A Good Day for Conrad Black | Bleader

Thursday, June 24, 2010

A Good Day for Conrad Black

Posted By on 06.24.10 at 02:27 PM

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The U.S. Supreme Court on Thursday unanimously cut the legal doctrine of honest services fraud down to size — good news for Conrad Black, sitting in a Florida prison serving the six-and-a-half-year sentence he was handed in 2007.

The Supreme Court ruled that the 1987 federal law that addresses honest services fraud properly "criminalizes only schemes to defraud that involve bribes or kickbacks." It came to this conclusion in Skilling v. United States, the case in which Jeff Skilling, former CEO of Enron, was charged with depriving Enron and its stockholders of their intangible right to his honest services —- and also with the more tangible crimes of wire and securities fraud and insider trading. He was convicted in 2006 of honest services fraud and of 19 other counts, and sentenced to 24 years in prison.

Asked by Skilling to reject in its entirety the 1987 law, the Court decided instead to boil it down to what it called its "bribe-and-kickback core" — which Skilling, said the Court, did not violate. Because the indictment against him "alleged three objects of the conspiracy — honest-services wire fraud, money-or-property wire fraud, and securities fraud — Skilling's conviction is flawed," said Justice Ruth Ginsburg's opinion, but whether the flaw fatally compromised his conviction or was harmless error will be up to lower courts remanded the case to decide.

Ginsburg didn't go far enough for Justice Antonin Scalia, the honest-services doctrine's biggest critic. Scalia wrote a separate opinion (Judge Clarence Thomas joined it) arguing that the Court was improperly rewriting the 1987 law to salvage a piece of it and instead should have found, simply, that Skilling couldn't possibly be convicted under that law because it was too vague for any court to make sense of.

Skilling set the precedent and Black v. United States immediately applied it. Conrad Black, CEO of the Chicago Sun-Times and the many other newspapers in the now defunct Hollinger International chain, and three other executives were convicted in 2007 of stealing millions of dollars from Hollinger by paying themselves bogus non-compete fees. At the trial the prosecution advanced two arguments: that Black and the others had fraudulently enriched themselves and that they'd fraudulently deprived the company and its stockholders of their honest services. Having decided in Skilling that honest services fraud was limited to bribes and kickbacks — something Black and the others were not accused of — the Court, in another opinion written by Ginsburg, concluded that the Black jury was given erroneous instructions by Judge Amy St. Eve on how to apply the honest services law. "As in Skilling," Ginsburg wrote, "we express no opinion on whether the error was ultimately harmless, but leave that matter for consideration on remand."

Again, Scalia put in a word of his own. In his view Judge St. Eve's error was "in instructing the jury on honest-services fraud at all" (his italics). In his view the law was "unconstitutionally vague" and should have been ignored.

When the Seventh Circuit Court of Appeals, in an opinion written by Judge Richard Posner, rejected Black's appeal, it noted that "only if honest services fraud were nullified as grounds to convict Black could he get a new trial—in that case there'd be no way of knowing if the jury convicted him for a reason the courts still recognized or a reason they did not." That's where Black finds himself today. Black was also convicted of a count of obstructing justice by removing files from his Toronto office that he'd been ordered to preserve as evidence. Nothing the Supreme Court did Thursday directly touches on that crime. But as a practical matter, a lower court (St. Eve or the Seventh Circuit) reviewing the case might have trouble holding him in prison for concealing evidence of other crimes he's no longer convicted of.

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