In post No. 210 I wrote about the Conrad Black case that is now pending before the US federal Supreme Court. In that post, I noted the same applied to some other white-collar cases that are of more than average interest to the legal community. One of those cases concerns former Enron CEO Jeff Skilling. Enron, need I say more?
The Black hearing took place earlier this week. Skilling, who - like Black - appealed his criminal conviction on honest services wire-fraud charges under 18 U.S.C. § 1346 before the SCOTUS, filed his brief on the merits last Friday. The hearing in his appeal will take place in February or March 2010.
Lots of background info about both cases - including relevant papers - can be found on the site of Houston's Clear Thinkers. Here's a key passage from the brief on the merits that captures the heart of the matter, namely the reason why Skilling was convicted in the first place.
The Government’s theory is not that Skilling received bribes or kickbacks, or that he directed money or property to an entity in which he had a personal interest, or indeed that he acted for any private gain that was distinct from his ordinary compensation incentives. The Government openly conceded at trial that Skilling stole no money from Enron, that the case against Skilling was not about “greed,” that Skilling sought to pursue Enron’s “best interests,” and that every act for which he was prosecuted was undertaken for the purpose of protecting Enron and promoting its share value.
The Government proceeded on the theory that Skilling nonetheless committed honest-services fraud simply because he took on too much risk for the long-term good of Enron, and improperly touted the company. It did not seek an instruction requiring jurors to find that Skilling acted pursuant to undisclosed personal financial interests in conflict with Enron’s. Instead the Government urged the jury to send Skilling to prison simply because he breached his “duty to do [his] job and do it appropriately.” That theory of honest-services fraud has no grounding in pre-McNally caselaw, and is totally at odds with the Government’s current conception of the statute.
The implications of that theory, moreover, extend far beyond what Congress reasonably could have intended when it enacted § 1346 to overrule McNally, a public-official kickback case. In the private sector, corporate officers are expected to take business risks and cheerlead for their enterprises. A rule that criminalizes every business decision that seems imprudent to prosecutors or lay jurors in hindsight — but does not involve the corrupt pursuit of private gain— would force officers to proceed at their peril in making everyday business judgments. Fortunately, the theory of honest-services fraud the Government advanced below is not the law, as the Government now recognizes.
As emphasized by Tom Kirkendall (the clear thinker from Houston), pointing at the 'honest services wire-fraud charges' in the Skilling case: "making a bad decision or doing a poor job in running a business is a crime. Almost nothing else need be said in explaining why the Skilling appeal is of paramount importance to the protection of taking risk and creating wealth in the American business community."
This 'policy rationale' based skepticism makes sense to me. In fact, it's the same skepticism I put forward late September - and repeated last Tuesday at the annual Vereeniging 'Handelsrecht' meeting (to be published soon) - when certain Dutch politicians started to talk about criminalizing financial mismanagement by bank directors. This is not the right way forward for Dutch society to hold corporate directors responsible for conduct that is seriously sub-par. Not even close.
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