Friday, August 5, 2005

No Time for Other Former WorldCom Accounting Manager

Troy Norman, who also plead guilty and cooperated with the government, received no jail time.  The Wall Street Jrl reports here that although Betty Vinson received five months in jail and five months of house arrest, Judge Barbara Jones did not give Troy Norman a like sentence.  The Assistant United States Attorney apparently argued for the lesser sentence premised on Norman's attempt to resign his position with the company.

People in need of the employment to support their families, people who may be more timid and less likely to stand up to authority, need to be aware that these extenuating circumstances may not be factored into a sentence recommendation of the government.  It may be a bottom line type of approach -  did you try to get out when you were asked to do something criminal,and if so, you get a better benefit than if you did not try and went along with the criminal activity. Your role in the eventual criminality may also play a factor in the sentence given. My only concern here is whether more timid individuals, those who tend to go along with the commands and activities of others- especially higher-ups, may receive more severe sentences as a result of this approach being taken.  Maybe they should?


August 5, 2005 in Sentencing, WorldCom | Permalink | TrackBack (0)

Employees Carry This Decision With You

Every employee should carry a copy of a newspaper article telling the sentence of Betty Vinson a former WorldCom worker. (see BBC article here) She entered the numbers on the books, albeit at the direction of her superiors. It was wrong, but when you work for someone you assume that you have to do as they say to keep your position.  Saving your job is never worth doing something illegal, especially something that may land you in jail down the road.  Following orders will not be an effective defense here.  So show your employer the newspaper article of Betty Vinson getting 5 months in jail and say - no way!


August 5, 2005 in WorldCom | Permalink | TrackBack (1)

Saturday, July 30, 2005

WorldCom Cooperating Defendants Face Sentencing

The five former WorldCom officers and employees who entered guilty pleas and cooperated with the government's investigation that led to the successful prosecution of former CEO Bernie Ebbers will be sentenced in the first two weeks of August.  The schedule of appearances before U.S. District Judge Barbara Jones (see U.S. Attorney's Office press release here) is:

Betty L. Vinson: August 5, 2005 at 10:00 a.m.

Troy M. Normand: August 5, 2005 at 2:00 p.m.

Buford T. Yates: August 9, 2005 at 10:00 a.m.

David F. Myers: August 10, 2005 at 2:00 p.m.

Scott D. Sullivan: August 11, 2005 at 10:00 a.m.

The order of appearances approximates the level of responsibility of the defendants in the company, with Vinson and Normand in the accounting department under the supervision of Yates.  Myers was the corporate controller who oversaw Yates' department and reported to Sullivan, WorldCom's CFO and effectively the second ranking executive on the financial side of the company under Ebbers.  The government has filed a 5K1.1 motion on behalf of Sullivan (see earlier post here) seeking a downward departure under the advisory Sentencing Guidelines.  Ebbers received a 25-year sentence from Judge Jones, which included a modest downward departure, so the 5K1.1 motion probably will drop Sullivan's sentence significantly, although I would be surprised if he did not receive a term of imprisonment much greater than the other four cooperating defendants, given his role in the fraud that triggered the largest bankruptcy in U.S. history. (ph)

July 30, 2005 in Sentencing, WorldCom | Permalink | TrackBack (0)

Sunday, July 24, 2005

Ebbers Sentence and the Media

Has the media been fair to Bernard Ebbers, who was recently convicted and sentenced to 25 years?

One person associated with the defense team does not think so and has written his case to the newspapers in the form of an op-ed. It remains to been seen whether the media will print this piece. In the meantime, you can find this op ed here -

Download craig_mccann_on_the_ebbers_sentence.pdf

Craig J. McCann, PhD, CFA, Securities Litigation and Consulting Group, Inc. states that:

"1. The bloodlust for Mr. Ebbers is misplaced and doesn’t justify the sentence. He should have been sentenced on the basis of what he was convicted of and 99% of the losses in WorldCom were definitely not caused by the things Mr. Ebbers was convicted of.

2. The standard of evidence for proving shareholder losses at sentencing hearings is so low that a rough assertion by the government suffices. I contrast this with the evidentiary burden in class action litigation.

3. The sentencing guidelines thresholds are so low that (combined with the low standard of proof for shareholder losses in sentencing hearings) executives at large publicly traded firms who are found guilty of filing false SEC reports statements will always get the maximum sentence – effectively a life sentence."

