Tuesday, June 29, 2010

Open Questions Post Skilling Related to the Honest Services Issue

As a result of the Skilling decision see here, here, here, here, and here, many questions are left for consideration by lower courts and perhaps Congress and the Supreme Court in future cases.  What are some of these questions:

  • Can Congress rewrite a statute that would pass constitutional muster? (but perhaps they should think twice about doing this - see here)
  • Did the Court engage in interpretation or invention?
  • What cases will require reversal as a result of the holding in Skilling (e.g., Will Governor Ryan's conviction stand?)
  • Are there other available statutes to prosecute conflicts of interest and self-dealing?
  • When does harmless error require a reversal of a case that alleged honest services?
  • The Court in footnote 37 notes the disagreement of lower courts on whether one has to violate state law, is this now an irrelevant question?
  • The Court limits "bribery and kickbacks" to the "core of the pre-McNally case law.  What does this include?
  • Does the Rule of Lenity only apply after the Court has made its interpretive (inventive) decision?
  • The Court states that its definition only covers "serious culpable conduct." Does this mean that minor frauds cannot be prosecuted under the honest services provisions?
  • Does the Court really set up a "uniform national standard" for honest services, and therefore can state law not be used to determine whether it is a bribery or kickback?
  • If the Court says you use pre-McNally caselaw on bribery and kickbacks, how do you interpret conflicting opinions by lower courts?
  • What does bribery mean?  The Court references 201 (b) and not (c), so is bribery limited?
  • In footnote 46 the Court refers to state and local corruption - but what statutes get included here?
  • Has the Court redefined what constitutes vagueness for purposes of statutory interpretation?
  • In adopting a position expressed by a law professor in an amicus brief, is the Court saying that law professors should focus on writing amici briefs and not law review articles?

(esp)

June 29, 2010 in Enron, Fraud, Judicial Opinions, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Thursday, June 24, 2010

Skilling - Commentary

It was a Thanksgiving Day turkey carving by the Court, and they left a lot more meat on the bones then many imagined.

Will We See More Government Stretching? The Court says, "[a]s to arbitrary prosecutions, we perceive no significant risk that the honest-services statute, as we interpret it today, will be stretched out of shape."  Gosh I hope they are correct. Based upon the DOJ's track record, that has not been the case.  They started the ball rolling with intangible rights well before the Supreme Court knocked it out in 1987.  And even when raised  as an issue in these three cases, the government argued for more to be included in the statute's sphere.

Should Congress Rewrite the Statute? The Court said - ""The 'vast majority' of the honest-services cases involved offenders who, in violation of a fiduciary duty, participated in bribery or kickback schemes." -  This should be a statement Congress should look at when and if the government takes up the Court's second invitation to rewrite the statute.

What happens now?  We saw that after the McNally case crushed the government's intangible rights theory, many cases required interpretation to see if they deserved to be tossed, or whether they could survive the holding.  In the next few weeks and months, we are likely to see a good number of these type of arguments being made. 

Will DOJ learn from this?  They have bribery, they have mail fraud and wire fraud with money or property, and they have section 666 for the state/local officials. The government has plenty of tools to prosecute crime.  The question is whether they will be happy with what they have, or instead decide that they want to try for more.

(esp)(blogging from Lisbon, Portugal)

June 24, 2010 in Enron, Fraud, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

NACDL President Comments on Honest Services Trilogy

GUEST BLOGGER-SOLOMON L. WISENBERG

Here is a press release from the National Association of Criminal Defense Lawyers ("NACDL") containing NACDL President Cynthia Orr's comments on today's U.S. Supreme Court honest services opinions. Orr is “heartened that the Court has unambiguously rejected government arguments that the ‘honest services’ fraud statute can be properly used across as broad a range of conduct as the government has sought to do in recent years.” Nonetheless she is"disappointed that the Court has held that there remains a place in our criminal justice system for a statute on whose meaning few can agree.” (In various friend of the court briefs, NACDL has taken the position, now shared by Justices Scalia, Thomas, and Kennedy, that 18 U.S.C. Section 1346 is unconstitutionally vague.)

Orr expects “to see future litigation surrounding efforts by prosecutors to wedge their cases into the ‘bribe or kickback’ paradigm to which the Court has now limited this statute.” Of this we can be sure.

