Supreme Court Curtails Reach of Honest Services Fraud and Affirms Juror Bias Metric

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On June 24, 2010, the Supreme Court released its much anticipated decision in the prosecution of former Enron CEO Jeffrey Skilling, sharply curtailing the scope of the federal “honest services” fraud statute. The statute, which prohibits depriving another person, such as one’s employer, of the “intangible right of honest services,” had been harshly criticized as unconstitutionally vague and overly broad. Some argued that it unfairly allowed prosecutors to obtain prison sentences for corporate officers and politicians who merely engaged in commonplace, noncriminal, self-serving behavior. The Court’s decision in Skilling v. United States rejected the constitutional challenge to the statute, but only after restricting its reach to a limited “core” of fraudulent conduct involving bribes and kickbacks. Prosecutors now may charge honest services fraud in cases where a private employee accepts bribes or kickbacks, but not where the employee merely acts while subject to an undisclosed conflict of interest.

Skilling was convicted in 2006 on 19 counts of conspiracy, securities fraud, insider trading, and lying to auditors, for his role in Enron’s collapse. He raised two issues in his appeal to the Supreme Court: (1) that the honest services statute was unconstitutionally vague if interpreted to apply to his actions, and (2) that pretrial publicity and community prejudice related to Enron prevented him from obtaining a fair trial in Houston, home of Enron’s headquarters.

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Published In: Business Organization Updates, Constitutional Law Updates, Criminal Law Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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