Supreme Court Takes Up Appeal by Enron’s Skilling

The Supreme Court on Monday heard oral arguments concerning an appeal by former Enron Corporation CEO Jeff Skilling, who was tried and convicted in 2006 on numerous counts of fraud, false statements and insider trading linked to his role in the Enron scandal.

Skilling, currently in prison facing a sentence of over 24 years, is challenging the constitutionality of a 1988 statute that makes it illegal to commit fraud that deprives someone of “the intangible right of honest services.” Prosecutors have used the law, which does not require them to prove that money or property has been stolen, to attack government and corporate corruption.

The statute’s vagueness has prompted the Supreme Court to consider it in three cases this term, and in his appeal Skilling argues that “the statute is nothing more than a common-law fiduciary-breach statute, impermissibly criminalizing whatever wrongful or unethical corporate acts a given prosecutor decides to attack.”

Skilling’s lawyers argue that prosecutors must show that Skilling acted for his own personal gain at the expense of the company, instead of only showing that he was disloyal or dishonest with company employees and customers.

They are also asking that Skilling be given a new trial because of the massive amount of negative publicity that followed Enron’s collapse. “As the trial approached, it became clear that the seismic effect of Enron’s collapse on Houston – frequently compared by residents to the September 11 attacks … eliminated any possibility that Skilling could receive a fair trial there,” Skilling argued in a brief.

But the Justice Department, in a reply brief, argued that the Constitution does not guarantee, “a trial in a venue whose populace has no exposure to the effects of the defendant’s crime or adverse pretrial publicity about it.”

The Justice Department also argued, without success, that the Supreme Court should not hear Skilling’s appeal after the Fifth Circuit Court of Appeals unanimously upheld his conviction. The court also agreed to resentence Skilling because of an error by a lower court. Kenneth Lay, Skilling’s predecessor as CEO, was also convicted, but died in 2006 before being sentenced.

Skilling “would not benefit even if his intentions were correct,” said Solicitor General Elena Kagan in an article on Bloomberg.com, because of his conviction on many other counts that were not tied to the “honest services” statute.

In an unusual move, the court decided to push the Skilling case up on the docket and hear it before either of the other two cases.

Experts say that Skilling’s clear push for a ruling on the constitutionality of the statute could press the court to make a broad ruling.

“The lack of clear guidance” on the statute “has been a problem in this area of criminal law for years,” said Mark Biros, a former federal prosecutor, in an interview with the Wall Street Journal. “It would be helpful to everyone if the Supreme Court steps in.”