Today the U.S. Court of Appeals for the Second Circuit upheld the conviction and prison sentence of former WorldCom CEO Bernard Ebbers. The 64-year-old defendant was convicted in 2005 of nine counts of conspiracy, securities fraud, and false SEC filings. He received a 25-year prison sentence, which all but assures that he will die in prison.
WorldCom’s demise was an $11 billion accounting fraud that included improper capitalization of operating costs, among other things. It sent WorldCom, a company with stock previously valued at $180 billion, into bankruptcy. Ebbers’s defense was that the CFO, Scott Sullivan, and his subordinates committed the fraud without his knowledge.
Ebbers’s attorney argued that the sentence was excessive and that Ebbers did not receive a fair trial because potential defense witnesses weren’t offered immunity from prosecution in exchange for their testimony. The witnesses said they would use the fifth amendment to avoid testifying.
Ebbers has been free while the appeal was pending, and is expected to be ordered to prison soon.
A long post, compliments of the Wall Street Journal. I thought this was a great piece. They chronicled how various high-profile white collar defendants fared. The lineup includes Frank Quattrone, Bernie Ebbers, Richard Scrushy, John Rigas, Dennis Kozlowski, Mark Belnick, Andrew Fastow, Martha Stewart, Joseph Nacchio, Walter Forbes, Martin Grass, and Jamie Olis.
Frank Quattrone (CSFB) – Conviction Overturned
After one mistrial, a subsequent conviction and an 18-month prison sentence, Frank Quattrone was granted a new trial. Mr. Quattrone, a former star investment banker whose success epitomized the Internet-stock boom of the late 1990s, had been convicted of obstruction of justice after forwarding an email in December 2000 urging employees to “clean up” their files during an investigation of allocations of initial public offerings at the firm then known as Credit Suisse First Boston. A federal appeals court Monday overturned the verdict, citing erroneous instructions given to the jury. The successful appeal was based partly on a May 2005 Supreme Court decision voiding a criminal conviction of Arthur Andersen LLP, the former accounting giant charged with shredding documents during an investigation of its client Enron Corp. The appeals court remanded the Quattrone case to the district court for retrial and ordered that it be assigned to another judge.
Bernard Ebbers (WorldCom) – Guilty
Bernard Ebbers, milkman-turned-WorldCom CEO, was convicted on all nine counts for his role in an $11 billion accounting scandal, the largest in U.S. history. In July 2005 a judge sentenced Mr. Ebbers to 25 years in prison — one of the stiffest sentences handed out in a white-collar case in recent years. Continue reading