WASHINGTON, March 1, 2010 -- A powerhouse team of lawyers for former Enron CEO Jeffrey Skilling filed into the Supreme Court this afternoon to argue that Skilling's 19 count conviction on fraud, conspiracy and insider trading was constitutionally flawed and subject to jury bias.
Skilling's lead lawyer, Sri Srinivasan of O'Melveny & Meyers, told the justices that the trial court judge had subjected Skilling to "deep-seated bias" in the community when he had refused Skilling's requests to have the trial moved from Houston.
Srinivasan also repeatedly criticized the judge's decision to limit the length of the procedure to choose jurors -- known as voir dire -- to five hours.
The justices struggled with the allegations of jury bias, and some seemed hesitant to second-guess a trial court judge who made his decisions based on interactions with prospective members of the jury.
Justice Stephen Breyer said he was worried the court was going to "get into the business of running the trial court's trials." But Breyer also read through some of the interviews with prospective jurors and said at one point, "I'm worried about a fair trial."
Srinivasan said the ordinary process of voir dire couldn't be trusted in such a high profile case, in which hundreds of Enron shareholders were financially devastated by the company's sudden collapse.
He compared the case to the Oklahoma bombing case, which, because of fears of pre-trial publicity, was moved from Oklahoma City to Denver.
A "wave of public passion" and "pervasive animus directed towards the defendant" had to be taken into consideration when deciding whether a trial should be moved, Srinivasan said.
But Deputy Solicitor General Michael Dreeben, arguing for the government, said the trial judge had "15 years of experience choosing a jury," and he ridiculed Skilling's contention that all of the 4.5 million people in the Houston area were infected by some sort of "pervasive prejudice."
High Court Weighs 'Honest Services' Statute
Dreeben said the "judge is the only person on the scene" who could make the "eyeball-to-eyeball" determinations regarding jury credibility.
But Justice Sonia Sotomayor, who has experience as a District Court judge, asked Dreeben if he could think of any other comparable case "in which voir dire only lasted five hours?"
Skilling's lawyers also argued that a statute that was used in the majority of the counts against him is "unconstitutionally vague," so much so that the average person has no clear understanding of what is prohibited.
Judges and defense lawyers across the country have expressed the same reservations about the law, which was passed in 1988.
The so-called "honest services" statute makes it a crime to deprive another of "the intangible right of honest services."
Historically the law has been used for municipal and state public officials who have greased their palms and engaged in bribes and kickbacks. But prosecutors have increasingly extended the statute into the board room, interpreting it to mean that depriving the shareholders of honest services is also a violation.
"Senior corporate officials are supposed to act in the best possible interest of their shareholders, not for their personal interest," former federal prosecutor Jacob S. Frenkel said.
In Skilling's case, the jury found that he schemed to inflate Enron's stock price to hide the true dire financial state of the company. While the government argued that his actions caused shareholders to lose money, Skilling contends that his actions never lined his own pockets.
Srinivasan said the statute was vague enough that there was a danger it could convert "any work place lie" into a felony.
Experts say the statute has become a crucial tool for prosecutors using it against corporate executives who allegedly put their personal financial interests ahead of their duties to shareholders.
"The big complaint about honest services is that nobody knows what it means. The statute is really vaguely written, which makes it valuable to prosecutors because they can fit a lot in it," said Adam Gershowitz of the University of Houston Law School.
But the government scoffs at the notion that Skilling didn't privately gain from his actions. In its briefs, the government writes that Skilling's "deception deprived shareholders of the information they needed to make informed decisions and thereby defrauded them of his honest services."
At trial, prosecutors said Skilling and Enron founder Kenneth Lay "chose to violate their duties of loyalty and trust by lying over and over again about the true financial condition of Enron, concealing from [the] employees and investors information which was critical for them to make good decisions about what to do with their own stock; and at the same time, they repeatedly put their own interests in front of those investors by self-dealing, by selling their own stock."
Critics of the law say the government didn't need it to go against Skilling.
"Their invocation of honest services reflects an overreach on the part of the government, which could have used more established law," said Noel J. Francisco of Jones Day. "It's a vague and amorphous law."
In two other cases before the Supreme Court, justices on both sides of the ideological spectrum have expressed some reservation about the law.
Experts have said the court could wipe it off the books or give it a more narrow interpretation.
"They could say it only applies to bribery and basically conduct that is unambiguously corrupt," Francisco said.
The court will decide the case by June.