Skilling v. United States

2010-06-24

Headline: Limits honest-services fraud to bribery and kickbacks, vacates part of Jeffrey Skilling’s conspiracy conviction, and upholds his Houston trial — narrowing federal fraud liability for corporate executives while leaving other convictions intact.

Holding: The Court held that the honest-services law reaches only bribery and kickbacks, so Skilling’s honest-services-based conviction cannot stand, and it found his Houston trial was not shown to be unfair.

Real World Impact:

Narrows honest-services prosecutions to bribery and kickbacks.
Makes prosecutors require third-party payments to use the law.
Could lead to retrials or resentencing on remand.

Topics: corporate fraud, jury fairness, honest-services law, pretrial publicity, white-collar crime

Summary

Background

Jeffrey Skilling, a former Enron CEO, was tried in Houston for an alleged scheme to hide Enron’s true finances and to enrich executives. Local media covered Enron’s collapse intensively, and many residents lost jobs or retirement savings. Skilling asked for a new trial location and raised objections about jury selection, arguing community hostility and media coverage made a fair trial impossible.

Reasoning

The Court addressed two questions: whether pretrial publicity and local anger denied Skilling an impartial jury, and whether the federal “honest-services” fraud law applies to his conduct. The majority found the Houston jury was not shown to be biased, noting the city’s large jury pool, absence of a dramatic televised confession, the passage of years since Enron’s collapse, and the fact the jury acquitted on several counts. On the statute, the Court concluded §1346 is limited to clear bribe-or-kickback schemes to avoid vague criminal exposure. Because the Government did not allege Skilling took bribes or kickbacks, the Court vacated the part of his conspiracy conviction based on honest-services fraud and sent the case back for further review.

Real world impact

The ruling narrows when prosecutors can use the honest-services law, making wire/mail fraud based on secret financial self-dealing harder to prove without bribes or kickbacks. Corporate officers face less risk under §1346, but other fraud counts remain in play and the lower court must consider whether the error was harmless.

Dissents or concurrances

Justice Sotomayor would have found the jury selection inadequate and would grant relief on the fair-trial claim. Justice Scalia argued §1346 is void for vagueness. Justice Alito emphasized that no biased juror actually sat.