A partial victory for Jeff Skilling:
High Court Sides With Skilling, Black
By BRENT KENDALL
Wall Street Journal
JUNE 24, 2010, 1:02 P.M. ET
WASHINGTON—The U.S. Supreme Court dealt a blow Thursday to the federal government's high-profile convictions of Enron's Jeffrey Skilling and former media mogul Conrad Black, sending the cases back to lower courts for possible reversal on at least some charges.
The high court, in opinions by Justice Ruth Bader Ginsburg, found fault with a federal law that gives prosecutors the authority to bring cases against executives who deprive companies of their honest services.
The rulings could have a significant impact on some white-collar crime prosecutions. The honest-services law has been a darling of government lawyers because it is broadly worded and gives them room to prosecute a wide range of conduct.
Justice Ginsburg said the honest-services law should be confined only to cover fraud schemes involving bribery and kickbacks. Justice Ginsburg said parts of Mr. Skilling's conviction were flawed, but said the flaws did not necessarily require reversal of his conviction on conspiracy charges.
Based on the court's ruling in the Skilling case, Justice Ginsburg said in a second opinion that the jury instructions in Conrad Black's case were incorrect.
The court expressed no opinions on whether the errors in the Skilling and Black prosecutions were harmless, and instead ordered lower courts to consider those issues.
In a second part of the court's Skilling opinion, the justices rejected the Enron executive's other attack on his conviction, based on the argument that he did not receive a fair trial.
Mr. Skilling's lawyers had contended that the economic damage Enron wreaked on its home city of Houston had so poisoned the jury pool that his trial should have been moved elsewhere. At the very least, Mr. Skilling argued, the trial judge should have scrutinized potential jurors more closely to guard against possible bias. Jury selection in the case lasted just five hours.
Justice Ginsburg said that Mr. Skilling failed to establish that actual bias infected the jury that tried him.
The court's 51-page Skilling opinion produced different lineups of justices on different legal questions. Five justices joined Justice Ginsburg in ruling that Mr. Skilling's honest-services conviction was flawed. Another three justices, led by Justice Antonin Scalia, concurred in that result, but would have gone further and invalidated the federal honest-services statute as unconstitutionally vague.
The court voted 6-3 that Mr. Skilling received a fair trial.
Five justices joined Justice Ginsburg's opinion in favor of Mr. Black, while another three justices concurred in that ruling.
Mr. Skilling was sentenced in 2006 to 24 years in prison for misleading shareholders about Enron's dire condition as it slid toward bankruptcy, even as he made millions of dollars selling shares.
Prosecutors had argued that Mr. Skilling, who was convicted on charges of conspiracy, securities fraud, insider trading and lying to auditors, violated the honest-services law when he allegedly participated in a scheme to deceive the public about Enron's financial health. They said Mr. Skilling's actions benefited his own financial interests because his compensation was tied to the performance of the company's stock.
Mr. Skilling's legal team had argued that his actions were taken to protect Enron and weren't motivated by personal gain. His lawyers said the crime of "honest services" fraud was too vaguely defined to be constitutional.
In Conrad Black's case, prosecutors had alleged that Mr. Black, the former chairman of Hollinger International Inc., and other executives supported lavish lifestyles by siphoning off millions from the company through bogus management fees and noncompetition agreements as Hollinger sold off many of its smaller newspapers.
The prosecution alleged that the Hollinger executives stole the money, but in a related legal theory, also alleged that the executives deprived Hollinger of their honest services as managers of the company.
Mr. Black, who was convicted in 2007 and is serving a 6 1/2 year prison sentence, had argued that the government's reliance on the honest-services law meant that the jury could have convicted him even if it didn't believe he stole anything.
A jury convicted Mr. Black on three counts of mail fraud and one count of obstruction of justice, though it acquitted him on nine other fraud counts.
Mr. Black and the other executives said they did not steal from the company, but instead sought to structure certain management fees in a way that the payments they received would not be taxable.
Mr. Black built Hollinger into what once was the world's third-largest newspaper company. At one time it operated more than 300 newspapers, including the Daily Telegraph in London, the Jerusalem Post in Israel, the Chicago Sun-Times and Canada's National Post.
The company is now much smaller and operates under the name Sun-Times Media Group Inc.
Write to Brent Kendall at brent.kendall@dowjones.com
online.wsj.com |
