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VOL. 124 | NO. 202 | Wednesday, October 14, 2009

Supreme Court Will Hear Appeal of Enron's Skilling

MARK SHERMAN | Associated Press Writer

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WASHINGTON (AP) - The U.S. Supreme Court said Tuesday it will take up former Enron CEO Jeff Skilling's appeal of his convictions for his role in the collapse of the energy giant, accepting another high-profile challenge to a favorite tool of prosecutors in white-collar and public corruption cases.

Skilling's appeal stems from his convictions in 2006 on 19 counts of conspiracy, securities fraud, insider trading and lying to auditors involving the 2001 collapse of Enron.

The justices already are entertaining similar claims from former newspaper magnate Conrad Black and a former Alaska lawmaker ensnared in a public corruption scandal.

At issue in all three cases is prosecutors' use of the federal "honest services" fraud statute, a 28-word law that critics call vague and unfair. Among the federal charges against former Illinois Gov. Rod Blagojevich is an "honest services" count, while his predecessor, former Gov. George Ryan was convicted of it.

The law makes it a crime to deprive shareholders or the public of "the intangible right to honest services."

Former federal prosecutor Peter Zeidenberg said the court probably will rein in the use of the law. "The betting is it's going to get a bit of a haircut," said Zeidenberg, who prosecuted some public officials for honest services fraud.

Zeidenberg, now a partner at the DLA Piper law firm in Washington, acknowledged that it is easier to prove honest services fraud than bribery, which typically requires demonstration that some promise was made or action was taken in exchange for money.

"I think a lot of defense attorneys would say it's a refuge for prosecutions that otherwise don't measure up," he said.

Honest services charges have been used regularly in public corruption cases stemming from the Jack Abramoff lobbying scandal, including in an ongoing trial of a former Abramoff associate. A few blocks from the Supreme Court, Kevin Ring's defense lawyers told the judge overseeing the trial that the high court had agreed to hear Skilling's appeal.

Skilling, serving a 24-year prison term, says he was improperly convicted. He says prosecutors did not show that he personally benefited from his allegedly fraudulent actions. Federal courts are split over whether prosecutors must prove a defendant's private gain to convict under the law.

Black, the former chairman and chief executive of the Hollinger International media company, is arguing a different point. He says the $5.5 million that he and other executives received from a Hollinger subsidiary was money that they were owed. They can't be convicted of fraud, Black says, when they did no harm to the company.

Skilling also is claiming that he did not receive a fair trial in Houston following Enron's collapse, describing "blistering daily attacks" in the media. "Skilling was pronounced guilty throughout Houston long before trial," his lawyer, Daniel Petrocelli, said in his court filing.

A ruling in his favor on the fair trial claim probably would result in a new trial. The effect of the ruling on honest services is unclear since Skilling was convicted on other charges as well, including securities fraud.

"We are so relieved," Petrocelli told The Associated Press Tuesday "We've been waiting almost three years now since Jeff was convicted. You know, the stain of the Enron story has been hard to overcome. And the Supreme Court has decided it's going to give us a full, frank and fair hearing."

Petrocelli said Skilling's legal team spoke with the former Enron CEO Tuesday. "He's in tears, as many of us are. We cannot wait to go before the Supreme Court and argue our case," he said.

No date has been set for the argument, but it will be held early in 2010.

In January, the 5th U.S. Circuit Court of Appeals in New Orleans upheld the convictions, but ordered Skilling's prison term reduced.

Skilling is the highest-ranking executive to be punished for the accounting tricks and shady business deals that led to the loss of thousands of jobs, more than $60 billion in Enron stock value and more than $2 billion in employee pension plans after the company imploded in 2001.

Company founder Kenneth Lay also was convicted of conspiracy, fraud and other charges, but his convictions were vacated after he died less than two months later of heart disease.

In 2005, the Supreme Court overturned the conviction of Arthur Andersen LLP, Enron's auditor, on charges of destroying Enron-related documents.

In June, the justices sided with former Enron executive F. Scott Yeager in a ruling that makes it unlikely he can be tried a second time on charges related to the company's collapse.

The case is Skilling v. U.S., 08-1394.


Associated Press writer Michael Graczyk in Houston contributed to this report.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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