A flawed fraud law
Jeffrey Skilling is not an appealing character. As president and chief executive of the energy company Enron, he presided over years of unsavory business transactions and deceitful accounting gimmicks. When the company went bankrupt, leaving thousands of employees and shareholders in the lurch, Skilling was prosecuted, convicted and sentenced to 24 years in prison.
But it is often the least sympathetic defendants who end up seeking and winning redress from the U.S. Supreme Court. In this case, Skilling challenged one of the laws used to convict him, which allows people to be prosecuted for fraud for “depriving another of the intangible right of honest services” — an ill-defined concept that has been taken to mean, in effect, the failure of politicians or corporate executives to act in the best interests of their constituents, shareholders or customers. The law, Skilling argued, was impermissibly vague and left too much discretion to prosecutors.
On Thursday, the Supreme Court agreed — up to a point — ruling that the law went too far and setting a specific limit on its application. Although the justices declined to invalidate the law, preferring to “construe” it rather than “destroy” it, they did conclude that it fails to adequately define the behavior it prohibits. Instead of overturning the law, they limited its application to cases in which the fraud involves kickbacks or bribery paid to a third party.
It would have been preferable if the court had overturned the much-overused law entirely and left it to Congress whether to rewrite it. But the decision correctly identified the flaws in the law, which was so broadly worded that any businessman or politician who deceived his company or constituents about almost anything could be snared. Fraud and corruption must be vigorously prosecuted, but this law allowed prosecutors to make criminal charges out of questionable but not necessarily illegal activities; ultimately, the law meant whatever a judge or prosecutor decided it meant. Justice Antonin Scalia was right that the law “invites abuse by headline grabbing prosecutors in pursuit of local officials, state legislators and corporate CEOs who engage in any manner of unappealing or ethically questionable conduct.”
Thankfully, Thursday’s rulings in Skilling’s case and a similar challenge by flamboyant media baron Conrad Black do not mean that either man will necessarily see his broader conviction overturned; Justice Ruth Bader Ginsburg’s opinions left resolution of both cases to the appellate courts. Prosecutors, however, may have to reconsider other cases, such as that of former Illinois Gov. Rod Blagojevich, who is being tried under the provision, and of Cardinal Roger Mahony of Los Angeles, who is being investigated by federal prosecutors in connection with the Roman Catholic Church sex abuse scandals.
