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Should Unfair Be Illegal?

Thanks to Conrad Black, the Supreme Court is set to think on the mushy concepts of honesty and intangible rights.

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If children made the laws, everything we do that isn't fair would also be illegal. The problem critics find in a federal law that could easily be called the Chicago doctrine is that it judges human conduct as a child might: behavior a parent would tell a child is bad, or an editorial writer a reader, or a prosecutor a jury, can be punished because—well, because it ought to be.

Now the U.S. Supreme Court has decided to take a close look at this 21-year-old law—which forbids "a scheme or artifice to deprive another of the intangible right of honest services." The word "intangible" tells us at once that we're dealing with a law that's a lot harder to pin down than most criminal statutes. The word "honest" says the same thing. As every child knows, honesty is the best policy, but Ricky Gervais's new movie, The Invention of Lying, isn't the first time someone has added the codicil "except when it isn't." The question becomes: is an intangible right to honesty too amorphous a concept to hang a prison sentence on? Shouldn't that hang on dishonesty's tangible benefits and harm?

A review of three cases will help the court decide. The 2007 conviction of newspaper baron Conrad Black and three codefendants concluded one of the most notorious Chicago trials of recent years. The 2006 conviction of Jeffrey Skilling, former CEO of the once mighty Enron Corporation, brought a national scandal to a climax. And Bruce Weyhrauch is a former Alaska legislator awaiting trial for mail fraud: he's accused of concealing the fact that he tried to get legal work from a company that was lobbying the legislature to reduce its taxes. Weyhrauch's case is most clearly to the point—the federal indictment accuses him of denying Alaskans his "honest services," and he replies, that's for Alaskans to decide, and they wrote no state law obliging me to reveal the communication in question.

The table was set for the Supreme Court to take up these cases by Justice Antonin Scalia's blistering dissent early this year in another notorious Chicago case. The court declined to review the 2006 convictions of Mayor Daley's former patronage chief, Robert Sorich, aide Timothy McCarthy, and Streets and San official Patrick Slattery for corrupt city hiring practices. Scalia disagreed. He wrote, "If the 'honest services' theory . . . is taken seriously and taken to its logical conclusion, presumably the statute also renders criminal a state legislator's decision to vote for a bill because he expects it will curry favor with a small minority essential to his reelection; a mayor's attempt to use the prestige of his office to obtain a restaurant table without a reservation; a public employee's recommendation of his incompetent friend for a public contract; and any self-dealing by a corporate officer. Indeed, it would seemingly cover a salaried employee's phoning in sick to go to a ball game."

Scalia noted a lack of consensus among appellate courts as to what the "intangible right of honest services" actually means. For instance, the Fifth Circuit in New Orleans requires that a state law be broken; the Ninth Circuit, encompassing Alaska, does not. The Seventh Circuit, here in Chicago, found it sufficient that Sorich, McCarthy, and Slattery had violated a 1983 consent decree limiting patronage hiring. "It may well be," said the three-judge panel that upheld their convictions, "that merely by virtue of being public officials the defendants inherently owed the public a fiduciary duty to discharge their offices in the public's best interest."

Scalia found the vagueness of this sentiment infuriating. He argued that without "some coherent limiting principle [the honest services law] invites abuse by headline-grabbing prosecutors in pursuit of local officials, state legislators, and corporate CEOs who engage in any manner of unappealing or ethically questionable conduct." He warned that a "serious argument" could be made—and he made it!—that the law "is nothing more than an invitation for federal courts to develop a common law crime of unethical conduct." And this, to Scalia, would be intolerable: "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 called on the court to "squarely confront both the meaning and the constitutionality of [the honest services law]. Indeed, it seems to me quite irresponsible to let the current chaos prevail."

The phrase "intangible rights" was coined and tied to mail fraud in the early 70s by the U.S. attorney's office in Chicago. In 1973 U.S. attorney Jim Thompson put it to its first big-time use. His target was federal appellate judge Otto Kerner, who'd come into some profitable racetrack stock while he was Illinois' governor in the 60s. There was little evidence that Kerner either extorted the stock or took it as a bribe—Kerner's son Anton tells me Kerner's petition to the Supreme Court for review raised "precisely the same point" that Weyhrauch's would: that he'd done nothing that violated state law.