The NACDL press release also bemoans the portion of the Skilling opinion which "shockingly found that pre-trial publicity and community prejudice did not prevent Mr. Skilling from obtaining a fair trial. In fact, though, there has not been a more poisoned jury pool since the notorious first robbery and murder trial of Wilbert Rideau in Louisiana." 

(slw)

June 24, 2010 in Current Affairs, Enron, Insider Trading, Judicial Opinions, Media, News, Obstruction, Prosecutions, SEC, Securities, Statutes | Permalink | Comments (1) | TrackBack (0)

More on Honest Services and Skilling

GUEST BLOGGER-SOLOMON L. WISENBERG

The breakdown is as follows. All nine justices agree that the judgments in the three honest services fraud cases must be vacated and remanded. The majority rules that Section 1346 honest services fraud encompasses only bribery and kickback schemes, and would be unconstitutionally vague if interpreted more broadly. The majority opinion in Skilling (and Black) is written by Justice Ginsburg, who is joined by five other justices. Justice Scalia (joined by Justices Thomas and Kennedy) concurs, but would simply hold Section 1346 unconstitutionally vague under the Due Process Clause and would not seek to salvage it through a narrowing interpretation.

The jury instructions in all of the cases allowed for conviction under the now-discredited broad view of honest services. The lower courts must decide whether the instructional errors were harmless.

Jefffrey Skilling's fair trial arguments were rejected 6-3, with Justice Sotomayor, joined by Justices Stevens and Breyer, dissenting.

Conrad Black and co-defendants properly preserved their objections to the jury charge.

All of this is based on my quick skim. More detailed analysis will come later.

Once more, here are the slip opions in Skilling, Black, and Weyhrauch.


(slw)

June 24, 2010 in Current Affairs, Enron, Fraud, Judicial Opinions, News, Prosecutions, SEC, Securities, Statutes | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 22, 2010

Enron Barge Case Continues

Some cases continue - like Jim Brown of the Enron Barge Case. The latest is that Hon. Werlein denied the defense Speedy Trial Act Motion. (Download Memorandum & Order 61510 Dkt. 1208)  The defense had claimed that "[s]ince August 13, 2009, the government has failed to take even a first step to bring Brown to trial." 

This case also includes claims of discovery violations on the part of the Enron Task Force, with the defense arguing that "[a]fter Brown's trial and appeal, a new prosecutor finally produced the government's notes of multiple conversations with Fastow, the grand jury testimony of Merrill counsel, and other Brady material -all which proves Brown's innocence on all charges." (Download SuppMtnNewTRIAL.Dkt.1160).  

Discovery violations have been prominent issues in several recent cases (see here) including the prosecution of former Senator Ted Stevens. Most recently, DOJ issued new guidelines pertaining to discovery practices in the DOJ (see here). With strong claims of discovery violations and prosecutorial selectivity in the Brown case, one has to wonder if DOJ will re-examine what has transpired in this case.

(esp)  

June 22, 2010 in Enron | Permalink | Comments (0) | TrackBack (0)

Monday, June 14, 2010

Skilling Magazine Article - Well Worth the Time to Read

With no ruling on the Jeffrey Skilling case today, you might have time to read what Dr. Archelle Georgiou has written in CNN Money - Fortune titled, Skilling speaks: Enron CEO's jailhouse interview.

(esp)

June 14, 2010 in Enron | Permalink | Comments (0) | TrackBack (0)

Monday, March 1, 2010

Commentary on Skilling Oral Argument

I'll pass on the jury prejudice issue and leave it to crimprof to handle this one. But the honest services exchange was fascinating.  You have several justices asking where to find this pre-McNally law. (see here). Do you need lawyers, do you have to carry around treatises -  but then Justice Alito hits the homerun.  He asks the important question of whether we would find this scenario in the pre-McNally cases. Mr. Dreeben says "not to my knowledge."  A "logical extension" is what he offers.  I call that - stretching. 

