Top court hears appeal by Enron's Skilling

Jeff Skilling (C), former Enron CEO, and attorney Daniel Petrocelli (R) are escorted by federal marshals, away from Houston Federal court October 23, 2006.

WASHINGTON (Reuters) - Former Enron Corp executive Jeffrey Skilling's right to a fair trial by an impartial jury was violated because of intense prejudice and anger in Houston over the giant energy trader's collapse, his attorney told the Supreme Court on Monday.

But a U.S. Justice Department attorney argued the trial judge did enough to weed out biased prospective jurors and said the jury showed its fairness by acquitting Skilling on some counts.

Supreme Court justices questioned both sides closely on whether Skilling received a fair trial in Houston, the site of Enron's headquarters, because of community anger over the collapse in 2001 of the nation's seventh largest company.

The justices also considered whether a law used by prosecutors in the case, making it a crime to "deprive another of the intangible right of honest services," was too vague.

During the hour-long arguments, the Supreme Court gave no clear indication of how it would rule. A decision is expected by the end of June.

Skilling and former Enron Chairman Ken Lay were convicted in 2006 on conspiracy, fraud and other charges. Lay later died of a heart attack, and his convictions were set aside because he died before his appeals had been exhausted.

The conviction was part of the Justice Department's crackdown early in the decade targeting top executives for their role in corporate fraud and accounting scandals in such companies as Enron and WorldCom.

Skilling as chief executive led Enron's transformation from a sleepy natural gas pipeline company into a global energy trading powerhouse, which disintegrated in bankruptcy in 2001.

Skilling, 56, is serving a prison sentence of 24 years at a minimum security facility in Littleton, Colorado. Depending on how the Supreme Court rules, part or all of his conviction could be overturned and he could get a new trial.

Sri Srinivasan, the attorney representing Skilling, said anger and passions in Houston were so intense that the trial should have been moved to another location.

But Justice Ruth Bader Ginsburg seemed skeptical and said many prospective jurors in their written questionnaires indicated they did not know that much about the case.

JURORS MAY HAVE FELT PRESSURE TO CONVICT

Srinivasan said anger and prejudice in Houston could have subtly pressured jurors to deliver a conviction. Even jurors who said they could be impartial could be subject to the pressure, he said.

Srinivasan said the trial judge took too little time -- just five hours -- in verbal questioning prospective jurors. In contrast, the Denver-based judge in the trial over the 1995 Oklahoma City bombing took 18 days.

Justice Stephen Breyer expressed concern that a ruling for Skilling would make it harder for judges to select juries and that the Supreme Court would be getting too involved in second-guessing a trial judge's decisions.

"That's the harm I'm worried about," Breyer said.

Chief Justice John Roberts asked Srinivasan about the "honest services law" that prosecutors have used in cases involving public corruption and fraud by corporate executives.

Roberts said shareholders had a right to Skilling's honest services. "I don't understand the difficulty," Roberts said.

Srinivasan replied that the law was unconstitutionally vague, that it should apply just to bribes and kickbacks and that it threatened to convert almost any workplace lie into a crime.

Deputy Solicitor General Michael Dreeben of the Justice Department defended the law and said Skilling failed to act in the best interests of shareholders by keeping Enron's stock price high so he could personally benefit by selling shares.

But Justice Antonin Scalia, a longtime critic of the law, remained skeptical. "That doesn't give me a whole lot of comfort," Scalia responded when Dreeben said prosecutors must show intent to deceive.

Justice Sonia Sotomayor asked Dreeben about the trial judge's brief questioning of prospective jurors and that he did not allow the lawyers to do it. "How can we be satisfied that a fair and impartial jury has been picked?" she asked.

The Supreme Court case is Jeffrey K. Skilling v. United States, 08-1394.

(Reporting by Jim Vicini; Editing by Leslie Gevirtz)