But Thompson persuaded a jury that Kerner had denied the public his honest services and should be punished. Paroled from prison because he was fatally ill, Kerner died in disgrace in 1976. Eleven years later the Supreme Court ruled that a right to honest services was an insupportable extrapolation of the mail fraud statute; had Kerner lived, his conviction probably would have been expunged. Congress responded in 1988 by writing the concept more explicitly into the mail fraud statute. It's that language the Supreme Court is now about to consider.

Aside from Black, three other convicted Hollinger executives, and Conrad Black's business partner, David Radler, who pleaded guilty to fraud and testified for the state, no one was more tarnished by the Black trial than Jim Thompson. (One defendant, a corporate lawyer who received probation, was arguably less tarnished than Thompson.) High-profile political prosecutions in the early 70s led to Thompson being elected governor in 1976; after 14 years in that office he became president and rainmaker of the law firm Winston & Strawn and joined the boards of various corporations, among them Black and Radler's Hollinger International. And as Thompson had to concede from the witness box, he obliviously chaired the audit committee as Black and Radler raked in millions in phony noncompete fees.

Anton Kerner sat in court every day that Thompson testified. If the honest services theory holds any water, he was thinking, it calls into question the services Thompson failed to perform for Hollinger stockholders. "I seek not malicious satisfaction in the misfortune of others," Kerner e-mailed me at the time, "but only my father's vindication in highlighting Thompson's ironic troubles at Hollinger."

Those troubles point to what's dubious about the honest services theory. Black asserted in a civil suit that his mistake had been to put his "good faith" in the judgment of Thompson's committee, and one can imagine a prosecutor deciding that a former governor was the biggest fish in the water and the honest services law was the hook to snag him with. U.S. attorney Patrick Fitzgerald was not that prosecutor, and alongside Black and Radler's schemes and predations Thompson's lax oversight remained no more than it should have been, a personal embarrassment.

Black's appeal cut no ice in the Seventh Circuit. Judge Richard Posner, writing 16 months ago for a unanimous three-judge panel, defended the notion of honest services fraud when the people or institutions owed the honest services are victimized by the lack of it. (Posner might have been thinking about what Hollinger became post-Black: the destitute Sun-Times Media Group, its stock worth pennies on the dollar, gasping for life.) Nonetheless, he wrote, "even if our analysis of honest services fraud is wrong, the defendants cannot prevail." Why? Because the "honest services" theory was simply a second reason given the jury to convict Black of fraud, the first reason being that he'd wrongly enriched himself. Only if honest services fraud were nullified as grounds to convict Black could he get a new trial—in that case there'd be no way of knowing if the jury convicted him for a reason the courts still recognized or a reason they did not.

No one can nullify the law but the Supreme Court. "Black is a case the government likes to take before the Supreme Court," says law professor Peter Henning of Wayne State University. "It's hard to reverse the conviction of someone the government says is a thief." But Henning, whose specialty is white-collar crime, thinks Black will benefit from having his appeal considered with Jeff Skilling's. Skilling was convicted of conspiracy, securities fraud, making false representations to auditors, and insider trading, and the jury was asked to consider the possibility that one effect of the conspiracy was to deny Enron and its shareholders his honest services. "Skilling is a closer case," says Henning. "You can't say Black was trying to help Hollinger. Skilling is accused not of being a thief but of playing fast and loose to help his company." In the end Enron stock lost $60 billion in value and employee pension plans more than $2 billion, but does that mean Skilling stopped providing honest services or simply that his luck turned?

Skilling's brief to the Supreme Court argued that the entire verdict against him should be overturned because the other counts rested on the conspiracy count, which he says was tainted by a "legally insufficient" honest services instruction. A layman might wonder why prosecutors bothered. Given the evidence against both Black and Skilling, the honest services theory seems gratuitous. When the evidence is much weaker, as it seems to be in Weyhrauch and hindsight suggests it was in Kerner, it smacks of a legal device that lets prosecutors win victories they haven't earned.

Henning told the Tribune October 14 that Black and Skilling stand a good chance of being awarded new trials. When I talked to him a few days later he was less certain, but at the very least he expects the Supreme Court to set limits on the honest services law and remand the Black and Skilling convictions to the appellate courts to reconsider in light of those limits.

Skilling's brief protested that the honest services law lets the state criminalize "whatever wrongful or unethical corporate acts a given prosecutor decides to attack." That brings us back where we began. A child would ask, if Skilling admits what he did was wrong and unethical, why does he think they should let him out of prison?

For more coverage of the Sun-Times Media Group saga, see our blog.

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