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June 24, 2010

Anyone have ideas how (and how many) federal fraud prosecutions will be impacted by Skilling?

Former Enron CEO Jeff Skilling's name will likely now remain (in)famous for a long time not just because of his role in Enron's collapse and his subsequent prosecution, but also because his case is now the chief one used by the Supreme Court to announce new rules concerning the reach and application of the federal "honest services" fraud statute (basics here, full opinion in Skilling here).  Though I will need to read and re-read today's Skilling decision in order to be able to comment intelligently on its meaning and import, it is not too early to encourage readers to speculate about the ruling's potential impact.

Specifically, there are two parts to my initial inquiry into the import and impact of Skilling: (1) just how might past white-collar convictions and sentences (and how many could) be attacked based on the ruling, and (2) just ho might future white-collar prosecutions be influences by the ruling.  Please share your thoughts in the comments on either or both of these fronts, dear readers.

June 24, 2010 at 10:42 AM | Permalink

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The bit I find amazing is that the court did not undertake the harmless error analysis in either Skilling or Black. I also think it insane that any such error could possibly be harmless, given that you have convictions for activity that can not possibly fit within the court's narrowing framework of what conduct actually violates the statute.

I don't find it at all surprising that Skilling lost the jury bias issue, that always seemed like a major stretch to me, to the point I was surprised they took it.

As for the future, constraining the behavior that can be punished is hardly ever a bad thing. If actual crimes have been committed it should not be hard for a federal prosecutor to come up with charges that withstand scrutiny.

Posted by: Soronel Haetir | Jun 24, 2010 11:09:41 AM

Off the top of my head, shouldn't this be fully retroactive under Teague, since it affects the substantive scope of the statute of conviction, as opposed to procedural aspects of the conviction/sentence?

Posted by: Anon | Jun 24, 2010 1:02:01 PM

this will affect the Michael Segal/Illinois insurance broker case, if retroactive

Posted by: FluffyRoss | Jun 24, 2010 1:26:03 PM

I'm not following the Blagoevich trial closely, but my loose impression is that this decision could affect that case (as in, make it much harder on the prosecution for the honest services portion of the program). If so, then there's another high-profile candidate for the "impacted by Skilling" category.

Separately, I'd be curious to see others's attempts to articulate a necessary-and-sufficient list of conditions of the elements of honest services mail fraud after Skilling. (My own hack attempt at this is here.)

Other questions: the Court tells us "bribery or kickback" prosecutions are in under honest services fraud- does this definitely mean that the defendant must be personally enriched financially? That the defendant must undertake some action in exchange for a discrete (personally-enriching) payment? (Also, since we're back to the pre-McNally "core," are there any pre-McNally cases which viewed campaign contributions as species of bribery or kickbacks? I'm thinking about the Blagoevich case again.)

Posted by: Michael Young | Jun 24, 2010 2:53:26 PM


Jeff Skilling partly prevailed his case today, and seldom has a defendant suffered a more devastating win.


Skilling, it will be recalled, was one of the Enron executives who made a fortune short-selling the stock while lying to shareholders and employees about Enron's true financial condition.

Skilling won what was certainly the most hyped part of the case. That is, he won the vacating of his conviction for conspiring to violate the honest services statute, on the ground that the conviction came about under what the majority decided was an excessively broad construction of the law. But that is pretty much as far as it went for Skilling. The conviction was not reversed; it was remanded to the lower courts to determine whether the error was, against the backdrop of the other massive evidence of Skilling's deceitful behavior, harmless.

Almost everything else in the case was bad news for Skilling and other honest services defendants.

First, Skilling lost his challenge to the trial as a whole as having been undertaken against a backdrop of adverse if not venemous publicity that made a fair trial impossible in the Houston venue. This was to be expected. To hold otherwise woud be to put a premium on the audacity of the defendant's crime. Where, for example, were we to try Timothy McVeigh? The backside of the moon?

Second, Skilling lost his facial challenge to the honest services statute. The Court held point-blank that the statute is not unconstitutionally vague when limited to bribes and kickbacks. It was not so limited in the instructions given on the conspiracy count at Skilling's trial, so Skilling won the vacating of that single count. But, for two reasons, the Department of Justice must be thrilled that the statute survived.

