RICHARD NIXON: “What is the situation on Daley, ah, and his people—Kerner. Are you gonna do anything out there, or not?”
JOHN MITCHELL: “I believe there will be, we’ve, uh, had . . . “
RICHARD NIXON: “I’d like to see you get him.”
When the Supreme Court heard oral arguments on the legal theory of honest services fraud December 8, one of the spectators in the crowded courtroom was Amy St. Eve of Chicago. Her interest was singular: the court was reviewing the conviction by a jury of former newspaper baron Conrad Black, and two years ago St. Eve, a federal judge, ran Black’s trial and sentenced him to six and a half years in prison.
St. Eve told me afterward she wasn’t the first judge who ever showed up to hear the Supreme Court review his or her handiwork, not that it’s routine. That was all she could tell me: the case might be remanded to her, so she wouldn’t discuss any of the legal issues the court raised or even say whether she enjoyed her busman’s holiday.
Pity the conscientious jurist—such interesting work and so little freedom to talk about it. The legal issue Black raised with the court is pretty damned fascinating. I’ve written about it myself several times and it’s obsessed Anton Kerner for more than 30 years.
Kerner was another visitor from Chicago at the hearing. Kerner, a real estate broker, wangled a reserved seat from the Supreme Court marshal by explaining that in 1973 his father had been sent to prison for honest services fraud. That trial put the theory on the map.
The late Otto Kerner was the governor of Illinois when he supposedly deprived the citizens of the state of his honest services, and he was a federal appellate judge when he was indicted in 1971. But Anton Kerner insists there was no crime and he believes the courts are close to conceding it. In 1987 the Supreme Court overturned the law on which his father’s prosecution was based, but Congress quickly revived it; now Kerner hopes to see the Court scuttle that language as well.
Anton Kerner believes his father was prosecuted because President Nixon wanted to get rid of him. The chairman of the 1968 U.S. Commission on Civil Disorders, which concluded that America was dividing into two separate and unequal societies, Kerner testified on May 25, 1971, before a Senate subcommittee exploring unemployment, race, and poverty. Three days later, Nixon and his attorney general, John Mitchell, had the taped exchange that begins above, an exchange Anton Kerner believes explains pretty much everything.
NIXON: “I’d like to see you get him.”
MITCHELL: “Yeah, I would too, for a number of reasons. One, I don’t like to see these bastards sitting on these courts, because they have just killed us, this political court out there in the Seventh Circuit. . . . They were the ones that started our wiretap problems. They’re the ones that have held this Chicago conspiracy trial. . . . Now he’s out talking about his Kerner Commission report . . . when he should be keeping his damn mouth shut as a judge.”
NIXON: “Kerner—the son of a bitch coming in and talked about it—that was disgusting.”
Otto Kerner was indicted seven months later and convicted in 1973. The federal prosecutors focused on profitable racetrack stock he’d acquired in the late 60s while he was governor of Illinois, and their argument was ingenious. They persuaded the jury that by taking this undisclosed stock, Kerner, who as governor enjoyed ultimate authority over racetracks, violated the public's intangible right to his honest services. “Intangible rights” was a phrase that the U.S. attorney’s office in Chicago coined to add meat to the bones of a new legal theory being teased out of the federal mail fraud statute. Kerner became the first prominent target of that theory.
Federal prosecutors had found themselves a handy new weapon, and its use spread—until 1987, when in the case of McNally v. United States the Supreme Court ruled it unconstitutional, declaring bluntly that the mail fraud statute “does not refer to the intangible right of a citizenry to good government.” If Otto Kerner had asked the Seventh Circuit Court of Appeals, on which he’d once sat, to reverse his conviction, it almost certainly would have—similar convictions were being overturned, including one of a former governor of Maryland. But Kerner died in 1976. So Anton asked the Seventh Circuit instead and was told the petition could only be filed by his father. But Anton insists that McNally “represented a substantive—though not formal—vindication.”
If the Supreme Court wanted an explicit reference, Congress was ready to provide it, promptly reloading the mail fraud statute by adding language that forbids “a scheme or artifice to deprive another of the intangible right of honest services.” Congress wanted to plug a legal hole to prevent a legislator, say, who quietly steers a public works contract to a favored nephew from slipping through. He hasn’t bribed or stolen or fleeced the public—but damn it, he’s done something that isn’t right.
