Founded in 1985, Enron Corporation grew from its headquarters in Houston, Texas, into the seventh highest-revenue-grossing company in America. Petitioner Jeffrey Skilling, a longtime Enron officer, was Enron’s chief executive officer from February until August 2001, when he resigned. Less than four months later, Enron crashed into bankruptcy, and its stock plummeted in value. After an investigation uncovered an elaborate conspiracy to prop up Enron’s stock prices by overstating the company’s financial well-being, the Government prosecuted dozens of Enron employees who participated in the scheme. In time, the Government worked its way up the chain of command, indicting Skilling and two other top Enron executives. These three defendants, the indictment charged, engaged in a scheme to deceive investors about Enron’s true financial performance by manipulating its publicly reported financial results and making false and misleading statements. Count 1 of the indictment charged Skilling with, inter alia, conspiracy to commit “honest-services” wire fraud, 18 U. S. C. §§371, by depriving Enron and its shareholders of the intangible right of his honest services. Skilling was also charged with over 25 substantive counts of securities fraud, wire fraud, making false representations to Enron’s auditors, and insider trading. In May 2006 Skilling was found guilty on 19 counts of conspiracy, fraud, false statements and insider trading. He was found not guilty on nine counts of insider trading. He was sentenced to 292 months in prison and ordered to pay $45 million in fines and restitution. In separate proceedings he appealed his sentence.
Skilling raised two main arguments on appeal to the Supreme Court here. First, he contended that pretrial publicity and community prejudice prevented him from obtaining a fair trial. Second, he alleged he was improperly convicted him of conspiracy to commit honest-services wire fraud.
The Supreme Court considered Skilling’s appeal which was based on two arguments relevant here. First, he contended that pretrial publicity and community prejudice prevented him from obtaining a fair trial. Second, he alleged that the jury improperly convicted him of conspiracy to commit honest-services wire fraud.
(a) In relation to Skilling’s arguments of juror bias, the Supreme Court re-counted Skilling’s early submissions in this regard. In November 2004, Skilling moved for a change of venue, contending that hostility toward him in Houston, coupled with extensive pretrial publicity, had poisoned potential jurors. He submitted affidavits from experts he engaged portraying community attitudes in Houston in comparison to other potential venues. The lower court denied the motion, concluding that pretrial publicity did not warrant a presumption that Skilling would be unable to obtain a fair trial in Houston. Despite incidents of intemperate commentary, the court observed, media coverage, on the whole, had been objective and unemotional, and the facts of the case were neither heinous nor sensational. Moreover, the lower court asserted, effective voir dire would detect juror bias. In the months before the trial, the court asked the parties for questions it might use to screen prospective jurors. The Supreme Court noted Skilling’s more probing and specific questions were used and that the court converted Skilling’s submission, with slight modifications, into a 77-question, 14-page document. The questionnaire asked prospective jurors about their sources of news and exposure to Enron-related publicity, beliefs concerning Enron and what caused its collapse, opinions regarding the defendants and their possible guilt or innocence, and relationships to the company and to anyone affected by its demise. The court then mailed the questionnaire to 400 prospective jurors and received responses from nearly all of them. It granted hardship exemptions to about 90 individuals, and the parties, with the court’s approval, further winnowed the pool by excusing another 119 for cause, hardship, or physical disability. The parties agreed to exclude, in particular, every prospective juror who said that a pre-existing opinion about Enron or the defendants would prevent her from being impartial. In December 2005, three weeks before the trial date, one of Skilling’s co-defendants, Richard Causey, pleaded guilty. Skilling renewed his change-of-venue motion, arguing that the juror questionnaires revealed pervasive bias and that news accounts of Causey’s guilty plea further tainted the jury pool. The court again declined to move the trial, ruling that the questionnaires and voir dire provided safeguards adequate to ensure an impartial jury. The court also denied Skilling’s request for attorney-led voir dire on the ground that potential jurors were more forthcoming with judges than with lawyers. Here the Supreme Court noted the court promised to give counsel an opportunity to ask follow-up questions, agreed that venire members should be examined individually about pretrial publicity, and allotted the defendants jointly two extra peremptory challenges. The Supreme Court noted, in relation to voir dire, after questioning the venire as a group, the court examined prospective jurors to identify red flag and possible bias. The court then permitted each side to pose follow-up questions and ruled on the parties’ challenges for cause. Ultimately, the court qualified 38 prospective jurors, a number sufficient, allowing for peremptory challenges, to empanel 12 jurors and 4 alternates. Skilling contended that pretrial publicity and community prejudice prevented him from obtaining a fair trial. The Supreme Court noted while the Fifth Circuit initially determined that the volume and negative tone of media coverage generated by Enron’s collapse created a presumption of juror prejudice the presumption is rebuttable. The Supreme Court noted an appeals court examined the voir dire, and found it “proper and thorough.” The Supreme Court reviewed there was no error in denying Skilling’s requests for a venue transfer. While it acknowledged a basis for such an argument was made out in Rideau v. Louisiana, 373 U. S. 723, the Supreme Court held prominence does not necessarily produce prejudice, and juror impartiality does not require ignorance. A presumption of prejudice attends only the extreme case. It noted Rideau was a small-town setting in but Houston is the Nation’s fourth most populous city with a large, diverse pool of residents. Second, the media may not be kind it noted the decibel level of media attention diminished somewhat in the years following Enron’s collapse. Finally, and of prime significance, Skilling’s jury acquitted him of nine insider-trading counts. The case, the Supreme Court stated, yielded no overwhelming victory for the Government. Houston’s size and diversity diluted the media’s impact. Nor did Enron’s sheer number of victims trigger a presumption. Finally on this issue the Supreme Court noted the extensive screening questionnaire and follow-up voir dire yielded jurors whose links to Enron were either non-existent or attenuated. In addition it noted when the other defendant pleaded guilty the lower court took appropriate steps to mitigate a risk of juror prejudice.
