Friday, Feb 23, 2018
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Ignorance no defense

THE higher they are, the harder they fall. Bernard Ebbers, former WorldCom CEO, is no exception.

Little solace, perhaps, to former employees and investors who lost jobs and billions of dollars in the collapse of Ebbers' telecommunications giant. But for a chief executive snared in a greedy corporate web of epic proportions, it is justice at last after three years of waiting.

Ken Lay can't be sleeping well after Ebbers' convictions on all nine counts against him for securities fraud, conspiracy, and filing false documents in an $11 billion accounting scandal that drove WorldCom into the largest U.S. bankruptcy ever.

If the former Enron CEO goes with the same defense strategy that Ebbers' attorneys did, with assertions that the defendant was unaware that company executives directly accountable to him were cooking the books, acquittal may not be in the cards for Mr. Lay, either.

Ebbers, like many CEOs, earned a reputation for being an exacting executive and a cost-conscious stickler for details. To argue that the man who built WorldCom Inc. into a telecommunications powerhouse from a small Mississippi upstart was clueless about its financial direction was unconvincing in the least.

But the story the 63-year-old Ebbers was sticking with had him totally in the dark about the financial shenanigans of his top executives to hide the firm's escalating financial problems from investors.

Undermining that story, of course, was the testimony of former WorldCom finance chief Scott Sullivan, one of six company executives indicted in the case, who pleaded guilty to fraud earlier and agreed to cooperate with prosecutors.

The star witness for the prosecution recounted the insistence of CEO Ebbers that the company "hit our numbers" despite Sullivan's reported warnings that improper "adjustments" would have to be made on the firm's financial statements to meet earnings projections. Sullivan said he interpreted Ebbers' command as an order to commit fraud.

Apparently so did the jury. After a six-week trial it rejected Ebbers' "Aw Shucks" defense that his primary role was one of corporate cheerleader and visionary unencumbered by pesky accounting details.

Chances are pleading not guilty to such fraud by reason of ignorance won't fly much any more after Congress passed the Sarbanes-Oxley Act three years ago to enact tighter corporate controls over the conduct of public-companies executives.

One of the law's mandates is that the CEO and CFO both sign off on the company's financial statements. Their required certification means neither can claim they were "out to lunch" when curious accounting occurs.

Ebbers faces what amounts to life in prison when he is sentenced in June. His lawyers vow an appeal and promise their client will be vindicated.

Let him spend his remaining millions on litigation. He is not a sympathetic character. High profile convictions like his and others from Adelphia Communications founder John Rigas to Martha Stewart send a signal that there is a price to pay for abusing power no matter who you are.

For now it will have to suffice for those whose retirement savings evaporated with worthless company stock because the high and mighty they trusted with their money considered themselves above the law.

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