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|Beating the government|
What do 5th Judicial District Attorney Billy Coenen and former Enron CEO Jeffrey Skilling have in common?
Not much, but it's a safe assumption both men are well versed in the federal statutes that deal with "honest services fraud."
Throughout the 1970s and much of the 1980s—according to our friends at Wikipedia and other sources—the federal courts agreed that mail fraud and wire fraud statutes covered schemes to defraud victims of money and property as well as intangible rights such as "honest services." In other words, the general public had the right to expect public officials and businessmen to provide "honest services" as part of their jobs.
In 1987, though, the U.S. Supreme Court ruled in McNally v. United States that mail fraud and wire fraud statutes strictly covered schemes to defraud victims of tangible property, including money. Overnight, the feds could no longer prosecute public officials and white-collar criminals for "honest services fraud" since the Supreme Court no longer recognized it.
One year later, the Congress took it upon itself to circumvent the court by amending the federal mail fraud and wire fraud statutes so that any "scheme or artifice to defraud includes a scheme or artifice to deprive another of the intangible right to honest services." And overnight, federal prosecutors were back in business with a very powerful tool at their disposal to root out public corruption as well as to nail powerful businessmen who did something wrong in the confusing world of big business, small business and anything in between.
When a jury in 2006 in federal District Court in Houston convicted Skilling of basically looting now-defunct Enron, one of the many charges against Skilling included the allegation that he committed "honest services fraud." He defrauded Enron employees as well as Enron stockholders of his "honest services," prosecutors said.
On appeal, which resulted in a pretty substantial Supreme Court ruling last week, Skilling took issue with the "honest services" law. He said it was vague. Justices agreed with him to some degree, though they left the "honest services" law in force.
In a 6-3 ruling, the court said prosecutors were free to continue pursuing public officials and white-collar criminals on "honest services fraud" charges as long as prosecutors provided evidence that defendants accepted bribes or kickbacks. Since "Skilling's misconduct entailed no bribe or kickback, he did not conspire to commit honest services fraud under our confined construction," said Justice Ruth Bader Ginsburg, a liberal jurist.
It should be noted that justices Anthony Kennedy, Antonin Scalia, and Clarence Thomas would have found the "honest services" law unconstitutional.
Skilling won't be a free man any time soon. He will, though, have his day in court before the 5th U.S. Circuit Court of Appeals in New Orleans, to which the Supreme Court remanded Skilling's appeal for further review. It's unclear whether his convictions will be overturned or whether his prison sentence will be reduced.
What's very clear, though, is the government's primary weapon in pursuing "honest services fraud" charges against public officials and white-collar criminals has been weakened to the point that it will lead to charges being dismissed against District Attorney Coenen and his two co-defendants in a case stemming from their involvement with Poverty Point Reservoir in Richland Parish. Mark my word.
Two years ago this week, Coenen and Poverty Point Reservoir District executive director Mike Thompson, as well as Monroe engineer Terry Denmon, were indicted by a federal grand jury in Shreveport over a land deal at Poverty Point. The government alleged that Coenen and company committed "honest services fraud." The indictment said nothing of bribes or kickbacks.
Though Coenen, Denmon and Thompson can breathe easier today thanks to Skilling's desire not to spend the next 25 years in federal prison, they will forever be marked as men who beat the government. If Coenen and Denmon are wondering what that means, they should write a letter to Edwin Edwards and let him answer it.
Thompson, on the other hand, is on his way to prison courtesy of a separate legal entaglement involving Poverty Point. He's headed there because he treated public employees as if they should serve him at the public's expense.
That sounds a lot like "honest services fraud."