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Skilling may get legal break

The Supreme Court justices, hearing an appeal from former Enron Corp. Chief Executive Jeffrey K. Skilling, strongly hinted Monday that they were likely to overturn his conviction, at least in part, because it rested on the notion that he cheated shareholders of his “honest services.”

Such a ruling would not set Skilling free, but it would lower his 24-year prison term. It also could cast doubt on the convictions of scores of public officials and corporate executives who were sent to prison for dishonest dealings.

Enron collapsed in the fall of 2001 shortly after it became clear that the supposedly highly successful energy trading company’s profits were a mirage. It had lost money on its trades, but its executives, including Skilling, had manipulated the books to make it look as though it were profitable.

Skilling had resigned a few months before the collapse and quickly sold 500,000 shares of his stock before they became worthless.

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Five years later, Skilling was tried in Houston on a series of charges, including securities fraud, conspiracy and insider trading. The jury convicted him on 19 counts and acquitted him on several others. His motion to move the trial elsewhere because Houstonians were outraged by the collapse of Enron had been rejected by the judge.

The justices spent part of the time Monday debating whether the trial judge had done enough to ensure a fair jury for the disgraced executive. Justices Sonia Sotomayor and Stephen G. Breyer were troubled that the judge spent only five hours questioning the jurors.

But more of their colleagues said they were troubled that some of the convictions rested on a violation of the “honest services fraud” law.

The justices, both conservatives and liberals, agree on the principle that a criminal law must clearly state what is a crime. And the law that makes it a crime to “scheme . . . to deprive another of the intangible right of honest services” is anything but clear.

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During Monday’s argument, a lawyer for Skilling said that under the government’s approach, it could be a crime for an employer to use an office computer for his personal use.

Deputy Solicitor Gen. Michael Dreeben struggled to defend the conviction. He said that although the words of the law may be vague, Skilling was convicted of lying and deceit. His “crimes were lying to Enron, lying to its shareholders about the health of the company,” he said. Skilling knew that he had been “engaging in numerous manipulations of earnings.”

But Chief Justice John G. Roberts and Justice Antonin Scalia said they were not convinced. The law was “fuzzy,” they said, and it did not spell out a crime.

It was the third time in recent months the justices have voiced doubt about the “honest services” law. However, even if part of Skilling’s conviction were overturned, government lawyers say some of his conviction for securities fraud should stand.

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david.savage@latimes.com


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