White-collar prisons open as Black goes first

A prison gate in Florida opened last week to free former newspaper magnate Conrad Black. (See story Page 5). The first white-collar convict helped by a new decision from the U.S. Supreme Court, Black won’t be the last.

The ruling isn’t going to empty U.S. prisons of all ex-executives and public officials accused of cheating shareholders or taxpayers. Total exoneration will be rare at best, and Black might find himself back in custody once his case plays out.

The court said it is no longer a stand-alone crime to deprive others of the so-called intangible right to honest services. Without an actual bribe or kickback, forget about it.

OK, so the honest services law was too vague and broad to be constitutional. It is, after all, not possible to outlaw every type of ethical breach and send to prison those who engage in them.

And yet it’s impossible not to lament the un-criminalization of such sleazy corporate and political conduct that, well, cheated shareholders and citizens of honest services.

“You violated your duty to Hollinger International shareholders,” U.S. District Judge Amy St. Eve in Chicago told Black as she sentenced him in 2007.

The jury found Black and cohorts guilty of skimming $6.1 million from the sale of company properties and claiming it was for non-compete payments when it wasn’t. Plus, jurors said he obstructed justice by trying to hide documents.

“I frankly cannot understand how someone of your stature, at the top of the media empire, could engage in the conduct you engaged in,” St. Eve said when she sentenced him to 6 ½ years.

Today, 28 months after he entered a low-security prison, Black faces the same judge in Chicago. Only now she is telling him the parameters of his new freedom. An appeals court ordered bond to be set for him after the Supreme Court weakened the law used to convict him.

For Black and others whose convictions include an honest-services fraud count, the ruling might shave time off their sentences. Among those hoping for that, or for total reversals of their convictions, are former Enron Corp. Chief Executive Officer Jeffrey Skilling, ex-Alabama Gov.  Don Siegelman and HealthSouth Corp. founder Richard Scrushy.

Also hopeful is Kevin Ring, a former congressional aide charged but not convicted as a protégé to busted lobbyist Jack Abramoff.

After a hung jury last year, Ring was set to be retried next month on bribery, honest-services fraud and obstruction of justice counts.

Given the new ruling, the judge is considering knocking out some of the charges.

“I am worried about whether there is sufficient evidence to sustain an indictment with the new definition of bribery/materiality,” U.S. District Judge Ellen Huvelle said at a hearing earlier this month, the Washington Post reported.

Likewise, she postponed the sentencing of another Abramoff associate, Michael Scanlon.

As for Abramoff, he is nearing the end of his four-year sentence on public corruption and fraud charges. He pleaded guilty and helped investigators build cases against others. Some 19 congressional aides, members of Congress and other officials were convicted, according to the Post.

Would Abramoff have been as vulnerable to prosecution if it weren’t for the honest-services law? It would have been a closer call.

We have gotten to this point before. In 1987, the Supreme Court struck down a similar law for similar reasons. A Kentucky official had been convicted after throwing the state’s insurance business to a friend, but the justices said there was no showing of public harm. No one had been deprived of tangible property, and the court found the law unconstitutional.

So Congress wrote another law, one members hoped would pass constitutional muster. It was the honest services statute, and it worked for more than 20 years, until now.

The new ruling presents a reason for lawmakers to try again, as well as a good excuse not to. The Supreme Court has made it clear it won’t accept a broadly written law, and so far Congress hasn’t been able to write one narrowly enough to outlaw that which it wishes to without covering conduct that shouldn’t be criminal.

They need to try. The corporate self-dealing the Black case represents and the influence-peddling at the heart of the Abramoff cases can’t possibly be legal.

But they are, unless Congress acts.

Ann Woolner is a Bloomberg News columnist.