(esp)

Addendum -See Lyle Denniston, Scotus Blog here ; Tom Kirkendall, Houston Clearthinkers here; Mary Flood, Houston Chronicle, Justices worried about fair trial for Skilling; Robert Barnes, Wash Post, Skilling case latest to test 'honest services'

Second Addendum - The more I keep reading, the more I keep thinking about the Court's words in the Carpenter case, where they found the "right to intangible property" covered under the mail fraud statute, but noted that the Wall Street Journal "was defrauded of much more than its contractual right to his honest and faithful service, an interest too ethereal in itself to fall within the protection of the mail fraud statute..."  Clearly this was pre-1346, but it is telling.

March 1, 2010 in Enron, Fraud | Permalink | Comments (0) | TrackBack (0)

Oral Arguments in the Skilling Case

The transcript can be found here. The defense focused on the jury prejudice issue, and rightfully so - a victory on this issue goes to all charges. But there was ample discussion of honest services.  Some highlights:

Justice Scalia - questioning Mr. Dreeben - states: "And there were cases that -- that -- some of which included bribery, but others of which included a variety of -- of other actions, some of which were allowed by some courts, and some of which were disallowed by some courts.  There was no solid content to what McNally covered."

Chief Justice Roberts - questioning Mr. Dreeben - states: "you need lawyers and research before you get an idea of what the pre-McNally state of the law was with respect to intangible..."

Justice Kennedy - questioning Mr. Dreeben - asks: "What authority do I look to, to see that some employees are fiduciaries and others are not?"

Best question goes to Justice Alito- questioning Mr. Dreeben - "Were there any pre-McNally cases that involved a situation like this, where the benefit to the employee was in the form of the employee's disclosed compensation?  Mr. Dreeben responded:  There were not to my knowledge, Justice Alito, and I would frankly acknowledge that this case is a logical extension of the basic principle that we have urged the Court to adopt in the nondisclosure cases, and the Court can evaluate whether it believes that that is legitimately within the scope of an honest services violation or not..."

Justice Breyer - questioning Mr. Dreeben - "Then if you're not saying that, then what the  person has to carry around with them is an agency treatise."

(esp)

March 1, 2010 in Enron, Fraud | Permalink | Comments (0) | TrackBack (0)

Monday, November 2, 2009

In the News & Around the Blogosphere

Mary Flood, Houston Chronicle, Ex-Enron broadband figure given home confinement

(esp)

November 2, 2009 in Enron | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 21, 2009

You Can't Prosecute An Acquittal - Yeager Case

Back from the Supreme Court's decision in United States v. Yeager (see discussion here), the Fifth Circuit Court of Appeals had to decide what to do with the remains of this case.  Mary Flood, Houston Chronicle, Appeals court wipes slate clean for Enron defendant Yeager reports on the Fifth Circuit Court of Appeals decision concerning this former Enron Broadband executive. Yeager, after a very long process, has now been acquitted. The Fifth Circuit Court of Appeals in United States v.Yeager stated:

Today, freed from the chains of Larkin it is clear under our initial Ashe analysis the jury made a finding in acquitting Yeager that precludes prosecution on insider trading and money laundering. We are satisfied that the panel conducted a proper review of Yeager’s claim and the required collateral estoppel analysis under Ashe and will not do so again. We decline the invitation to revisit our settled findings.

(esp)( w/ a hat tip to Bill Olis)

October 21, 2009 in Enron, Judicial Opinions | Permalink | Comments (1) | TrackBack (0)

Monday, June 1, 2009

Enron Broadband's CFO Pleads

A DOJ Press Release reports on Former Enron Broadband Chief Financial Officer Pleads Guilty to Falsifying Books and Records.  "According to the terms of the plea agreement, Howard faces a maximum sentence of up to 12 months of home confinement at his sentencing."  The press release states that "[i]n an attempt to generate earnings sufficient to meet the earnings target, Howard admitted that he and others at EBS structured a transaction known as 'Project Braveheart' designed to 'monetize' or book a portion of the anticipated hundreds of millions of dollars of future earnings from EBS’s agreement with Blockbuster in the fourth quarter of 2000."  But the reality is that Howard had a hung jury the first time around and a conviction vacated the next time.  Most likely the cost of trial, including the psychological cost, made this plea extremely attractive.  

