Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

تمرين 24

Skilling v. United States
Supreme Court of the United States,___ U.S.___, 130 S.Ct. 2896, 177 L.Ed.2d 619 (2010).
FACTS In August 2001, Jeffrey Skilling resigned his position as Enron Corporation's chief executive officer. Four months later, Enron filed for bankruptcy. An investigation uncovered a conspiracy to deceive investors about Enron's finances to ensure that its stock price remained high. Among other things, Skilling had concealed more than $2 billion in losses from Enron's struggling divisions. He had overstated Enron's profits in calls to investors and in press releases. To hide more losses, he had arranged deals between Enron's executives and third parties, which he falsely portrayed to Enron's accountants and to the Securities and Exchange Commission as producing income. Skilling was convicted in a federal district court of various crimes, including conspiring to commit fraud to deprive Enron and its shareholders of the "honest services" of its employees. He was sentenced to 292 months' imprisonment and three years' supervised release, and ordered to pay $45 million in restitution. Skilling appealed, and the U.S. Court of Appeals for the Fifth Circuit affirmed the trial court's ruling. Skilling appealed to the United States Supreme Court, arguing, among other things, that the honest-services statute is unconstitutionally vague or, in the alternative, that his conduct did not fall within the statute's compass.
ISSUE Is the honest-services fraud statute unconstitutionally vague?
DECISION Yes. The United States Supreme Court vacated the appellate court's ruling that Skilling's actions had violated the honest-services statute.
REASON The Supreme Court reasoned that the 1988 statute is so vague that it does not provide fair notice of the conduct that is prohibited, which makes it unconstitutional. Before 1988, most honest-services cases involved defendants who, in violation of a fiduciary duty, participated in bribery or kickback schemes. Although the honest-services doctrine originated from prosecutions involving bribery allegations, the statute prohibited "a wider range of offensive conduct." The Court acknowledged that upholding a conviction under this broad honest-services statute "would raise the due process concerns underlying the vagueness doctrine." There was no evidence that Skilling had solicited or accepted side payments from a third party in exchange for making misrepresentations about Enron's financial health, so there was no bribery involved. The Court remanded the case for further proceedings to determine how its decision would affect the other charges against Skilling.
FOR CRITICAL ANALYSIS-Ethical Consideration During Skilling's tenure at Enron, the mood among the employees was upbeat because the company's future prospects appeared "rosy." Among other things, many employees invested all their pension funds in Enron stock. Is there anything unethical about this situation? Discuss.