(b) As regards actual prejudice the Supreme Court found none contaminated Skilling’s jury. It rejected Skilling’s assertions that voir dire defuse juror prejudice. It allowed deference to the trail judge in because the judge “sits in the locale where the publicity is said to have had its effect”. It rejected because the voir dire lasted only five hours that it failed adequately to probe the jurors. The questionnaire was drafted in large part by Skilling. And the secured jurors were largely uninterested in publicity about Enron. Noting a trial court’s findings of juror impartiality may be overturned only for manifest error (citing Mu’Min, 500 U. S., at 428). The Supreme Court concluded there was no actual prejudice contaminating Skilling’s jury and it rejected Skilling’s assertions that voir dire did not adequately detect and defuse juror prejudice and that several seated jurors were biased.
In relation to the second line of appeal the court considered the legislative history of the 18 U.S.C. § 1346. The Government indicted Mr. Skilling for, among other things, conspiring to deprive Enron and its shareholders of the intangible right of his honest services. 18 U.S.C. § 1346, specifically expands the mail-fraud and wire-fraud statutes to reach "a scheme or artifice to deprive another of the intangible right of honest services."
The Supreme Court traced the development of the doctrine in a series of decisions beginning in the 1940s, interpreting the prohibition to mean “any scheme or artifice to defraud” to include deprivations not only of money or property, but also of intangible rights. Unlike traditional fraud, in which the victim’s loss of money or property supplied the defendant’s gain, with one the mirror image of the other, the honest-services doctrine targeted corruption that lacked similar symmetry. While the offender profited, the betrayed party suffered no deprivation of money or property; instead, a third party, who had not been deceived, provided the enrichment- and the actionable harm lay in the denial of that party’s right to the offender’s “honest services.” Most often these cases involved bribery of public officials, but over time, the courts increasingly applied to a private employee who breached his allegiance to his employer, often by accepting bribes or kickbacks. The Supreme Court then noted that in 1987, this Court halted the development of the intangible-rights doctrine in McNally v. United States, 483 U. S. 350, 360, which held that the mail-fraud statute was “limited in scope to the protection of property rights.” “If Congress desires to go further,” the Court stated, “it must speak more clearly.” Congress indeed responded the next year by enacting §1346, which provides: “For the purposes of th[e] chapter [of the U. S. Code that prohibits, inter alia, mail fraud, §1341, and wire fraud, §1343], the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.”
The Supreme Court next considered that if Section 1346 as written was unconstitutionally vague as claimed. It recalled that to satisfy due process, “a penal statute [must] define the criminal offense  with sufficient definiteness that ordinary people can understand what conduct is prohibited and  in a manner that does not encourage arbitrary and discriminatory enforcement” (citing Kolender v. Lawson, 461 U. S. 352, 357.) It stated the void-for-vagueness doctrine embraces these requirements. Skilling contends §1346 meets neither of these two due-process essentials.