See also Tom Kirdendall, Houston ClearThinkers. Chalk up Another Trial Penalty Deal;Amir Efrati, WSJ Blog, Former Enron Exec Could Get Home Confinement After Plea

June 1, 2009 in Enron, Prosecutions | Permalink | Comments (1) | TrackBack (0)

Monday, May 11, 2009

Skilling Files Petition for Cert

Jeffrey Skilling filed a Petition for Certiorari to the US Supreme Court and focuses his claim on the honest services aspect of mail fraud and jury prejudice.  Clearly these are strong arguments as the Houston home court advantage was extraordinary in a case that was related to Enron and the honest services aspect of mail fraud has been a source of contention in many cases. Justice Scalia, in a recent dissent ona denial of certiorari, voiced strong opposition to the progression of mail fraud's intangible rights doctrine.  He noted the breadth in the "28 words" in the statute and concluded by stating that "it seems to me quite irresponsible to let the current chaos prevail."  It's a good move for Skilling to focus on this aspect of the statute, but the key will be whether the Court will accept certiorari in this case. Based upon a dissent in another Second Circuit en banc case, Rybicki, there are many circuits split on various aspects of the mail fraud statute. 

See also Mary Flood, Houston Chronicle, Skilling asks Supreme Court to review conviction.; Bill Mears, CNN, Former Enron CEO Files High Court Appeal; Ashby Jones, WSJ Blog, Skilling Takes Appeal to High Court

(esp) 

Addendum - Adam Liptak of the NYTimes (here) reminds us, in an unrelated story of today, that "the Senate approved Justice Scalia's nomination ... by a vote of 98-to-0."

May 11, 2009 in Enron, Fraud | Permalink | Comments (0) | TrackBack (0)

Saturday, March 21, 2009

Supremes to Hear White Collar Case from Enron Broadband

The U.S. Supreme Court is set to hear oral argument tomorrow on the case of Yeager v. United States, (see here) a case that reexamines the collateral estoppel rule in a white collar context.  The question before the Court is:

"Whether, when a jury acquits a defendant on multiple counts but fails to reach a verdict on other counts that share a common element, and, after a complete review of the record, the court of appeals determines that the only rational basis for the acquittals is that an essential element of the hung counts was determined in the defendant's favor, collateral estoppel bars a retrial on the hung counts."

The defendants in the case "were tried on various counts for their actions while employed at Enron Broadband Services ("EBS"). The jury acquitted Defendants on some of these counts but hung on others, after which the United States ("Government") again indicted Defendants on some of the mistried counts." The issue is now whether collateral estoppel can apply to hung counts.

There is no question that the circuits are split on this issue and that Supreme Court guidance is needed. But a lot is at stake here in that the collateral estoppel rule, an important component of the constitutional protection against double-jeopardy,  is being tested.  Some of the questions here are: Should prosecutors be rewarded for "overcharging their cases and then failing to prove the superfluous charges?" Should courts provide legal oversight when it is clear that the law can only be interpreted one way? If the acquitted counts estop the hung counts, can a court chalk this up to jury irrationality and just permit the jury a second bite at the apple?

(esp)

Addendum - Briefs can be found on this ABA site here. (w/ a hat tip to Jack Townsend)

March 21, 2009 in Enron, Judicial Opinions, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 20, 2009

Skilling Asks for En Banc Hearing

Not surprisingly, Jeffrey Skilling is asking the Fifth Circuit for an en banc hearing.  He focuses on three issues, with the lead one being premised on "honest services" fraud.  The petition argues that the panel's decision is in conflict with other Fifth Circuit decisions, including U.S. v. Brown. It also raises the issue of vagueness as to section 1346.  After all - what is "honest services"?

