February 22, 2010

United States v. Jeffrey Skilling

Next Monday, the Supreme Court hears oral arguments in U.S. v. Skilling (yes, the Enron guy).  This is like the Winter Olympics for white-collar crime, because it challenges the constitutionality of  an important and controversial prosecutorial tool.  The Court is clearly interested in this statute, as it's the subject of not one, but two other cases this term. 

The statute at issue, part of federal mail fraud law, is the so-called  “honest services” statute (18 USC 1346). Congress passed it in 1988 to overrule McNally v. U.S., a 1987 Supreme Court’s decision that the mail fraud statute (18 USC 1341) punished only frauds that deprived the victim of money or property.  Prior to that case, many lower federal courts had accepted prosecutors’ argument that mail fraud included the denial of “honest services.”    

By writing the statute, Congress didn’t really clarify much, however.  1346 only says mail fraud includes the theft of “honest services”--it doesn’t define “honest services.”  Unfortunately, the pre-1987 courts that accepted the “honest services” theory didn’t clearly define it either.

The law of theft has historically evolved from covering only violent takings of property to covering deceptive takings of property to covering deception that has intangible and abstract effects—this last category is of course hard to define.  On the one hand, that shows law has become more flexible and attuned to reality.  On the other, the government may be unfairly expanding its power to punish.

Of the three "honest services" cases this term, Skilling is the big one because a. he's the Enron guy; and b. the other two cases present more specific challenges to the statute. 

Kind of.

Actually, Skilling’s original petition to the Supreme Court also made a more narrowly focused challenge to the statute.  So if the Court uses Skilling to decide the broader question of whether the statute is unconstitutionally vague, it may come in for criticism of being --gasp!-- an “activist” Court—something it was accused of when it invalidated the corporate campaign finance statute in its recent Citizens United v. FEC decision (my thoughts on other matters in that case are here). 


February 2, 2010

Corporations and Campaign Finance

As you probably know by now, the U.S. Supreme Court recently invalidated certain restrictions on corporations’ participation in campaign finance in Citizens United v. Federal Election Commission. Because I focus on corporate law, a colleague told me I should write an article about this, to which I replied, I did—ten years ago.

I argued there that the Court’s campaign-finance jurisprudence has consistently failed to consider a large business corporation as a complex hierarchical entity.  A decade later, the Court continues to treat a corporation as the equivalent of an individual human speaker under the First Amendment. The Court imagines a corporation as an organization that reflects the will of its constituent individuals.

Citizen United, like past opinions, states in don't-blink-or-you'll-miss-it  fashion that shareholders control corporate speech through “corporate democracy."  But the Court has never tried to describe how “corporate democracy” works.  In fact, while shareholders can cast votes in director elections, directors typically run unopposed and it is very difficult for shareholders to nominate alternate candidates. Moreover, directors do not run corporations-CEOs do, and they are appointed by directors, not elected by shareholders.  While shareholders can express discontent with corporate political spending by selling their shares, this is only a kind of after-the-fact punishment, not a method of participation in making political spending choices.

There are certainly some arguments to be made in favor of the petitioners in Citizens United, but “corporate democracy” is not one of them.

If you are interested in hearing more about this issue, Professor Chris Elmendorf and I will participate in a panel discussion on Citizens United in [CORRECTION] King Hall ROOM 2008 at noon on Tuesday, February 9.