Lord Black and Jeffrey Skilling have much in common as both former CEO’s, (Black of Hollinger and Skilling of Enron) have challenged the federal law that was used to convict each of them of honest services fraud. Fraud, bribery and extortion are well known criminal offences but what is “honest services fraud”? It is a “scheme or artifice intended to deprive another of the intangible right of honest services”.
If a person commits fraud and steals money, the law is clear that the fraud is a criminal act. However, where federal prosecutors are not certain whether an accused’s conduct is criminal behavior or just overly aggressive business practices, they will prosecute under honest services legislation.
In Skilling’s case, he was sent to prison for 24 years for his part in a widespread conspiracy to deceive shareholders, employees and investors by concealing the ailing financial health of Enron. His lawyers argue that he did not profit from this deception.
Black was sentenced to six and one half years for siphoning $5 million plus from a Hollinger subsidiary utilizing scam non-compete clauses. He maintains that he made Hollinger so much money that they suffered no loss.
Both cases have now been heard by the United States Supreme Court and decisions are expected next month. How will the Supremes rule in these cases? If Justice Scalia’s recent comments are any indication, it may be that this law is on its way out. He noted that taken literally this law could make it an offence to call in sick to work and go to a baseball game instead!
Former Illinois Governor Rod Blagojevich (recently fired on Celebrity Apprentice) is keeping his fingers crossed. He’s charged under the same law.