So prosecutors were again off and running. But over time, the vagueness of the new language led to a jumble of clashing interpretations of what it meant and how far it reached. Fed up, Justice Antonin Scalia blistered the law in February as "nothing more than an invitation for federal courts to develop a common law crime of unethical conduct." Scalia urged the Supreme Court to "squarely confront both the meaning and the constitutionality of” the honest services law. “Indeed,” he wrote, “it seems to me quite irresponsible to let the current chaos prevail."
James Thompson was the U.S. attorney whose prosecution of Otto Kerner put honest services fraud on the map and Kerner in prison. Years later, long after he’d completed his four terms as governor of Illinois, Thompson headed the audit committee of Hollinger International, Conrad Black’s newspaper empire. If he’d been on his toes, Thompson might have seen through the spurious noncompete agreements that the government says Black and his partner David Radler concocted to enrich themselves to the tune of tens of millions of dollars. Thompson spent three uncomfortable days on the witness stand during the Black trial explaining why he’d “skimmed” documents he should have studied, and Anton Kerner sat in the back of the courtroom watching his dad’s old nemesis suffer.
Anton, who prefers e-mail to conversation for its exactitude when discussing his father’s case, wrote me that he went to Washington to hear the court argue “the overreaching honest service theory invented in 1971 by [Thompson and Mitchell] in service of President Richard Nixon's determination to get my father.” He said he was there because the session “promised to expose for the first time since the McNally decision in 1987 the wrong at the core of his prosecution and conviction. I was not disappointed.”
The Black appeal is one of three cases the Supreme Court has decided to hear as it revisits the theory of honest services fraud, and it probably makes the shakiest case of the three that the theory did the petitioner an injustice—clearly Black profited handsomely from his manipulations. Honest services fraud was simply a backup theory the prosecution gave the jury in case it decided the money Black helped himself to was his own. But then, the argument wasn’t about Black; it was about points of law.
Anton Kerner wrote me afterward that “no one acknowledged the obvious elephant in the room, namely, the unindicted audit chairman himself who was not prosecuted despite his admission that he simply skimmed and signed off on multiple non-compete disclosures—as if his looking the other way in exchange for all the fees and perks he and his business interests got at Hollinger were any less a violation of honest service fiduciary duty than was alleged selectively by the government against Black and his co-defendants.”
If the elephant, Thompson, was obvious only to Anton Kerner, Black himself was practically as invisible; his name was mentioned a total of once in the hour-long discussion of the points his petition raised.
Kerner called the second case the Court took up “precisely on point.” Alaska legislator Bruce Weyhrauch is accused of honest services fraud because he failed to disclose that while he was heavily involved in writing legislation that would affect the tax rate of an oil services company, he solicited work from that company. But if this was a crime, it was only because the federal government said so—there’s no state law in Alaska compelling disclosure. Likewise, “There was nothing in Illinois law requiring my father’s disclosure of his racetrack stock ownership,” Kerner says, recalling that when his father sold the stock, he “dutifully reported” the profit as a capital gain.
The third petition the Supreme Court accepted challenging the honest services fraud theory was brought by Jeffrey Skilling, who argues that his maneuvering as head of Enron was done only to save the company and he didn’t personally benefit. Skilling’s petition will be argued early next year, and the justices expect his opening brief, not yet filed, to propose that unless it’s predicated on private gain, the honest services statute is unconstitutional.
So to some extent the justices were just marking time on December 8, taking potshots at the statute. Scalia, the vaunted “textualist,” led the way in mocking the text for what it does not say.
SCALIA: “Why would it have been so difficult for Congress to say no bribes, no kickbacks . . . “
JUSTICE STEPHEN BREYER: “I thought there was a principle that a citizen is supposed to be able to understand the criminal law that was around even before Justice Scalia . . . “
SCALIA: “Is that the system we have, that Congress can say, nobody shall do any bad things . . . ? And it comes to this court, and this court says, bad things means bribery. And that law is a valid law, right?”
JUSTICE DEPARTMENT ATTORNEY DEFENDING THE LAW: “That's not what this law says, and that's not what this court has done in response to other criminal law . . . “
SCALIA: “What is it—what is it that you are arguing for, that—that a law that is on its face inherently vague can somehow be rendered valid to the citizens by a decision of this court . . . ? One of the briefs in one or the other of these cases describes the great variety of pushing-the-envelope prosecutions that the Justice Department has, indeed, pursued, and they are all over the place. And if the Justice Department can't figure out what—what is embraced by this statute, I don't know how you can expect the average citizen to figure it out.” v
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