Supreme Court Narrows Scope of ‘Honest Services’ Law

BY Quinn Bowman  June 24, 2010 at 12:02 PM EST

The Supreme Court ruled Thursday to apply more narrowly a law used to prosecute white-collar crime in response to three separate cases involving the so-called “honest services” law. The decisions were unanimous.

In Skilling v. United States, former Enron CEO Jeffrey Skilling appealed his conviction under the law, arguing that the law is too vague. He was convicted in 2006 on 19 charges of fraud and lying to auditors after Enron collapsed because the company had lied about earnings to inflate stock prices.

Skilling claimed that he did not receive a fair trial in Houston because of media coverage of the company’s collapse made it impossible for the court to provide an impartial jury. The court rejected that claim by a 6-3 verdict.

The court agreed that the use of the honest services law was too vague and said the law should only apply to “bribes and kickbacks.” The court left it to the Fifth Circuit Court of Appeals to decide whether to throw out Skilling’s convictions. He is serving a 24-year prison term, according to the Associated Press.

In March, Marcia Coyle of the National Law Journal explained to the NewsHour’s Margaret Warner Skilling’s argument in the case:

MARGARET WARNER: And, then, finally, Skilling did have another argument, didn’t he, that the law under which he was convicted was unconstitutionally vague?

MARCIA COYLE: Yes.

This is a law that makes it a crime to deprive your — your employer of the right to your honest services. And it’s become a very important tool of the government in prosecutions of public corruption and, in this case, financial fraud.

And, here, Mr. Skilling’s attorney was saying, this is the kind of law where any kind of lie in the workplace could become the focus of a criminal prosecution. The government, on the other hand, is saying, this isn’t any kind of a lie. A CEO of a company owes a duty of loyalty to the shareholders, and Mr. Skilling violated that duty.

MARGARET WARNER: In part because he lied — or is accused of having lied about the condition of the company…

MARCIA COYLE: The condition of Enron.

MARGARET WARNER: … and also made some very profitable stock sales.

MARCIA COYLE: Right. Exactly.

In two other cases, Black v. United States and Weyhrauch v. United States, the court applied a similar judgment, remanding Black’s conviction and Weyrauch’s case to a lower court.

In the first case, newspaper executive Conrad Black and two other company executives of Hollinger International were accused of hiding money from shareholders.

In the latter case, Alaska House of Representative Bruce Weyhrauch was convicted of honest services fraud for promising official acts as an elected officeholder in exchange for future legal work with an oil company.