09.28.10

Leahy Introduces Bill To Address Supreme Court’s Skilling Decision

WASHINGTON (Tuesday, Sept. 28, 2010) – Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) introduced legislation Tuesday to close the gap created by the Supreme Court’s decision earlier this year in Skilling v. United States.  The legislation, called the Honest Services Restoration Act, will restore critical tools used by investigators and prosecutors to combat public corruption and corporate fraud, which the Court eliminated in the Skilling decision.

The Honest Services Restoration Act expands the honest services statute to cover undisclosed “self-dealing” by state and federal public officials, and corporate officers and directors, prohibiting those officials from secretly acting in their own financial self-interest at the expense of the public or the company they are entrusted with serving.  The bill targets cases in which officials failed to disclose the interests they benefited in violation of federal, state and local disclosure laws.  The legislation applies narrowly to public officials, and to officers and directors of publicly traded companies and public charities, allowing prosecutors to once again investigate corrupt officials and executives and prosecute them under the honest services statute. 

“We cannot let corrupt or fraudulent conduct go unchecked,” said Leahy.  “The Skilling decision left gaps in the current law.  The Honest Services Restoration Act aims to restore the law to what it was before the decision, strengthening it to allow prosecutors to investigate and combat public corruption and corporate fraud.  I hope Senators on both sides of the aisle will support this carefully drafted legislation.”

The honest services statute significantly weakened in Skilling was passed by Congress, in response to a 1987 Supreme Court decision which limited prosecutors’ ability to bring corruption charges under the mail and wire fraud laws.  The legislation, enacted in 1989, added a provision to the law to allow prosecutors to bring corruption charges for deprivation of honest services under the mail and wire fraud statute.   In Skilling, the Supreme Court vacated the conviction of former Enron executive Jeffrey Skilling, and dramatically limited the honest services fraud statute by holding that it only applies to cases involving bribery or kickbacks, and not other important types of cases targeting corrupt or fraudulent behavior.  The Honest Services Restoration Act would close this gap.

Leahy chaired a Senate Judiciary Committee hearing Tuesday morning to examine the scope and impact of the Skilling decision.  It was the latest in a series of Judiciary Committee hearings Leahy has organized in recent years to explore the impact of important Supreme Court decisions. 

Leahy has been a leader in congressional efforts to combat fraud and public corruption.  He is the author of Fraud Enforcement and Recovery Act, which was signed into law in May 2009, and of the bipartisan Public Corruption Prosecution Improvements Act, which was reported by the Judiciary Committee in March 2009.

The Honest Services Restoration Act is cosponsored by Senators Sheldon Whitehouse (D-R.I.) and Ted Kaufman (D-Del.).  The text of the legislation is available upon request.

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Click here to read Senator Leahy's statement from the Judiciary Committee hearing.

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