Ebbers Verdict Sends Resounding Message to Other CEOs

There may be much more at stake in Bernie Ebbers' conviction than a potential life sentence.

The former WorldCom leader, who was found guilty of helping commit fraud at the telecom giant, also finds himself as a bit of a guinea pig to his counterparts in other courtrooms around the country.

His guilty verdict for claiming ignorance doesn't bode well for the Ken Lays of Enron or Richard Schrushys of HealthSouth, according to business reports and editorials from Atlanta to Austin.

"If there ever was a golden age of CEO ignorance, a time when the top executive could claim to be unaware of their company's financial health, that era is long over," wrote USA Today reporters Greg Farrell and Del Jones. "Just ask Bernie Ebbers."

Business reporters quoted experts who spelled doom for CEOs under fire who had planned to mimic the Ebbers defense. Kristen Hays of the Associated Press turned to Charna Sherman, a partner with a Cleveland white-collar crime law firm, who said, "The message to others awaiting like trials, as well as those running other corporate giants, is clear: If you play in big leagues, but only intend to coach, expect to get benched to the nearest federal prison."

The Atlanta Journal-Constitution calls the jury's decision in the Ebbers case an "ominous sign" that should "send a chill through the defense team" for Scrushy, now on trial for fraud at his Alabama-based health care company.

"Like Ebbers, Scrushy claims he never knew about the wide-scale accounting fraud," wrote reporter Patti Bond. "Also like Ebbers, Scrushy blames the fraud on underlings, claiming he relied on an army of managers, lawyers and outside accountants to make sure that the company's finances were on the up and up."

The similarity wasn't lost on the judge overseeing Dennis Kozlowski's second trial, underway in New York for alleged fraud at Tyco. The judge went to the extent of pressing jurors to ignore the highly publicized verdict, asking them to "rely solely on evidence and elements of law explained at the Tyco trial," wrote Barbara Ross of the New York Daily News.

And yet, Washington Post staff writers point out differences in Kozlowski's defense tactics that could help shield him from Ebbers trial backlash.

"Earlier high-profile defendants such as Martha Stewart and Frank P. Quattrone were tried for personal misdeeds, and the heads of Tyco International Ltd. and Adelphia Communications Corp. simply argued that their actions were not criminal," wrote reporters Brooke A. Masters and Carrie Johnson. "By contrast, Ebbers' defense lawyers conceded fraud had occurred, but sought to distance their client from it."

Copyright © 2008 Donald W. Reynolds National Center for Business Journalism