Supreme Court Wrap-Up: Skilling v. United States

June 25, 2010
Guest Post

By Martin Magnusson. Mr. Magnusson is an associate at Day Pitney LLP.

The Supreme Court recently issued its much-awaited opinion in Skilling v. United States, in which it addressed two hotly debated criminal-law issues:

• What is the test for whether pretrial publicity and community prejudice will prevent a criminal defendant from obtaining a fair trial?
• Is the honest-services-fraud statute, an important federal law in prosecuting public corruption, unconstitutionally vague?

The facts of Skilling are rooted in the 2001 collapse of Enron, which caused shareholders to lose nearly eleven billion dollars. In the wake of this scandal, the Government conducted an investigation in which it uncovered an elaborate conspiracy to prop up Enron's stock prices. The Government subsequently prosecuted several Enron employees who participated in that conspiracy, including former CEO Jeffrey Skilling.

The Government indicted Mr. Skilling for, among other things, conspiring to deprive Enron and its shareholders of the intangible right of his honest services. This charge is predicted on 18 U.S.C. § 1346, which expands the mail-fraud and wire-fraud statutes to reach "a scheme or artifice to deprive another of the intangible right of honest services."

Mr. Skilling's trial was set to take place in Houston, where Enron had been headquartered. Mr. Skilling, though, moved for a change of venue, contending that the collapse of Enron had so dramatically affected the Houston community that he could not get a fair trial there. Mr. Skilling supported his motion for a change in venue with hundreds of news reports detailing Enron's downfall and with affidavits from experts who had studied community attitudes in Houston in relation to community attitudes in other potential venues.

The District Court rejected Mr. Skilling's request that venue be changed. The District Court also denied Mr. Skilling's request for attorney-led voir dire, although it permitted Mr. Skilling's attorneys to ask potential jurors follow-up questions. Notably, the voir-dire process took only five hours. After a four-month trial, the jury convicted Mr. Skilling of nineteen counts, including conspiring to engage in honest-services fraud.

In its recent opinion, the Supreme Court rejected Mr. Skilling's arguments that Houston was an improper venue and that prejudice contaminated his jury. The Court cited four reasons for rejecting Skilling's argument for a presumption of juror prejudice:

• Houston's large, diverse pool of 4.5 million potential jurors makes it quite feasible to impanel twelve impartial jurors.
• Media coverage did not feature a confession or any other blatantly prejudicial information.
• Over four years had elapsed between Enron's bankruptcy and Skilling's trial.
• Skilling's jury acquitted him of nine insider-trading counts, which belies any presumption of prejudice.

The Court also rejected Skilling's argument that voir dire was inadequate. Noting that no hard-and-fast formula dictates the necessary depth or breadth of voir dire, the Court concluded that, taken as a whole, voir dire was adequate.

Having thus disposed of Mr. Skilling's juror-prejudice claims, the Court addressed his argument that the honest-services-fraud statute is unconstitutionally vague. This issue has been closely watched, as the Supreme Court has heard two other cases involving challenges to the honest-services-fraud statute: Weyhrauch v. United States and Black v. United States.

Mr. Skilling argued to the Supreme Court that the honest-services-fraud statute is unconstitutionally vague because it is so unclear and indefinite as not to give a person of ordinary intelligence the opportunity to know what is prohibited. Justice Breyer emphasized the vagueness of § 1346 at oral argument in Black when he asked whether a worker who reads a racing form at work has committed honest-services fraud:

JUSTICE BREYER: Now, as I hear that -- I am exaggerating, possibly, but I think every agent has a duty of loyalty to provide loyal and honest services to the master, master agent. Every worker is an agent of his master, the employer. So every instance in which a worker does not provide honest services to the employer, he has met your test.
I think there are 300 -- perhaps there are 150 million workers in the United States. I think possibly 140 of them would flunk your test.
(Laughter.)
JUSTICE BREYER: I mean, that's what worrying me. Now, why? Because -- I -- "Do you like my hat?" Says the boss. "Oh, I love your hat," says the worker.
(Laughter.)
JUSTICE BREYER: Why? So the boss will leave the room so that the worker can continue to read the racing form. Deception? Designed to work at reading the racing form instead of doing your honest work and, therefore, violation?
Now, explain to me how your test does not --and I think you can probably do it; I just don't understand it at the moment. Explain it to me, how your test does not make this statute potentially criminalizing 100 million workers in the United States, or some tens of millions?

The Supreme Court concluded that the statute is unconstitutionally vague, but ruled that it should be read in such a way that it is sufficiently narrow to avoid vagueness problems. The Supreme Court thus held that § 1346 only criminalizes bribery and kickback schemes and would thus not reach the conduct of Justice Breyer's hypothetical hat-loving, race-form-reading employee.