Court takes on federal anti-fraud law

AP News
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Posted: Dec 08, 2009 3:09 AM

The Supreme Court is considering whether to rein in federal prosecutors' use of a 28-word fraud law that has become a preferred tool in high-profile corporate crime and public corruption cases _ and a favorite target of critics.

The court is hearing three cases this term, including two Tuesday, in which defendants are challenging the use of the so-called honest services fraud law against them. The law makes it illegal for officials, executives and others to scheme to deprive those they serve and possibly others of "the intangible right to honest services."

The justices also are expected to issue their first opinions of the term, in cases argued in recent months.

In the fraud law issue, former newspaper mogul Conrad Black, who has served nearly 22 months of a 6 1/2-year prison term, and former Alaska legislator Bruce Weyhrauch, who has been indicted but not tried, are asking the court to throw out the prosecutions against them.

Former Enron CEO Jeffrey Skilling, convicted in 2006 on conspiracy, securities fraud, insider trading and lying to auditors involving the company's collapse in 2001, will have his case heard in spring. He attacks the law as unconstitutionally vague.

Prosecutors also have used the charge against former lobbyist Jack Abramoff and others caught up in that scandal. One former Illinois governor, George Ryan, was convicted of honest services fraud, and another, Rod Blagojevich, faces the same charge, among others.

Former Alabama Gov. Don Siegelman and ex-HealthSouth CEO Richard Scrushy also are appealing their honest services fraud convictions to the Supreme Court.

Critics of the law include the U.S. Chamber of Commerce and the National Association of Criminal Defense Lawyers.

The defendants appear to have a powerful ally on the court, Justice Antonin Scalia. Urging the court in February to take a case to resolve questions about the law, Scalia said it "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."

Black and two other former executives were convicted of depriving the Hollinger International media empire of their faithful services as corporate officers. They say the honest services conviction must be overturned because they intended no economic harm to the company, which once owned the Chicago Sun-Times, the Daily Telegraph of London, the Jerusalem Post and hundreds of community papers across the United States and Canada.

Central to the case is $5.5 million that the defendants say were management fees they were owed and were trying to collect in such a way that they would not have to pay Canadian income tax. The government says the money belonged to the company's shareholders.

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Weyhrauch wants charges against him dropped. Prosecutors allege that he failed to disclose he was in job negotiations with an oil-field operations company at the same time the state legislature was also considering an oil bill. But Weyhrauch says disclosure was not required by Alaska law. He wants the court to bar a federal honest services fraud prosecution without an allegation of a violation of state law as well.

Former Attorney General Richard Thornburgh has been on both sides of the issue. When Congress adopted the current law in 1988, he was supportive. The law was enacted in response to a high court decision limiting mail and wire fraud prosecutions.

Twenty years later, Thornburgh was part of celebrity pathologist and former county coroner Cyril Wecht's legal team as Wecht faced a 41-count indictment for depriving Allegheny County, Pa., taxpayers of his honest service. Among the charges were 24 counts for faxes that cost the county a total of $3.96.

Wecht's first trial ended in a mistrial and prosecutors later dropped remaining charges.

"I continue to think there's room for reasonable honest services fraud," Thornburgh said. "But his case showed how overbroad and mischievous it might be in nickel-and-dime cases."

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