See Ashby Jones, WSJ Blog, Skilling, Petrocelli Make Two More Pleas to the Fifth Circuit ;  Kristen Hays, Houston Chronicle, Enron’s Skilling asks full court to review convictions

(esp)

January 20, 2009 in Enron | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 7, 2009

What Others Are Saying About the Skilling Decision

Doug Berman, Sentencing Law & Policy here (note that Professor Frank Bowman has a comment on the possible sentence)

Dan Slater, WSJ Blog, Skilling Conviction Upheld, Resentencing Ordered

Tom KIrkendall, Houston Clearthinkers, The Fifth Circuit rules in the Skilling appeal

Juan A. Lozano,Washington Post (AP), U.S. Court Orders Skilling Resentenced

Jef Feeley and Thom Weidlich, Bloomberg.com,  Skilling’s Conviction Upheld, Resentencing Ordered

(esp) (blogging from San Diego)

January 7, 2009 in Enron, Sentencing | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 6, 2009

Skilling - Commentary on the Decision

The Fifth Circuit issued a 106 page opinion in the Skilling case (see here or here) - here are some thoughts on it -

  • Many courts have struggled with the scope and definition of the honest services fraud statute.  Since its passage, section 1346 has caused several opinions that have attempted to provide a definition to "honest services" - a term that is undefined in the statute.  The Fifth Circuit, in a prior case - Brown had placed some restraints on prosecutions using this statute.  The Skilling decision narrows these restraints and allows more prosecutorial power in bringing an honest services fraud case. The court states:

"Therefore, it is not a matter of Skilling setting the corporation’s policy himself. Instead, the question is whether anyone who supervised Skilling specifically directed his actions—such as how Fastow sanctioned the scheme in Brown. Skilling never alleged that he engaged in his conduct at the explicit direction of anyone, and therefore he cannot avail himself of the exception from Brown."

Simplistically - will this mean that if you can blame someone else for your conduct (such as a higher-up in the corporation), this will mean the Brown exception applies, but if you are the person at the top you may be out of luck in trying to make this claim?

  • The court finds - at best- harmless error in the giving of a deliberate ignorance instruction.
  • The court rejects each of the claims regarding improper jury instructions.
  • The court also rejects the venue claims of Skilling saying -

"It would not have been imprudent for the court to have granted Skilling’s transfer motion. The issue before us, however, is whether the court committed reversible error. It did not."

  • The court rejects Skilling's claims of prosecutorial misconduct, and also rejects the Brady violation claims of the defendant.  But the court does let Skilling know that he can raise some of the Brady issues in the trial court.  So this issue may have a future. The court explicitly states:

"We find the omission of this statement from the 302s troubling. Perhaps even more troubling is that the government never disclosed the page of interview notes containing this statement to the district court. However, because the district court never had the opportunity to consider this page of interview notes, we cannot address this Brady claim for the first time on appeal. The district court did not assess the materiality of this statement or determine whether its suppression violated Brady. Thus, there is nothing for us to review. Skilling must bring this claim to the district court before we can address it."

Basically, this means that this case is far from over.

  • The sentencing aspect is the biggest win for Skilling. Although the court states that it was proper to use the SEC testimony, it does reject the "four-level enhancement for substantially jeopardizing the safety and soundness of a 'financial institution.'"  What is  the definition of a "financial institution" is the question here, and the court uses the rule of lenity and sides with the defense. I await Professor Doug Berman's calculations from the Sentencing Blog, as to exactly the amount of time that this could reduce his sentence.

(esp)(blogging from San Diego)

January 6, 2009 in Enron, Fraud, Sentencing | Permalink | Comments (1) | TrackBack (0)

Skilling- Sentencing Reversal and Remand; Conviction Stands

Opinion here - Download 06-20885-CR0.pdf

Commentary to follow.

(esp) (from San Diego)

January 6, 2009 in Enron, Sentencing | Permalink | Comments (0) | TrackBack (0)

Thursday, April 3, 2008

Skilling Hearing - Sounds Like it Wasn't a Hot Bench

Reading the reports from those who were there, it sounds like the Skilling bench was a quiet one. But then again - a lot of the argument dealt with "honest services" under the mail fraud statute. 

The mail fraud statute is an 1872 statute that was a section in a revision of the Postal Act.  In the 1970's prosecutors extended mail fraud to prosecute cases involving "intangible rights."  In the case of McNally v. United States, the Supreme Court shot this doctrine down finding that "money or property" was required.  Congress came back with a new statute 18 U.S.C. 1346 that allowed prosecutions premised on a right to "honest services."  But the statute has been problematic in both its breadth and in the government's attempt to extend it in new ways.  The courts as seen in the Brown case, have provided limits to what might appear as a limitless statute.  But the bottom line is that this statute has numerous problems, both in its wording and in its application. And because mail fraud is difficult to understand, it is not surprising that a hearing related to this crime might prove dry.