The first is that, as the Court pointed out, "The 'vast majority' of the honest-services cases involved offenders who, in violation of a fiduciary duty, participated in bribery or kickback schemes." Thus the statute remains available without legislative re-writing for almost all the cases in which the Department would want to use it, including the on-going trial of former Illinois Governor Rod Blogojevich. The honest services charge against him rests principally on the theory that he was seeking an old-fashioned bribe.

The second reason the Department should be thrilled is that most observers of the oral argument had already counted the statute as dead meat. Justice Scalia, who dissented here, was leading the charge against it, and it was hard to find a single voice on the Court who resisted his attack. But in the opinion, Scalia was able to carry with him only Justices Thomas and Kennedy. Justice Breyer, who had seemed openly to riducule the statute at oral argument, joined the majority finding the statute constitutional, as limited.

The good news for the government doesn't stop there. The Court noted that, while the legislative language adopted in response to the Court's first limiting decision about the statute in the 1987 McNally case still left it too vague, Congress could try again. Indeed it repeated verbatim its observation in McNally that, if Congress wanted to cover boader forms of dishonesty -- for example, self-dealing and undisclosed conflicts of interest that do not directly result in financial harm to the betrayed party -- it could do so, but "it must speak more clearly than it has." Writing statutory language that will reach these somewhat less concrete forms of dishonesty presents a daunting, but not insuperable, legislative task.

The best news for the government may be in the longer-term implications of the approach the Court used to preserve the core of the honest services statute. From a law professor's point of view, the most interesting aspect of the decision is the debate between Justice Ginsburg and Justice Scalia about whether a limiting construction of a statute amounts to respect for, or an abrogation of, Congress's sole power to write the law. Scalia accuses the majority of simply judicially enacting the honest services statute it wants. Ginsburg answers that preservation of the statute, in a mildly limited form -- but in a form consistent with the decided majority of interpretations adopted over many years of lower court interpretation -- shows respect for Congress and restraint in exercising the Court's power to invalidate a statute in its entirety.

Reasonable minds will differ on who won that debate. But what is most telling is that each side was trying to show that it was the most devoted to judicial restraint and deference to Congress as the law-writing body. Compared with the breezy if not nearly unconscious assumption of judicial supremacy of the Warren Court, this is itself gratifying -- and important. It is also a signal that the conservative legal movement, while far from universally successful in winning substantive points over these last few years, has changed the terms in which the debate is conducted.

Posted by: Bill Otis | Jun 24, 2010 4:42:04 PM

As indicated by Anon, it appears to be substantive and should not be limited by Teague (although I admit I have only glanced at the opinion at this point). However, there could be procedural default and statute of limitations issues. It may be possible to get around some problems by proceeding under 28 U.S.C. § 2241 if § 2255 is no longer available. The following is from a brief that is a few years old.

Teague only applies to procedural rules and not to decisions by the Court regarding the elements of a crime (which are substantive in nature). Bousley v. United States, 523 U.S. 614, 620 (1998); see also, Logan v. United States, 434 F.3d 503 (6th Cir. 2006) (§2255 petitioner could utilize the decision in Jones, that redefined the relevant statute by imposing an additional element, serious bodily injury or death resulting from the crime, in order to increase the statutory maximum penalty, that had previously been considered a sentencing factor); Callanan v. United States, 881 F.2d 229, 231 (6th Cir. 1989) (involving substantive decision in McNally v. United States, 483 U.S. 350 (1987) that held defrauding public of intangible rights was not a basis for mail fraud) cert. denied 493 U.S. 1083 (1990); Murr v. United States, 200 F.3d 895, 905-906 (6th Cir. 2000) (decision in Richardson v. United States, 119 S.Ct. 1707 (1999), which interpreted 21 U.S.C. §848 as requiring findings of “which specific ‘violations’ make up [the] “continuing series [of violations]”, added extra elements to the crime, was substantive in nature and that Teague did not apply in 2255 proceeding) citing Bousley, supra; In re Hanserd, 123 F.3d 922, 926 (6th Cir. 1997) (petitioner could utilize decision in Bailey v. United States, 516 U.S. 137 (1995) that narrowed definition of illegal “use” of firearm).

