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Court reins in fraud law

‘Honest services’ a prosecutor favorite

WASHINGTON – The Supreme Court on Thursday sharply curtailed prosecutors’ use of an anti-fraud law that was central in convicting politicians and corporate executives in many of the nation’s prominent corruption cases. The ex-CEO of disgraced energy giant Enron and a Canadian media mogul, both in prison, are among those who could benefit from the ruling.

The justices voted 6-3 to keep the law in force, even as they joined unanimously in weakening it, and left it to a lower court to decide whether Jeffrey Skilling, the former Enron boss, and Conrad Black, the former newspaper owner, should have their convictions stemming from “honest services” fraud overturned.

The “honest services” law has been criticized by defense lawyers as the last resort of prosecutors in corruption cases that lack the evidence to prove that money is changing hands. It also has been called vague, subjecting people to prosecution for mistakes and minor transgressions in business and politics. But watchdogs consider it key to fighting white-collar and public fraud.

The court, in an opinion written by Justice Ruth Bader Ginsburg, said prosecutors may continue to seek honest services fraud convictions in cases where they put forward evidence that defendants accepted bribes or kickbacks.

Thursday’s decision does not necessarily mean that any of the 19 counts against Skilling or four counts against Black will be thrown out, Ginsburg said.

It is unclear whether any convictions will be overturned or prison sentences reduced as a result of the decision, lawyers familiar with the fraud law said. Determinations will have to be made case by case.

But there is no doubt how important the law has been to prosecutors. Supreme Court nominee Elena Kagan said recently that the honest services cases at the high court were the ones that mattered most to the Justice Department.

Justice Department spokeswoman Tracy Schmaler said prosecutors would continue to urge that honest services convictions be upheld. “While we are disappointed that today’s Supreme Court decisions narrowed the honest services statute, we are pleased that the Court upheld many of the core provisions that have been used for decades to prosecute corrupt public officials and corporate executives who have breached their duties to their constituents, clients, and investors,” Schmaler said.

The new limits could mean the end of federal prosecutors’ case against former Alaska lawmaker Bruce Weyhrauch.

Donald Ayer, who represented Weyhrauch, said the ruling will put the brakes on prosecutors’ efforts to win convictions under the 28-word fraud law that makes it a crime “to deprive another of the intangible right of honest services.”