Amit Efrati, U.S. Judges Hint at Little in  Skilling Appeals Session

Loren Steffy - Houston Chronicle Business Blog - Skilling's Appeal Opens With a Bang, Ends With a Whimper

(Houston Chronicle) AP Court Hears Appeal of Enron's Skilling

Nola.com Skilling Hearing Concludes With Smaller Audience Than Expected

(esp)

April 3, 2008 in Enron | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 1, 2008

They're Expecting A Crowd for Skilling

The Fifth Circuit Court of Appeals has special instructions on its website about the Skilling oral argument set for today. For example, it states "[n]o one will be allowed to enter any of the courtrooms prior to 1:00 p.m., April 2, 2008, to allow court staff to set up additional chairs in the East Court room, and prepare other courtrooms for overflow spectators."

The case will be heard by three judges: Hon. Jerry E. Smith (Yale law grad, Reagan appointee), Edward C. Prado (Texas law grad, George W. Bush appointee), and Alia Moses Ludlum (Texas law grad, George W. Bush appointee) (see Times Picayune here).   

Some of the key issues before the court are:

  • Whether there was a Brady violation in the failure of the prosecution to provide the Fastow Notes and full discovery pre-trial.
  • Whether there is any reason not to follow the court's precedent in the Brown case with the prosecution's use of  the "honest services" theory.
  • Whether there was error in instructions given to the jury with respect to deliberate ignorance.
  • Whether it was improper to refuse instructions on materiality, reliance, and "oral side deals."
  • Whether the accused was deprived of a fair trial as a result of the venue of this trial.
  • Whether the accused was provided sufficient voir dire.
  • Whether errors with respect to the honest services doctrine spillover to other aspects of the case.
  • Whether there were sentencing errors.

(esp)

April 1, 2008 in Enron | Permalink | Comments (0) | TrackBack (0)

Monday, March 31, 2008

Wednesday Is Jeffrey Skilling Day

This Wednesday is the day that the Fifth Circuit will listen to arguments in the case of United States v. Skilling.  Although the briefs are filled with many arguments, the ones focused upon in the oral argument will likely be fewer in number.  That's typical, as you can't hit everything in a time-tight oral argument. 

As one looks at all of the original legal arguments and the new issues from the release of the Fastow notes, it is clear that the court will have a good bit to consider. And perhaps one item that might be lingering in some minds, is the continuing question as to  why the government didn't object to Fastow's argument for a sentence below the agreed upon terms of the plea agreement. Tom Kirkendall at Houston ClearThinkers (see here) pointed out one segment from the Skilling trial when Fastow was on redirect examination and he answered questions as follows:

Q. And what is the minimum amount of time that that plea agreement calls for?

A. It calls for a 10-year sentence.

Q. So after January 14th, can your cooperation lower that 10 years?

A. My understanding is that I will be sentenced to 10 years. The Judge ultimately has a discretion; but in my plea agreement, I agreed to the 10-year sentence."

Andy Fastow, however, received a sentence of six (6) years. This was despite a provision in the plea agreement that stated:

"The parties agree that Defendant's sentence under the Sentencing Guidelines shall include 120 months in the custody of the Bureau of Prisons.  Defendant agrees that he will not move for a downward departure from the offense level or the guideline range calculated by the Court and that no grounds for a downward departure exist."

And the government did not object.  Why?

The following are links to key posts from this blog that relate to the forthcoming argument, and the briefs that have been filed.

Government Responds to Skilling Supplemental Brief

The Skilling Discovery Problem - Part II of Commentary

The Falling of the Enron Case House of Cards

Skilling and the Fastow Notes

The Skilling Case - Stay Tuned

The Fastow Notes

Commentary on Skillings Reply Brief

Skilling's Reply Brief Arrives, Just in Time for the Holidays

The Government Weighs in on Skilling

Skilling's Fifth Circuit Brief Arrives

Also check out Larry Ribstein's Ideoblog here

(esp)

March 31, 2008 in Enron | Permalink | Comments (0) | TrackBack (0)