High Court Reins In Use Of Fraud Law

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The Supreme Court has issued a ruling that severely restricts the ability to bring corruption cases against public officials and corporate executives. The judges unanimously ruled to limit the so-called honest services law.


It's MORNING EDITION, from NPR News. I'm Steve Inskeep. Good morning.

This may count as some of the best news Jeffrey Skilling has had in years. The former Enron executive took his case to the Supreme Court, and the court sided with him. The court severely limited the ability of federal prosecutors to bring corruption cases against public officials or corporate executives. And Skilling is by no means the only person affected. This case could bring hundreds of other convictions into doubt.

Here's NPR legal affairs correspondent Nina Totenberg.

NINA TOTENBERG: The so-called honest services statute has, for decades, been a key tool for federal prosecutors. It was, for example, one of the laws used against former Enron executive Jeffrey Skilling. He was convicted of engaging in a scheme to enrich himself by deceiving shareholders about Enron's true financial status, thus depriving investors of his honest services.

But yesterday, the Supreme Court ruled that the definition of honest services is so broad that if read literally, it would be unconstitutionally vague, providing inadequate notice to citizens about what conduct is legal and what is not.

A six-justice majority led by Ruth Bader Ginsburg declined to invalidate the law outright. The six instead construed the statute narrowly to outlaw only the core corruption crimes of bribery and kickbacks. Three other justices would have voided the law entirely as unconstitutional.

The decision has consequences far beyond Skilling. Among others, at least two former governors and three former members of Congress will likely try to get their convictions set aside. And impeached former Illinois governor, Rod Blagojevich, is already trying to abort his trial on corruption charges that include violations of the honest services statute.

Defense lawyer Howard Shapiro is former general counsel for the FBI.

Mr. HOWARD SHAPIRO (Attorney): I suspect it'll have a very significant impact. The honest services fraud has become one of the favorite arrows in the federal prosecutor's quiver, and a large number of those cases go well beyond the core area of bribery and kickback that the court today limited the statute to.

TOTENBERG: The high court sent Skilling's case back to the lower courts, along with a companion case filed by media magnate Conrad Black, also serving time for a conviction under the honest services law. But experts said they expected the men to remain in prison because they were convicted of other crimes in addition to honest services fraud.

Defense lawyer Jacob Frenkel is a former federal prosecutor.

Mr. JACOB FRENKEL (Attorney): Even if the honest services fraud counts are thrown out, they are going to continue to be guests of the United States Bureau of Prisons because the other convictions likely will continue to stand.

TOTENBERG: That may be cold comfort to federal prosecutors. Former U.S. Attorney General Richard Thornburgh.

Mr. RICHARD THORNBURGH (Former U.S. Attorney General): It does represent a real cutback on what the department can use in seeking convictions in some of these cases.

TOTENBERG: Columbia law school professor John Coffee, who specializes in white collar criminal law, says unless Congress rewrites the law with more specificity, public corruption could be largely immune from federal prosecution.

Professor JOHN COFFEE (Law, Columbia University): For the future, there is a broad range of misconduct that is now beyond the reach of most federal statutes.

TOTENBERG: He cites a wide variety of wrongdoing that would no longer be a crime under federal law.

Prof. COFFEE: Suppose you're the mayor or city council president of some city, and at the public city council meeting, you award a very lucrative contract to a corporation that you've failed to disclose you and your family own 50 percent of. That's not bribery. That's not a kickback. That is undisclosed self-dealing, and a month ago, this would've been seen as unlawful. And after this decision, it's not.

TOTENBERG: There are some apparent injustices that may occur as a result of yesterday's ruling, as well. Small fry who pleaded guilty to honest services fraud in Enron and other major investigations are, by-and-large, stuck. Most guilty pleas include a waiver of any right to appeal in the future. But those who went to trial and were convicted now have a new lease on life.

Former federal prosecutor Robert Luskin, who teaches criminal law at the University of Virginia, says the ball is now in Congress's court.

Mr. ROBERT LUSKIN (Attorney; Lecturer, University of Virginia): The only thing they would have to do is define it with enough clarity that someone would know that their conduct is prohibited. That's really the only deficiency that court found in the statute. It's not that Congress can't do it. It's simply that it hasn't done it yet.

TOTENBERG: The question is whether Congress has the will to write this law with specificity, something it's never done before.

Nina Totenberg, NPR News, Washington.

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