In a story told in investigative reports and in the course of the Ebbers trial, Vinson said that her boss approached her with a plan to reduce expenses, which, he told her, had been approved by top finance officials. Later, finance chief Scott D. Sullivan, who has since pleaded guilty to related charges, told Vinson and other subordinates that the scheme would not last forever and that the company could work its way out of financial trouble. For her efforts, Vinson was promoted to head the financial reporting department and received a huge salary increase in 2002.
After internal accountants blew the whistle, prosecutors swooped in and Vinson pleaded guilty to conspiracy and securities fraud charges. While she awaits sentencing, regulators have suspended her accounting license. Her lawyer has said she hopes to win leniency from a judge because her testimony helped prosecutors convict WorldCom chief executive Ebbers.
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For other corporate underlings, the motive for participating in fraud appears to be less intimidation and greed than a heartfelt, if misguided, loyalty to their bosses. One of the most dramatic examples of the past few years involves Franklin C. Brown, former chief legal counsel of Rite Aid Corp., the Pennsylvania-based drugstore chain.
Brown provided legal advice to Rite Aid founder Alex Grass and his son Martin L. Grass for more than four decades. Brown was indicted, along with Martin Grass, in a wide-ranging accounting fraud scheme in 2002. Defense lawyers cast Brown, 76, as an elderly man with deep loyalty to the Grass family and particularly to Martin Grass, whom he had counseled since childhood.
Brown lawyer Reid H. Weingarten said his client was "an old man, shuffling around, trying to be useful." Jurors ultimately convicted Brown of backdating contracts and giving his secretary $25,000 to buy a new car in exchange for tampering with paperwork.
With the trials stemming from the last decade's corporate meltdowns far from over, the larger issue remains: How do we redirect allegiances and instill ethics in corporate employees?
Federal prosecutors in New York and Alabama say that bringing criminal charges against accounting subordinates may help serve as a deterrent, although defense lawyers and some law professors have criticized the government for penalizing workers at WorldCom and HealthSouth who simply followed orders. A 2002 corporate responsibility law, the Sarbanes-Oxley Act, demands more accountability from board members and provides for aggressive oversight of independent auditors, who often failed to detect fraud in the 1990s. Requiring gatekeepers to ask tougher questions, the theory goes, fosters a better corporate climate for employees who want to do the right thing.
But no legislation or company code of ethics can guarantee honesty. Experts say that any attempt at ending accounting fraud must be aimed at the conditions that fuel these manipulations. Earlier this month, mortgage giant Fannie Mae seemed to take that message to heart: It announced that it had recalibrated its pay system to reward officials for beefing up fiscal controls rather than reporting smooth, steady earnings.
At many companies, however, executive pay remains tied to quarterly earnings targets, creating a powerful motive to monkey with the numbers. Unless board members and business leaders are willing to tackle the difficult problem of executive pay and the incentives it creates to cheat, we can expect more courtroom dramas -- and more ruined lives -- in places such as Birmingham, Jackson and Houston.
Author's e-mail:
johnsonca@washpost.com
Carrie Johnson, a reporter for The Post's Business staff, has been covering the corporate fraud investigations since 2002.
