The U.S. Supreme Court scaled back a favorite tool used by prosecutors in fraud cases, ruling in favor of former Enron CEO Jeffrey Skilling on his conviction for leading the Enron Corp. accounting fraud while stopping short of granting him a new trial.
The high court sent his case back to lower courts.
Writing for the court, Justice Ruth Bader Ginsburg said the law, which covers fraud schemes to “deprive another of the intangible right to honest services,” was so vague it could be constitutionally applied only to cases involving bribery or kickbacks. The ruling raises questions about potentially hundreds of other convictions and pending prosecutions.
The justices were unanimous in saying the honest-services law couldn’t be applied to Mr. Skilling and former Hollinger International Chairman Conrad Black. Three justices — Antonin Scalia, Clarence Thomas and Anthony Kennedy — would have gone further and struck down the law even for bribery and kickback cases.
Mr. Skilling’s lawyers said before the ruling that a victory on the honest-services question would give them grounds to seek reversal of the rest of the conviction, along with his 24-year sentence. However, the government has said even the conspiracy verdict that was directly before the high court might not have to be overturned.
“We’re back in the game,” Daniel Petrocelli, Mr. Skilling’s lead lawyer, said in a telephone interview. He said Thursday’s ruling would be “fatal to the government’s case.”
Mr. Skilling was convicted on 19 counts. The honest-services ruling directly concerns only one of those: conspiracy to commit fraud.
He was convicted in May 2006 alongside Kenneth Lay, the former Enron chairman who died less than two months later. A federal appeals court upheld the conviction. Mr. Skilling is serving his sentence in a federal prison in Colorado.
The Supreme Court on a 6-3 vote rejected Mr. Skilling’s contentions that he couldn’t get a fair trial in Houston and that the trial judge who oversaw the case didn’t adequately explore indications that some jurors were biased against him.
Enron was the world’s biggest energy-trading company, with a market value of as much as $68 billion, before it collapsed, wiping out more than 5,000 jobs and $1 billion in employee retirement funds.
The bankruptcy spawned criminal charges against 34 defendants, including Arthur Andersen, the now-defunct accounting firm whose conviction the Supreme Court overturned in 2005.
The honest-services statute is being used against former Illinois Gov. Rod Blagojevich, now on trial on a federal indictment that includes allegations that he tried to trade the U.S. Senate seat vacated by President Barack Obama for campaign cash or personal favors. U.S. District Court Judge James Zagel, presiding over Mr. Blagojevich’s trial, said the high court ruling “may not offer a lot of hope” for the former governor.