Enron’s Skilling wins his appeal

THE scandalous collapse of Enron may have started out as a case study in abusive management but it is ending up looking more like a worrying example of overzealous prosecution by government. On June 24th the United States Supreme Court ruled in favour of an appeal by Jeff Skilling, Enron’s former chief executive, against his conviction on charges of failing to provide “honest services” to the firm. The court also found in favour of Conrad Black, a Canadian media mogul, who had also been convicted of honest-services fraud, and whose appeal Mr Skilling’s legal team had supported.

The Supreme Court’s decision was not unexpected, given the tone of the questions asked by the judges during their hearings. The notion at the centre of the prosecutions, last reiterated by Congress in 1988, though far older in its origins, holds that someone hiring someone else to do a job for them has an intangible right of honest services. The law makes it illegal to deprive the employer of such services fraudulently, but fails to make it clear what would constitute dishonest service. In February 2009, dissenting from a Supreme Court decision not to take on another honest-services case, one of its judges, Antonin Scalia, wrote that some prosecutors’ and juries’ interpretation of the offence, taken to its logical conclusion, would stretch even to a salaried employee phoning in sick to go to a ball game. More to the point, he also argued that it is simply not fair to prosecute someone for a crime that has not been defined until the judicial decision that sends him to jail. He concluded: “It seems to me quite irresponsible to let the current chaos prevail.”

It is to be hoped that the latest ruling will clear up this chaos, by limiting the use of the honest-services law to cases of bribery and kickbacks. Whether it will set free Mr Skilling or Lord Black remains to be seen, as the Supreme Court declined to rule of whether the prosecutorial abuse was harmful, instead remitting the cases to lower courts to decide.

Even so, the ruling represents the latest in a long series of reversals for the government. With hindsight, its Enron task-force, established in 2002 to bring to justice those responsible for the firm’s collapse, should perhaps have raised doubts over whether there was the intention of extending to Enron executives or those they worked with the usual presumption of innocent until proven guilty. Prosecutors have had a consistently tougher time in the appeals court with Enron-related cases than they had in the initial jury trials.

Convictions were overturned in a case relating to Nigerian barges that Enron sold to Merrill Lynch, though the case seems to be rumbling on. Doubts over the prosecution’s use of honest-service arguments led to the overturning of a conviction against Enron Broadband’s former finance chief, Kevin Howard (he later admitted one charge to avoid undergoing a third trial). Also overturned was the conviction against Enron’s auditor, Arthur Andersen (albeit too late to save the venerable firm from being broken up).

Of course, Enron’s affairs were infernally complicated, so any trials over its collapse were bound to be complex too. However, the unfortunate impression that this string of legal upsets has left is of a scrabble to bring convictions at all costs rather than a quest for truth and justice.