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Verdict Weakens Ignorance Defense

Former Executives Of Enron, HealthSouth Also Blame Underlings

By Brooke A. Masters and Carrie Johnson
Washington Post Staff Writers
Wednesday, March 16, 2005; Page E01

NEW YORK, March 16 -- Former WorldCom Inc. chief executive Bernard J. Ebbers found out Tuesday what it feels like to take the ultimate gamble and lose.

Facing a criminal case in which prosecutors had no documents clearly linking him to the multibillion-dollar central fraud, Ebbers, 63, took the stand, admitted he had no clue about what was happening in his own company and endured a humiliating cross-examination. On Tuesday, 12 New Yorkers convicted him anyway.

Bernard J. Ebbers climbs into a taxi after the guilty verdict was delivered. He testified during his trial that he missed $800 million swings in key expenses. (Adam Rountree -- Bloomberg)

_____Live Discussion_____
Transcript: The Washington Post's Brooke A. Masters was online to discuss the Ebbers case.
Transcript: Roma Theus, vice chairman of the Corporate Integrity and White Collar Crime Committee at the Defense Research Institute
Graphic: A Titan's Rise and Fall
Photo Gallery: Ebbers Through the Years
Video: The Washington Post's Brooke Masters discusses the scene inside the courtroom.
_____In Today's Post_____
WorldCom's Ebbers Convicted (The Washington Post, Mar 16, 2005)
Verdict Stirs Up Mix of Emotion For Employees (The Washington Post, Mar 16, 2005)
Ebbers, One in a Long Line of Egos (The Washington Post, Mar 16, 2005)
_____Recent Coverage_____
Jury Seeks Guidance In Ebbers's Trial (The Washington Post, Mar 10, 2005)
Jury Begins Deliberations in Trial of WorldCom's Ebbers (The Washington Post, Mar 5, 2005)
Ebbers's Attorney Blames Underlings (The Washington Post, Mar 4, 2005)
Prosecution Says Ebbers Had Motive, Led Fraud (The Washington Post, Mar 3, 2005)
Conflicting Portraits Of Ebbers Drawn at Trial (The Washington Post, Mar 2, 2005)
_____From FindLaw_____
Indictment (U.S. v. Ebbers)
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As a result, the other corporate titans on trial and awaiting trial for equally large financial crimes -- HealthSouth Corp. founder Richard M. Scrushy and Enron Corp. leaders Kenneth L. Lay and Jeffrey K. Skilling -- should be sleeping uneasily, outside legal analysts said.

"This is a fatal blow to the 'the CEO is above it all and out of the loop' defense," said defense attorney Jacob S. Frenkel. "This goes to show that CEOs can be held accountable for false filings" to the Securities and Exchange Commission even when they do not get personally involved in the preparation. Ebbers was convicted of seven false-filing counts, even though he personally signed only two of filings.

The Ebbers verdict could serve as a bellwether for the current crop of corporate scandals because his defense -- that he was misled by trusted underlings -- is echoed in claims from the leaders of Enron and HealthSouth.

"He is one of the most prominent CEO defendants, and, in deciding whether to settle criminal cases, lawyers are going to be looking to see what happens in other cases," said Robert J. Giuffra Jr., a partner at Sullivan & Cromwell LLP in New York.

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.

By contrast, Ebbers's defense lawyers conceded fraud had occurred but sought to distance their client from it.

Lead attorney Reid H. Weingarten argued that the government's star witness -- former finance chief Scott D. Sullivan -- was falsely accusing Ebbers of crimes to cut his own prison time.

But that strategy set the case up as a "he said-he said" case and put strong pressure on Ebbers to testify and contradict Sullivan's assertion that he repeatedly told Ebbers in private meetings that he was making improper expense and revenue adjustments.

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