A federal appeals court, citing the U.S. Supreme Court’s ruling in Skilling v. United States, has tossed out most of the convictions of two figures in a large public corruption case involving a city near Los Angeles. 

The U.S. Court of Appeals for the Ninth Circuit reversed all of the counts based on the government’s "honest services" fraud theory against Albert Robles, former treasurer of South Gate, Calif., and a businessman, George Garrido. They’d been convicted on charges that they steered city contracts to companies for their own benefit.

The panel upheld separate bribery convictions against Robles.

In Skilling, the high court in 2010 ruled that the honest-services fraud statute was unconstitutionally vague except as it applies to bribes or kickbacks. In the South Gate case, the panel concluded, the jury instructions, the indictment and closing arguments at trial had permitted a conviction based not on a bribe or kickback but on a failure to disclose a conflict of interest — not allowed under Skilling.

"Thus, Appellants have met their burden under the plain error standard of review to show that there was a reasonable probability that the instructional error affected the outcome of the trial and that the error seriously affected the fairness, integrity or public reputation of judicial proceedings," the panel wrote.

The ruling came less than two weeks after the Ninth Circuit refused a similar appeal by former Orange County, Calif., Sheriff Mike Carona to set aside his witness tampering conviction based on Skilling.

On April 4, the U.S. Justice Department issued a notice to shareholders, employees and other victims of Enron Corp. that is former chief executive officer, Jeffrey Skilling, the subject of the Supreme Court precedent, would be resentenced. He is serving 24 years in federal prison following his conviction for insider trading and securities fraud.

"It’s a significant decision, but obviously we would have liked to have won the whole thing," said Robles’ attorney, Thomas Kiley, of Cosgrove, Eisenberg & Kiley in Boston. "It’s not the last chapter in the book on this case." Garrido’s attorney, Dennis Riordan, Riordan & Horgan in San Francisco, did not return calls for comment.

Thom Mrozek, a spokesman for the U.S. attorney’s office in Los Angeles, declined to comment.

Robles and Garrido were indicted in 2004. In one scheme, the government accused Robles of inducing two local companies to hire a friend as a consultant, and then directed South Gate’s city council to award contracts to those companies. In the second scheme, which involved Garrido, Robles helped a waste hauling company secure a contract.

In 2005, a jury convicted both men on all the counts in a superseding indictment. Robles was sentenced to 10 years in prison and Garrido to 51 months.

"After reviewing the trial record as a whole, we conclude that there is a reasonable probability that the jury convicted Robles and Garrido of honest services fraud based on their failure to disclose a conflict of interest," the panel wrote. "Because of the emphasis on the conflict of interest theory in the jury instructions and in the closing arguments, we find that the error affected the Appellants’ substantial rights."

The panel concluded that the indictment was "ambiguous at best," since it encompassed mostly the conflict of interest theory of honest services fraud.

"There is evidence in the record that could support a bribery or kickback conviction," the panel wrote. "Nevertheless, it is impossible to conclude that the jury convicted Robles and Garrido based on their participation in either a bribery or a kickback scheme instead of based on Skilling’s unconstitutional failure to disclose a conflict of interest."

The panel reversed honest-services mail and wire fraud convictions on 21 counts against Robles and five counts against Garrido. The panel acquitted Robles of two counts and Garrido of one count because prosecutors, after Skilling, admitted they had insufficient evidence to support the charges.

In addition, the panel reversed four money-laundering counts against Robles because they "are predicated on the flawed honest services fraud convictions."

But the panel upheld five bribery counts on which Robles was convicted.

Contact Amanda Bronstad at abronstad@alm.com.