The Court then reasoned that it must if possible, construe, not condemn, Congress’ enactments, (citing Civil Service Comm’n v. Letter Carriers, 413 U. S. 548, 571, in support). It noted that Courts of Appeals while alive to the potential breadth of the provision it declined to throw out the statute as irremediably vague. The Supreme Court then stated it agrees that §1346 should be construed rather than invalidated and returned to pre-McNally cases to ascertain the meaning of the phrase “the intangible right of honest services.” It concluded Congress intended §1346 to refer to and incorporate the honest-services doctrine recognized in Courts of Appeals’ decisions before McNally ‘derailed the intangible-rights theory of fraud’ –indeed it noted Congress, enacted §1346 precisely to remedy McNally and the statute deliberately employed that decision’s terminology. The Court next pared the pre-McNally body of precedent down to its core: i.e. cases involving fraudulent schemes to deprive another of honest services through bribes or kickbacks supplied by a third party who had not been deceived. In parsing the various pre-McNally decisions, the Court acknowledged that Skilling’s vagueness challenge has force-it agreed honest-services decisions were not models of clarity or consistency. But it noted it has long been the Court’s practice, before striking a federal statute as impermissibly vague, to consider whether the prescription is amenable to a limiting construction (here it referred to Hooper v. California, 155 U. S. 648, 657). As regards Skilling contention that it is impossible to identify a salvageable honest-services core (because the pre-McNally cases are inconsistent and hopelessly unclear), the Supreme Court acknowledged the disagreement among the Courts of Appeals –but stated it was still clear the vast majority of cases involved bribery or kickback schemes. Indeed, McNally itself presented a paradigmatic kickback fact pattern. In view of this history, there is no doubt that Congress intended §1346 to reach at least bribes and kickbacks. The Supreme Court on this point that §1346 criminalizes only the bribe-and-kickback core of the pre-McNally case law.
The Supreme Court then responded to Government arguments that §1346 also proscribes the undisclosed self-dealing by a public official or private employee. The Court rejected this as an offence within the legislation. It noted firstly McNally itself did not center on nondisclosure of a conflicting financial interest (rather it involved a classic kickback scheme). The Court recalled again that Congress’ undoubted aim was to reverse McNally. In addition the Court rejected that pre-McNally conflict-of-interest cases constitute core applications of the honest-services doctrine. It reasoned where Courts of Appeals upheld honest-services convictions for some conflict-of-interest schemes, there was no consensus if the schemes qualified. Given the relative infrequency of those prosecutions and the intercircuit inconsistencies they produced, the Court concluded that a reasonable limiting construction of §1346 must exclude this amorphous category of cases including on the basis of principle that “ambiguity concerning the ambit of criminal statutes should be resolved in favor of lenity” and the absence of Congress’ clear instruction otherwise.
On the basis that its interpretation encompassed only bribery and kickback schemes, §1346 is not unconstitutionally vague. A prohibition on fraudulently depriving another of one’s honest services by accepting bribes or kickbacks presents neither a fair-notice nor an arbitrary-prosecution problem. The Court stated it has always been clear that bribes and kickbacks constitute honest-services fraud, Williams v. United States, 341 U. S. 97, 101, and it reasoned the statute’s mens rea requirement further blunts any notice concern (referring to Screws v. United States, 325 U. S. 91, 101–104). As to arbitrary prosecutions, the Court perceived no significant risk that the honest-services statute, as here interpreted, will be stretched out of shape. Its prohibition on bribes and kickbacks draws content not only from the pre-McNally case law, but also from federal statutes proscribing and defining similar crimes.
Skilling did not violate §1346, as the Court interprets the statute. The Government charged Skilling with conspiring to defraud Enron’s shareholders by misrepresenting the company’s fiscal health to his own profit, but the Government never alleged that he solicited or accepted side payments from a third party in exchange for making these misrepresentations. Because the indictment alleged three objects of the conspiracy—honest-services wire fraud, money -or-property wire fraud, and securities fraud—Skilling’s conviction is flawed (here the Court referred to See Yates v. United States, 354 U. S. 298 in support). It continued that its conclusion does not necessarily require reversal of the conspiracy conviction, for errors of the Yates variety are subject to harmless-error analysis.
The Court left the parties’ dispute about whether the error here was harmless for resolution on remand, along with the question whether reversal on the conspiracy count would touch any of Skilling’s other convictions (i.e. the court of appeals' judgment was vacated insofar as it upheld defendant's conspiracy conviction, and the matter was remanded for further proceedings. The court of appeals' ruling that defendant received a fair trial was affirmed.) The Supreme Court judges were divided as follows: 6-3 decision on the fair-trial issue; 9-0 decision on honest services fraud. 2 concurrences; 1 dissent in part.
In 2004 the former finance chief of Enron Andrew Fastow, pleaded guilty to criminal fraud charges and agreed to cooperate with prosecutors in return for a 10-year prison sentence.
In 2006 former chief accountant for Enron Corp. Richard A. Causey, received a 5.5 year prison sentence and pleaded guilty guilty to a single count of securities fraud
In July 2006 Enron company founder Kenneth L. Lay died of heart disease less than two months after a jury convicted him and Skilling of conspiracy to commit securities and wire fraud. His death vacated his conviction on fraud and conspiracy charges. He died before sentencing was pronounced.
United States Supreme Court