Supreme Court To Review Skilling's Enron Conviction

By Christine Caulfield

Law360, New York (October 13, 2009) -- The U.S. Supreme Court has agreed to hear former Enron Corp. CEO Jeffrey Skilling's appeal of his convictions stemming from the massive fraud that led to the energy giant's collapse.

The high court granted Skilling's petition for certiorari on Tuesday, nine months after the U.S. Court of Appeals for the Fifth Circuit rejected the disgraced executive's bid for an en banc rehearing of his case.

Skilling is challenging the appeals court's Jan. 6 ruling that upheld his convictions on 19 counts of fraud, conspiracy and insider trading, arguing that the jury was prejudiced and that prosecutors had relied on a faulty application of the honest services fraud statute.

His lawyer Daniel Petrocelli, a partner at O'Melveny & Myers LLP, welcomed the Supreme Court's decision to hear the case.

“We've been waiting three years for this day. Finally we're going to have an opportunity to present Jeff's case to the Supreme Court and get a full, frank and fair hearing on issues that were pivotal to his wrong convictions,” Petrocelli said.

Skilling's appeal is the third case to be granted a hearing by the Supreme Court this year that centers on a 1998 amendment to the mail and wire fraud statutes, known as Section 1346, which outlaws any scheme to deprive an individual of the right to “honest services.”

The high court in May agreed to take up the appeal of media baron Conrad Black, who is serving six years in prison after being convicted under the controversial statute of swindling Hollinger International Inc. out of millions of dollars.

The justices then agreed in June to take up the case of former Alaska Rep. Bruce Weyhrauch, who is awaiting trial on public corruption charges premised on the statute.

“This is going to be the year of the mail fraud statute,” said Ellen S. Podgor, professor of law at Stetson University. “We've got three cases now, all dealing with one 28-word statute. It's a statute that's used quite a bit by the government, but the question is, what is honest services?”

Mark Harris, a partner at Proskauer Rose LLP, said the Supreme Court's inclusion of Black and Skilling's case “may well portend a blockbuster ruling.”

“Obviously, this is an issue that the court wants to consider and resolve as much of the confusion as possible by including two high-profile cases,” Harris said.

Michael Sher, a partner at Neal Gerber & Eisenberg LLP, said the Supreme Court agreed to take the cases following Justice Antonin Scalia's scathing dissenting opinion in Sorich v. United States, which was denied certiorari in February.

Like the Weyhrauch case, Sorich centered on whether prosecutors could charge three Chicago city officials under the statute absent any proof of bribery or kickbacks.

“Scalia made it clear that the court should clarify the standard that governs 1346 prosecutions,” he said. “My guess is the Supreme Court will now try to imprint some governing principles.”

Sher said the high court could provide a long-needed distinction on the application of the statute to cases involving public corruption and those of Skilling and Black.

In Skilling's case, the justices will also consider whether private gain is required to support an honest services conviction.

“Some circuits say yes, other circuits say no. So there's a fair amount of conflict among the circuits on that point as well,” Sher said.

Petrocelli, who represented Skilling in the appeal and at the original trial, said Tuesday the statute was “hopelessly vague and unconstitutional.”

“The statute has typically been used in cases where there has been bribery or kickbacks, or where an employee has recovered some private financial gain. That didn't happen in our case,” he said.

“The government has attempted to extend the statute beyond its permissible bounds to criminalize conduct that has always been subject to civil proceedings, not criminal cases.”

Skilling and Enron founder Ken Lay were found guilty by a jury in May 2006 for concealing the financial woes of Enron, which filed for bankruptcy in 2001.

Lay died while awaiting sentencing. Skilling was jailed for 24 years, a sentence vacated by the Fifth Circuit in its Jan. 6 ruling.

Skilling is represented by O'Melveny & Myers LLP.

The case is Jeffrey K. Skilling v. United States, case number 08-1394, in the U.S. Supreme Court.

--Additional reporting by Ben James and Erin Coe