Senators hear reasons to close loophole
WASHINGTON — The top Justice Department prosecutor urged Congress on Tuesday to close legal loopholes left by a recent Supreme Court decision on Enron CEO Jeff Skilling's conviction for violating the federal honest services law.
Skilling, who became synonymous with corporate corruption when the Houston-based energy company collapsed in 2001, was convicted in 2006 on 19 counts of fraud, conspiracy and insider trading, and was sentenced to 24 years in prison.
In its case against Skilling, the Justice Department alleged that the former Enron executive had committed honest services wire fraud by concealing the extent of Enron's financial difficulties in order to inflate the price of Enron's stock and, therefore, his own compensation package.
In June, the Supreme Court ruled in the Skilling case that the honest services statute was unconstitutionally vague and should be pared down to its "solid core" of cases involving outright bribery and kickbacks. The high court sent Skilling's case back to a lower court for review. A hearing in the case is set for Nov. 1.
The Skilling ruling has had immediate repercussions for other defendants convicted under the same statute. Conrad Black, the Canadian media magnate serving 6½ years in federal prison, was ordered released on bail while the U.S. Court of Appeals for the 7th Circuit re-examined his 2007 conviction. Hearings in the Black case are set for today in Chicago.
Joseph Bruno, the former Republican leader in the New York state Senate, was convicted earlier this year under the statute and sentenced to two years in prison. He is free on bail pending an appeal based on the high court's decision in the Skilling case.
Lanny Breur, the assistant attorney general in charge of the Justice Department's criminal division, told the Senate Judiciary Committee Tuesday that the high court's ruling in the Skilling case had "significantly eroded" the government's ability to prosecute fraud and corruption cases. The provision making it a felony to "deprive another of the intangible right of honest service" has been used by prosecutors to convict public and private officials who used their official capacities for private gain.
"I can assure you that the impact of (the Skilling decision) is real, and that there is conduct that would have been prosecuted under the honest services fraud statute" before the Skilling decision, which can no longer be prosecuted under the federal criminal law, Breur told the panel.
He said that by limiting the honest services law to cases of outright bribery, the Skilling case created loopholes for more "creative" types of corruption. A politician or corporate executive who uses his or her office for personal gain may not be taking a direct kickback but still will damage the "integrity of the decision-making process itself," he said.
He urged Congress to close the legal gap with new legislation that would allow prosecutors to go after cases outside the reach of current laws.
Sen. Patrick Leahy, D-Vt., chairman of the committee, lashed out at the Supreme Court decision in the Skilling case.
The court "appears to have undermined congressional efforts to protect hard-working Americans from powerful interests" by siding with Skilling, Leahy said, adding he planned to introduce legislation to address the issue.
Another committee member, Sen. Russ Feingold, D-Wis., urged speedy legislative action.
"Fraudulent behavior should not go unpunished merely because it is more devious, more sophisticated or more complex than a simple bribe or kickback," Feingold told his colleagues.
In his testimony before the panel, Samuel Buell, a law professor at Duke University and a former federal prosecutor, said that any new law would need to be clearly defined and limited to cases where a clear intent to defraud could be demonstrated.
Any legislation that is passed wouldn't affect Skilling's case.
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