, the dissenters said, it cannot be salvaged by an act of judicial “invention.”

In the Skilling case, the former Enron executive had been convicted of a conspiracy to commit fraud, and that charge was based on prosecutors’ claim that Skilling had denied his company his “honest services.”  He also was convicted of twelve counts of securities fraud, five counts of making false statements to accountants, and one count of insider trading.  (He was found not guilty on nine other counts of insider trading.)  As a result of Thursday’s ruling, the conviction on the conspiracy  count is to be reevaluated by lower courts, according to the Court.  But the Court gave both sides some options when the case goes back to lower courts.  It told prosecutors they could try to sustain the conspiracy conviction by showing that it was only a “harmless error” to gain a conviction on that count based on an “honest services” theory.  It told Skilling’s defense lawyers that they could attempt to persuade lower courts that every count of his conviction was tainted by the “honest services” fraud charge, so all parts of the guilty verdict should fall.  Thus, it was clear that, on Thursday, the Supreme Court itself had not nullified Skilling’s conviction in any final way.

Skilling had earlier won a resentencing in the case, but that has been on hold while his case went to the Supreme Court.  The sentencing issue now will be expanded because of the ruling on the “honest services” issue.  But Skilling’s lawyers also have plans to seek a completely new trial, on the theory that prosecutors denied them access to information that would have helped the defense.

In the Court’s separate opinion in the Black case, it similarly put into doubt the conviction of former Canadian newspaper magnate Conrad M. Black as well as those of two of his corporate colleagues, but did not overturn their convictions outright.  Black and his colleagues had been convicted of violating the “honest services” fraud law by a scheme of corporate compensation that prosecutors attacked as violating duties they owed to the newspaper corporation, Hollinger International.

The Court, noting its Skilling opinion, said that the charge in this other case “did not involve any bribes or kickbacks,” so it ruled that its decision had undercut a jury instruction by the trial judge that they could convict the Hollinger executives if they found that they had misused their positions for private gain or had violated their duty of loyalty to the company.   The executives’ lawyer had properly objected to that instruction, so they were free to challenge that on appeal, the Court ruled, even though they had resisted the use of a clarifying verdict form that could have indicated just what part of the verdict on fraud was based on the denial of “honest services.”

But, as in the Skilling case, the Court said that lower courts were free to consider whether the flawed instruction was a “harmless” error; thus, it did not nullify the fraud conviction explicitly.  The Court also indicated that Black, who had also been convicted of obstructing justice by destroying records, could raise in lower courts his argument that the “honest services” evidence had spilled over to taint the obstruction conviction.

Justices Kennedy, Scalia and Thomas repeated in the Black case their argument that the “honest services” prosecution had to be overturned because of their view that the law is unconstitutionally vague.

The Court’s third ruling in this trio of cases was a one-paragraph, unsigned opinion (delivered orally by Justice Ginsburg) in the case of Bruce Weyhrauch, a Juneau, Alaska, lawyer, who had been charged with “honest services” fraud for allegedly attempting to obtain legal work from an oil field services company while he was a member of the state legislature, allegedly in return for his voting on tax measures that the company, VECO Corp., had favored.  The “honest services” charge was based on prosecutors’ assertions that Weyhrauch had failed to disclose to voters that he was seeking such favors as a legislator.

Weyhrauch has not yet been tried on any charges.  On the “honest services” fraud charge, the Ninth Circuit Court had ruled that the case could go ahead even without any proof that the legislator had a duty under state law to disclose his alleged conflict-of-interest.  Thursday’s Supreme Court ruling simply wiped out that ruling, and returned the case to the Circuit Court to consider the impact of the Skilling decision.  Weyhrauch has been accused in the case of other crimes.

The “honest services” issue was only half of what the Court decided in the Skilling case.  With a different pattern of voting among the Justices, the Court rejected Skilliing’s claim that his entire trial — and thus all of the convictions — was unconstitutionally unfair because of the atmosphere in which it was tried in Houston — Enron Corp.’s home city — in 2006.

Justice Ginsburg’s opinion finding that Skilling suffered no “actual prejudice” at the trial was supported in whole or significant part by the Chief Justice and Justices Alito, Kennedy, Scalia and Thomas.   Justice Alito wrote a separate opinion on that issue, saying he would strike down a jury verdict as unfair only if there were actual proof that a biased juror was actually seated at the trial.  Justice Sotomayor dissented, joined by Justices Breyer and Stevens.

There is a very sharp divergence between the Ginsburg and Sotomayor opinions, in how each interpreted the publicity and the community atmosphere that surrounded the Houston trial of Skilling and another top Enron executive, Kenneth Lay (who also was convicted, but who died later). and in how each opinion interpreted the efforts by the trial judge to ensure that an impartial jury was chosen for the trial.   The Ginsburg opinion was far less impressed with the negative atmosphere than were the dissenters, and far more favorably inclined toward the actions of the trial judge.   (The trial judge was U.S. District Judge Simeon T. “Sim” Lake of Houston; he is not named in either opinion. which is quite customary.)

The majority of the Court rejected two claims by Skilling’s lawyers: one, that the atmosphere in Houston — after the economic collapse of Enron, with widespread economic harm, and the drumbeat of accusatory publicity in the local news media — entitled him to a “presumption of prejudice” that should have led the trial judge to move the trial elsewhere, and, two, that the actual conduct of the jury-selection process resulted in “actual prejudice” because the jury was not impartial.  (The dissenters did not object to the majority’s conclusion that the judge did not act unconstitutionally in failing to move the trial out of Houston.)

For the first time, the Court ruled that the “presumption of prejudice” from prejudicial publicity is to be reserved only for “the extreme case,” and the Court cited a handful of its prior rulings in the most extreme cases of prejudice and contrasted those with what occurred in Houston.

After canvassing the jury selection process, and the characteristics of the jurors actually seated in the trial, the majority concluded that Judge Lake had a “sturdy foundation” for his conclusion that a fair jury had been selected.