U.S. Supreme Court: Will justices hobble corruption posse?

Dec. 6, 2009 at 2:15 AM
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WASHINGTON, Dec. 6 (UPI) -- Enron's Jeffrey Skilling, former Illinois Gov. Rod Blagojevich, jailed media baron Conrad Black -- all their high profile cases, and many more, could be affected or even gutted by a U.S. Supreme Court ruling later this term that could hogtie federal prosecutors and void convictions.

At stake is the federal prosecutor's favorite violation in a law used frequently against public officials and corporate executives: fraud through the denial of "the intangible right of honest services."

Congressional enactment of the honest services fraud law was spurred by a 1987 Supreme Court ruling that barred the use of federal fraud statutes against a Kentucky official who had diverted the state's insurance business to cronies. There was no evidence he had been bribed to do so.

In response to the ruling, Congress added a short provision to the federal fraud statute that said, "For the purposes of this chapter, the term scheme or artifice to defraud includes a scheme or artifice to deprive another of the intangible right of honest services."

Honest services fraud is a far more subtle concept -- critics call it unconstitutionally vague -- than outright bribery, though bribery can be an element of the crime. One federal appellate judge said honest services fraud simply occurs whenever a corporate officer or a public official misuses his or her position for private gain -- even if the gain isn't money.

One highly public use of the provision was in the prosecution of Black, the Montreal-born media mogul. Black controlled Hollinger International, a conglomerate that controlled a number of newspapers, including the Chicago Sun-Times and Canada's National Post.

Black, now serving his 6 1/2 year sentence in a federal prison in Florida, asked the Supreme Court to review his conviction, and those of two fellow executives, in federal court in Illinois for diverting $6.1 million from Hollinger in a complicated series of deals.

In his petition to the Supreme Court, Black's lawyers say the lower courts are "hopelessly divided" on how the federal honest services statute should be applied to private citizens, and whether the statute "applies to the conduct of a private individual whose alleged 'scheme to defraud' did not contemplate economic or other property harm to the private party (Hollinger) to whom honest services were owed."

In other words, no intent to harm, no foul.

The Supreme Court is scheduled to hear Black's case Tuesday, along with that of a former Alaska legislator charged under the same law.

Bruce Weyhrauch was a member of the Alaska House of Representatives when he was accused of favoring an Alaskan oil company, the VECO Corp., in hopes of future employment -- he voted in favor of a tax bill favoring VECO but didn't get the job.

The federal trial judge threw out evidence used for the honest services charge, saying it merely showed Alaska could have required Weyhrauch to disclose the conflict of interest, not that Weyhrauch had violated any duty imposed by state law.

A federal appeals court reversed, ruling that the government did not have to prove an independent violation of state law, Oyez reported, for a violation of the federal honest services statute. The appeals court said the evidence had to be included to prove that state law imposed a duty on Weyhrauch to reveal the conflict of interest.

Weyrauch wants the Supreme Court to decide whether a state law has to be violated by an official as part of the honest services violation.

The Weyrauch case led to the prosecution against then-Sen. Ted Stevens, R-Alaska, who accepted an expensive remodeling of his home from a VECO executive and others. Stevens was found guilty of making false statements to federal investigators, but the conviction was thrown out because of government efforts to hide evidence that might have helped the senator.

The Black and Weyrauch cases are not the only honest services cases before the Supreme Court this term though rulings in their cases should affect all the others.

The justices also have agreed to review Skilling's case, though argument has yet to be scheduled. Skilling, now in a federal prison in Texas, was sentenced to 24 years and four months and a $45 million fine for crimes linked to the collapse of Enron in 2001. One of the issues Skilling is asking the Supreme Court to review is whether the honest services fraud law is "unconstitutionally vague."

But in addition to challenging the honest services fraud statute, Skilling maintains the enormous publicity surrounding his case made it impossible to have a fair jury.

The Obama administration has asked the high court to hold the Skilling case until after the rulings in the Black and Weyhrauch cases.

An analysis for the First Amendment Center, a free expression advocacy group, says the court's agreement to take the Skilling case may mean the justices have something new to say about pretrial publicity as well as the honest services law.

Kevin Goldberg, outside counsel for the American Society of News Editors, told the center the justices "could be thinking that in the Internet era, pretrial publicity is not as easy a question anymore."

Skilling's briefs to the high court point out that a column headline in the Houston Chronicle read, "Your Tar and Feathers Ready? Mine Are," and even a local rap song urged listeners to "Drop the S off Skilling."

The Chronicle itself points not to publicity, but to the honest services statute and how prosecutors use it. Barry Pollack, a Washington lawyer who participated in two Enron cases, told the newspaper, "The Enron Task Force doesn't have a great record on appeal." The high court ruled favorably earlier in the cases of two more minor Enron figures.

Supreme Court rulings in the Black and Weyhrauch cases could even reach the case of Blagojevich, the impeached Illinois governor, who faces trial in June on federal corruption and fraud charges.

Blagojevich is best known for allegedly planning to trade President-elect Barack Obama's vacated U.S. Senate seat for some kind of reward, but the Chicago Tribune points out, "Honest services fraud plays a prominent role in the indictment of ... Blagojevich, who is accused of depriving state residents of his honest services through a scheme involving kickbacks and other alleged dirty deeds."

Blagojevich has not challenged the honest services statute, but the Tribune suggests, "Maybe his next stop should be on the steps of the Supreme Court."

Despite the stakes, there hasn't been much analysis on how the Supreme Court will rule in the Black and Weyhrauch honest services cases. But at least four justices must vote to accept a case for review, meaning there is a sizable bloc on the nine-member court that at least wants to say something about the law.

One court member, conservative Justice Antonin Scalia, is already on record as condemning the statute.

Last February, the Supreme Court refused to review the cases of three aides to Chicago Mayor Richard Daley who were convicted of honest services fraud in 2006.

Scalia dissented in an extensive opinion to the denial of review.

"If the 'honest services' theory -- broadly stated, that officeholders and employees owe a duty to act only in the best interests of their constituents and employers -- is taken seriously and carried to its logical conclusion," Scalia said, "presumably the statute also renders criminal a state legislator's decision to vote for a bill because he expects it will curry favor with a small minority essential to his re-election; a mayor's attempt to use the prestige of his office to obtain a restaurant table without a reservation; a public employee's recommendation of his incompetent friend for a public contract; and any self-dealing by a corporate officer. Indeed, it would seemingly cover a salaried employee's phoning in sick to go to a ball game. ... Quite a potent federal prosecutorial tool."

Scalia said federal appeals courts "have spent two decades attempting to cabin the breadth of (the honest services statute) through a variety of limiting principles. No consensus has emerged.

"Without some coherent limiting principle to define what 'the intangible right of honest services' is, whence it derives, and how it is violated," he added, "this expansive phrase invites abuse by headline-grabbing prosecutors in pursuit of local officials, state legislators and corporate CEOs who engage in any manner of unappealing or ethically questionable conduct."

However, Scalia may not have it all his own way on the high court bench. Several other court members may have some sympathy for prosecutors.

Justice Stephen Breyer was an assistant special Watergate counsel in 1973. And the two most junior members of the court, Justices Samuel Alito and Sonia Sotomayor, were federal prosecutors early in their careers.

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