WASHINGTON, D.C. — (DMN) – The Supreme Court on Monday turned aside jailed Enron executive Jeff Skilling’s second appeal, upholding his corporate corruption fraud conviction. The justices without comment rejected call to take another look at the scope of a conspiracy charge — so-called “honest services” fraud. The high court two years ago had given Skilling a temporary victory when it upheld the continued use of the popular federal prosecution tool but limited when it could be used against business executives and politicians. Lower federal courts were ordered to re-examine whether the trial judge should have allowed the jury to consider that charge. A federal appeals court subsequently ruled again for the government, prompting the latest Supreme Court appeal.
Skilling, 58, is currently in federal prison. He was convicted of 19 counts of fraud, conspiracy, and insider trading relating to the collapse of the Texas-based energy services giant in late 2001. His lawyers claimed all 19 convictions should be overturned because he was improperly accused of withholding his “honest services” from Enron’s shareholders, a violation of federal law dealing with fiduciary responsibilities. He had been a longtime executive at what became the world’s largest wholesaler of gas and electricity, with $27 billion traded in a single quarter at Enron’s height. Skilling was named CEO in February 2001, but resigned under pressure six months later as the company began to collapse financially. Thousands of investors and company employees lost their savings and their jobs in a case that became emblematic of corporate corruption cases during the past decade.
Skilling and Enron’s top executive, Kenneth Lay, were accused of spearheading a massive campaign to mislead investors and shareholders with an aggressive investment strategy aimed at suppressing the company’s shaky financial footing. Both men were convicted in May 2006. Skilling was sentenced to more than 24 years in prison and fined $45 million. Lay died in July 2006 before being sentenced. Skilling’s conviction was twice upheld by a federal appeals court. In a related part of his original appeal, the high court had said he was given a fair trial in Houston, where Enron was based, upholding that aspect of his conviction.
His attorneys told the court 60% of prospective jurors said in their initial questionnaires they would be unable to set aside their biases. They also claimed during the so-called “voir dire” part of the trial, in which the jury is selected, the judge spent an average of only 4.5 minutes on each prospect. Skilling also said local media attention should have led to change in venue. But when it came to the “honest services” fraud, the justices in 2010 said the Justice Department failed to make its case against Skilling. “The government did not, at any time, allege Skilling solicited or accepted side payments from a third party in exchange for making these representations” about the energy services company’s financial health. “It is therefore clear, as we read (the law), Skilling did not commit honest-services fraud.”
The court gave no explanation why it decided not to review his latest appeal challenging the conviction. Justice Elena Kagan did not participate in considering the appeal, since she had been at the Justice Department when the original case was argued at the Supreme Court. The 2010 high court rulings were a mixed bag for the Obama administration and the Justice Department, which was allowed to continue pursuing corporate fraud prosecutions, but under somewhat limited circumstances. Congress could now be asked to step in and clarify when “honest services” prosecutions can be used.
The “honest services fraud” argument also has been used to convict ex-lobbyist Jack Abramoff, onetime HealthSouth CEO Richard Scrushy, and former governors Don Siegelman of Alabama and George Ryan of Illinois. Rod Blagojevich, who was impeached and forced to step down as Illinois governor, also faced the same charge at one time. Groups such as the Chamber of Commerce and the National Association of Criminal Defense Lawyers have argued the law can invite abuse by headline-grabbing prosecutors. And some legal experts have said it was being increasingly misused by federal prosecutors as a “catch-all’ statute, added to an indictment when evidence of serious criminal conduct may be thin. The case is Skilling v. U.S. (11-674).