On June 24, the Supreme Court sent back for a new hearings one of the Enron villains, Jeffrey Skilling, and two other unrelated defendants. The Court did this in part by severely curtailing the scope of the federal honest-services fraud law. But the Court should have just struck the law down, so they got this one only half-right.
Federal law makes it a crime to use the U.S. mail or wire-transfer services in a fraudulent scheme. Over time the lower federal courts developed a much broader doctrine, saying that the law in question allows the government to convict for fraud anyone who denies someone their “honest services” if they owe that party any sort of duty, including at the workplace.
The Supreme Court yanked the chain on that doctrine in the 1987 McNally case, saying such a theory went far beyond the words of the statute. Congress responded by passing a new law shortly thereafter, officially giving prosecutors the power to go after anyone who denies anyone else his “honest services.”
(As I mentioned in my December column when the Court heard the first of these cases, the way this law is written, if you lied to your employer that you were busy at your workstation when in fact you were just wasting time, perhaps surfing the web, you could be convicted of a federal felony and imprisoned for twenty years. It seems a bit excessive.)
So in the last of these three cases, Skilling v. U.S., the Court held that the honest-services fraud statute, 18 U.S.C. § 1346, needs to be scaled back. Recognizing that this law was originally applied only to bribes and kickbacks before McNally, the Court held that those are the only two things covered by the statute. No bribe or kickback, no conviction. Such was the decision of seven of the justices, written by Ruth Bader Ginsburg.
Justices Antonin Scalia and Clarence Thomas agreed that Skilling’s conviction needed to be set aside, but for the reason that § 1346 was unconstitutionally vague, and so should be completely discarded. That would have been the best result in this case, as Justice Scalia noted that the statute nowhere referenced bribes or kickbacks, and so rather than just assume that those two actions are what Congress intended by this vague law, that instead the law should just be declared too vague to be enforceable.
But the majority wouldn’t go there. Instead, the conviction was vacated (set aside) and the case sent back to the lower court to determine if Skilling had received a bribe or kickback.