Tuesday, June 28, 2005
The U.S. Attorney's Office for the Southern District of New York filed a memorandum on the government position on the sentencing of former WorldCom CEO Bernie Ebbers, which is currently set for July 13. The government's memorandum, which runs 83 pages (available below), adopts the position taken by the Probation Office that the loss from the criminal conduct was $2.223 billion (heaven knows how they came up with that total). Other enhancements recommended to the court (and supported by the prosecutors) are that the crime had more than 50 victims, Ebbers derived more than $1 million from the misconduct, and he had a leadership role in the offense. The PSR does not recommend an enhancement for obstruction of justice, but the government argues that Ebbers committed perjury, which can result in an additional two level enhancement. All told, the government calculates the offense level (under the advisory Federal Sentencing Guidelines) at 44 (the Sentencing Table only goes up to 43, so this is as high as a sentence can get), which would result in a life term of imprisonment. The government, not surprisingly, opposes Ebbers' arguments for a downward departure, and his argument that the loss was zero -- the latter will be a very tough sell to the judge, no doubt.
The last section of the government's memorandum is interesting because the prosecutors argue that the sentence Judge Barbara Jones imposes should be consistent with those given to other senior executives who engaged in significant fraud that caused their companies to collapse, triggering substantial losses for investors. The three examples of sentences that should guide the court as offered by the U.S. Attorney are John Rigas, former CEO of Adelphia Communications who received a 15 year sentence, Patrick Bennett, the former CFO of Bennett Funding who received a 22 year sentence (after resentencing), and Steven Hoffenberg, the former CEO of Towers Financial Corp. who received a 20 year sentence. While the Guidelines call for a life sentence, the government seems to be taking a more reasonable approach by asking for a sentence in the range of 15-20 years, which for a 63-year old man is virtually a life sentence. While I still stand by my earlier prediction of an 8-10 year sentence for Ebbers (a foolish consistency and all that), I suspect that the John Rigas sentence will likely be the floor for Ebbers, and the 20 years given to his son, Timothy, could well be the target. (ph)