Ebbers Verdict Chills Chieftains - TheStreet

Corporate Caesars, beware the Ides of March.

The Bernie Ebbers verdict sent a chilling message Tuesday to a host of embattled former chieftains.

Ebbers, the longtime head of



was found guilty Tuesday in the $11 billion accounting fraud that brought down the once-highflying telco. He'll face up to 85 years in federal prison when he's sentenced in June.

More important to his former peers atop such corporate calamities at




, though, Ebbers is the first CEO to face the music following a new millennium market swoon that saw several high-profile companies implode. Now, observers say, the citizens who sit on juries around the nation want to hold someone accountable -- and the top execs are ready and waiting.

"I think this shows, in part, the temperature of society," says former federal enforcement attorney Ron Geffner, now a securities lawyer with Sadis & Goldberg in New York. "There's a strong bias against those former shining stars that may have crossed the line one too many times."

Legal experts praise the defense plan executed by Ebbers lawyer Reid Weingarten, and caution that every trial is different. Still, the failure of Ebbers' defense strategy -- arguing that yes, fraud went on at his company, but no, the exec didn't know till too late -- can't be comforting to the likes of ex-Enron honcho Ken Lay or former HealthSouth head Richard Scrushy.

Ebbers, who started out some 20 years ago with a tiny phone company in Brookhaven, Miss., and cobbled together 65 acquisitions to form the nation's No. 2 long-distance company, appeared on the witness stand in the guise of an unsophisticated college dropout who excelled at accumulating motels and later phone companies -- but didn't know a lick about accounting.

But the jury didn't buy the "aw shucks" defense and sided with the prosecution, which argued that Ebbers knew enough about WorldCom's books to cook them in an effort to protect his collapsing personal fortune.

"I think this is telling people in Ebbers' position that ignorance is not going to be a defense," says Greg Wallance, a former U.S. assistant prosecutor and now defense attorney with Kaye Scholer in New York.

Moreover, the jury found ex-finance chief Scott Sullivan, who testified against Ebbers, entirely believable. That's a crucial point, because many of the other ex-CEOs facing trials are going to face impeaching testimony from former underlings.

Enron collapsed in early 2002 after its bookkeeping games were exposed in October 2001. Lay faces 11 criminal counts of securities fraud and wire fraud, in addition to charges of fraud and insider trading from the SEC. Lay is expected to go to court in Houston early next year.

HealthSouth collapsed in March 2003 under the weight of encroaching government probes. Scrushy faces 58 federal criminal charges, including providing false certifications to securities regulators, conspiracy, making false statements and money-laundering. Scrushy is on trial in Birmingham, Ala.

Though he hardly brought down his company, former



CEO Dennis Koslowski is also back under the legal microscope, after last year's first trial brought a hung jury. He is currently being retried on securities fraud charges.

"There's a lot of public outrage" over seemingly pervasive corporate fraud, says Wallance. "But we have to have faith in the system. One has to hope those considerations don't play a role."