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The “honest services” criminal fraud statute applies only to cases involving bribery and kickbacks, the U.S. Supreme Court has ruled.

The Court also held that pretrial publicity did not deprive former Enron CEO Jeffrey Skilling of his right to a fair trial.

Skilling was convicted of securities fraud and a number of other charges, including conspiracy to commit “honest services” fraud. The federal “honest services” fraud statute criminalizes employee conduct intended to achieve “private gain” rather than to advance the employer’s interest.

Skilling appealed his conspiracy conviction, arguing his conduct did not indicate any conspiracy. In the alternative, he claimed that the honest services statute was unconstitutionally vague.

While the 5th Circuit agreed that Skilling’s acts were not intended to harm Enron or to obtain personal benefit at Enron’s expense, they affirmed his conviction, holding that the charge required only a finding of a material breach of a state-law fiduciary duty and resulting harm to the employer.

Skilling petitioned the U.S. Supreme Court for certiorari, and the Court agreed to consider the “private gain” application of the statute, determine whether the statute was unconstitutionally vague, and decide whether widespread media coverage of a criminal case resulted in juror prejudice.

First, in an opinion authored by Justice Ruth Bader Ginsburg, the Court declined to strike down the honest-services law as overbroad, opting instead to limit it.

Noting that the law stemmed from cases “involv[ing] fraudulent schemes to deprive another of honest services through bribes or kickbacks supplied by a third party who had not been deceived,” it concluded that limiting the law to bribes and kickbacks would avoid overbroad application.

“In view of this history, there is no doubt that Congress intended [the law] to reach at least bribes and kickbacks,” Ginsburg wrote. “Reading the statute to proscribe a wider range of offensive conduct, we acknowledge, would raise the due process concerns underlying the vagueness doctrine. To preserve the statute without transgressing constitutional limitations, we now hold that [it] criminalizes only … bribe and-kickback” cases.

The ruling was unanimous on the honest-services question, but divided 6-3 on the fair trial question, with Justices Stephen Breyer and John Paul Stevens joining Justice Sonia Sotomayor’s dissent on that issue.

In another honest services case decided the same day, the Court reversed and remanded, finding that the jury instruction was erroneous in light of the Skilling ruling.

In a third honest-services case involving a public official, the Court also reversed and remanded in light of the Skilling ruling.

U.S. Supreme Court. Skilling v. U.S., No. 08-1394.  June 24, 2010. Lawyers USA No. 993-2041. Black v. U.S., No. 08-876.  June 24, 2010. Lawyers USA No. 993-2043. Weyhrauch v. U.S., No. 08-1196.  June 24, 2010. Lawyers USA No. 993-2042.

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