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Get ready for corporate supertrials
January 20, 2005


(Do you solemnly swear ... taking the oath this year will be, from left, Bernard Ebbers, Dennis Kozlowski, Richard Scrushy and Ken Lay. Photos: AP, Reuters)


US prosecutors have been chasing corporate crooks and piling up big statistics in court for five years. Now get ready for a series of trials featuring many of the biggest executives charged with the most audacious crimes of their era.

A few big figures, such as Martha Stewart and Frank Quattrone, were in the mostly no-name court line-up last year. But 2005 will be remembered as the year of the marquee CEO on trial. Take a look at this line-up:

Bernie Ebbers: The trial of the former WorldCom chief executive charged as the front man for an $US11 billion ($14.5 billion) fraud begins this week in New York.

Ebbers is charged with fraud and conspiracy in the WorldCom collapse, the largest bankruptcy in United States history. Former chief financial officer Scott Sullivan, who cut a plea deal, will be the government's star witness.

This will be an important test of the "idiot CEO" defence (see Richard Scrushy and Ken Lay, below). Ebbers is expected to say he left all the numbers to Sullivan, who told prosecutors what they wanted to hear when he got in trouble. Ebbers was a big-picture guy.


Dennis Kozlowski, the sequel: The former Tyco International chief, who became a symbol of material excess, began his retrial in New York on Tuesday. The first trial of Kozlowski and Tyco CFO Mark Swartz ended in a mistrial after a juror favouring acquittal found herself in the middle of a media frenzy and ultimately received a threatening note.

Kozlowski and Swartz are charged with stealing hundreds of millions of dollars from Tyco by hiding details of their compensation from directors and selling big blocks of company stock after inflating its value.

But it was Kozlowski's outrageous spending on the company tab (including $US15,000 for a poodle-shaped umbrella stand) that grabbed the headlines.

Richard Scrushy: The founder of HealthSouth Corp is charged with masterminding a $US2.7 billion earnings fraud in a trial underway in Alabama. A jury is being selected.

The HealthSouth scam wasn't as big as the WorldCom fraud, and the company continues to operate. But Scrushy takes the cake when it comes to defence stories. He wasn't just the idiot CEO, he may have been in a coma.

Prosecutors will rely on five former chief financial officers who will all implicate him as ringleader; one secretly recorded the former chief executive. Scrushy will blame his lieutenants for inflating HealthSouth's profits. See a pattern?

Ken Lay: The former Enron chairman faces two trials. One, in which he faces fraud, conspiracy, and bank fraud charges alone, will probably be held later this year. The other, in which he is charged along with two other former Enron executives, may not make it to court until next year.

Former chief executive Jeff Skilling and chief accounting officer Richard Causey will join Lay at a second fraud trial.

The Enron team was on the job during the most infamous corporate fraud of its time. More than 5000 employees lost their jobs when Enron filed for bankruptcy in 2001. Lay, as you surely know by now, was just another big-picture guy in the dark.

The idiot CEO strategy may sound risky, but it has been successful elsewhere. A jury in Connecticut was unable to reach a verdict against former Cendant Corp chairman Walter Forbes two weeks ago, despite incriminating testimony from three executives.

The trials ahead culminate the effort to hold people criminally responsible for the worst excesses of a dangerously excessive time. But don't count the idiots out yet.
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Link: http://www.smh.com.au/news/Business/Get-ready-for-corporate-supertrials/2005/01/19/1106110810821.htm....