Posted by: Tim Holloway | Jun 25, 2010 2:49:40 PM

I agree with Tim, above, that "Teague" analysis does not apply to the "Skilling" decision concerning the reach and scope of the "honest services fraud" statute, 18 U.S.C. sections 1341, 1346. "Bousley" 523 U.S. 614,620(1998),and cases cited therein, make this clear. Bousley involved the retroactive effect of the Supreme COurt's "Bailey" gun decision. Decisions of this kind (interpreting the meaning of a Federal criminal statute) automatically have retroactive effect, because they say (define) what the statute has actually meant since the day it was enacted by Congress.

Those still incarcerated or on supervised release can use 28 U.S. C. section 2255 (Motion for Habeas Corpus) to attack their "honest services fraud" convictions and seek to have them vacated. Note that they can use 2255 even if they are beyond 1 year after their convictions have become final, since "Skilling" is a new Supreme Couirt decision that automatically (as a matter of law) has retroactive effect. See, section 2253.

For those who have "honest services fraud" convictions that don't invovle bribery or kickbacks and who have already completed their sentences, including supervised release, the proper vehicle is to file a Petition for a Writ of Error Coram Nobis. Although I don't have access to the citation at home on Sunday, as I write, you can see an example of what I am describing by searching for an Eleventh Circuit case called "Peters v. United States", where the long ago convicted defendant obtaied a Writ of Error Coram Nobis when the Supreme Court ruled (as in "Skilling") concerning the meaning of another Federal criminal statute, after the defendant had completed his sentence. I predict that a mini-boom in post-conviction "honest services fraud" cases will occur in the Federal Courts as a result of this decision.

Posted by: Jim Gormley | Jun 27, 2010 12:40:30 PM

After writing my prior post here, I did a little on-line research to provide support to what I wrote. The Eleventh Circuit "Coram Nobis" case I referred to is "United States v. Michael J. Peter", 310 F.3d 709, 712 (11th Cir.2002); it gives the rationale and road map on how to proceed in attacking an "honest services fraud" conviction after the defendant has completed his sentence and term of supervised relief. The Writ of Error Coram Nobis is available under the "All Writs Act", 28 U.S.C. section 1651. THe Supreme Court says that a Writ of Error Coram Nobis is available to attack a conviction under these circumstances. "United States v. Morgan", 346 U.S. 502, 509 n.15, 512-13 (1954). A "not too old" decision from the Fifth Circuit explains the interface between 2255 (defendant is 'in custody' or still serving supervised release) and Coram Nobis (defendant has completely finished serving his sentence), when the Supreme Court renders decisions interpreting the statutory meaning and scope of Federal criminal statutes. See, "United States v. Esogbue", 357 F.3d 532 (5th Cir.2004). I hope these citations help.

Posted by: Jim Gormley | Jun 27, 2010 1:41:04 PM

I think the coram nobis would even work if there is a plea agreement and appellate waiver because this goes to subject matter jurisdiction. It is settled law that a defendant can never waive subject matter jurisdiction. I have a client in the ninth circuit that perfectly fits this profile. I am not a appellate attorney. Any recommendations on a good appellate attorney for this in the ninth. I always felt that he was a political target. Case evolved during a hotly contested election. Involved some random theory of failure to disclose. Did not even involve a conflict of interest. Definately no bribery or kickbacks alleged. But there was an appellate waiver and plea agreement. Any thoughts?

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Posted by: Supra Skate | Oct 30, 2010 5:56:51 AM

After writing my prior post here, I did a little on-line research to provide support to what I wrote. The Eleventh Circuit "Coram Nobis" case I referred to is "United States v. Michael J. Peter", 310 F.3d 709, 712 (11th Cir.2002); it gives the rationale and road map on how to proceed in attacking an "honest services fraud" conviction after the defendant has completed his sentence and term of supervised relief. The Writ of Error Coram Nobis is available under the "All Writs Act", 28 U.S.C. section 1651. THe Supreme Court says that a Writ of Error Coram Nobis is available to attack a conviction under these circumstances. "United States v. Morgan", 346 U.S. 502, 509 n.15, 512-13 (1954). A "not too old" decision from the Fifth Circuit explains the interface between 2255 (defendant is 'in custody' or still serving supervised release) and Coram Nobis (defendant has completely finished serving his sentence), when the Supreme Court renders decisions interpreting the statutory meaning and scope of Federal criminal statutes. See, "United States v. Esogbue", 357 F.3d 532 (5th Cir.2004). I hope these citations help.

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