Although many may disagree with the Ebbers sentence, find the media mischaracterizing the harm, and find some of the recent white collar sentences beyond recognized punishment theory, convincing the public may prove more difficult.  The Wall Street Journal's poll on the Ebbers sentence (here) shows 55% of the people voting in the poll finding the Ebbers sentence to be fair, with only 24% finding it too harsh.  But maybe you haven't voted yet.


July 24, 2005 in Media, WorldCom | Permalink | TrackBack (0)

Wednesday, July 13, 2005

25 years for Ebbers

The court issued a sentence of 25 years for Bernard Ebbers, the former chief executive of WorldCom Inc. (see here).  The Wall Street Journal notes that the judge cited his health and "charitable work" as reasons for the reduced sentence. 

Reduced?   Like the sentences for the two Rigas defendants and Jamie Olis, this sentence is setting a new trend in sentencing of white collar offenders.  The trend is basically - - lock-em-up for the rest of their lives. 


1. Do you feel safer knowing that Ebbers will be in prison for 25 years (unless he is successful in his appeal) and John Walker Lindh received a lower sentence for "supplying services to the Taliban" (see here)?   

2.  Do you give any credence to concerns of AG Gonzales of a “drift toward lower sentences” resulting in the loss of a “critical law enforcement tool.”  (see here)?

3. Has anyone bothered to notice that the white collar offenders are not recidivists? (see here)

The bottom line - this sentence represents a new trend in this country - a trend that fails to follow long studied sentencing theory of deterrence and rehabilitation.  It is good to see a crackdown on white collar crime, but folks lets be rational in how it is done.   



Update (7/13): Should Charitable Work and Contributions Matter?

U.S. District Judge Barbara Jones noted in sentencing Bernie Ebbers that the Sentencing Guidelines called for a sentence of 30 years, but she gave a small downward departure for his charitable work and health condition in giving a 25 year sentence, which will require him to serve over 20 years in a Federal Correctional Institution.  A Wall Street Journal article (here) notes that the judge will recommend that he serve his term in the FCI in Yazoo City, Miss., a minimum security prison (information here) north of Jackson, Miss.  The Journal also has a link (here) to letters submitted by supporters of Ebbers, many of which discuss his charitable contributions to (among others) Mississippi College and his local Baptist church, where he once taught Sunday school.  Should generosity with one's time and money be sufficient to lower a sentence?  The Sentencing Guidelines state that "[m]ilitary, civic, charitable, or public services; employment-related contributions; and similar prior good works are not ordinarily relevant in determining whether a sentence should be outside the applicable guideline range." (Sec. 5H1.11) 

I have found it a bit troubling that white collar defendants rely on their work on behalf of local charities, churches, and schools as a ground to reduce a criminal sentence.  Don't people have a civic, moral, or religious obligation to be generous with their time and money?  Charitable works may show the person is not a threat to society, but it does not necessarily reflect on the seriousness of the crime or the punishment that is fair.  In U.S. v. Serafini, 233 F.3d 758 (3d Cir. 2000), a state legislator convicted of perjury before a grand jury investigating potential bribery received a three-level downward departure based on his "extraordinary" charitable works that included seeking financing for a medical practice and mentoring a college student who had been seriously injured.  I have a hard time accepting the position that a person who has the time and financial resources -- and perhaps a political motivation -- to contribute to the community while also engaged in criminal conduct should be able to argue for a reduced sentence based on that charity.  A public official who will lie to a grand jury commits a serious crime, and that person's charitable works does not lessen the harm done. 

Did Ebbers act outside the "ordinary" range to warrant a reduction? Given the minimal reduction in the sentence granted by Judge Jones, its is doubtful she was swayed very much by the many letters on Ebbers' behalf extolling his honesty and commitment to the community.  His sentence is certainly on the high side, but is not one that I think is outside a fair range, based on the effect of the accounting fraud at WorldCom.  The judge may have given the modest reduction to forestall an appeal based on the reasonableness of her sentence, the standard under the new Booker regime for federal sentences, so that the reference to charitable contribution and his medical condition is more of a sop than anything else. 

The judge ordered Ebbers to report to prison on Oct. 12, and the next issue will be whether Judge Jones or the Second Circuit will grant bail pending appeal, postponing the start of the prison term.  Given the denial of Ebbers' new trial motion, I think it's unlikely Judge Jones will allow him to remain free beyond that date, barring some major change in Ebbers' physical condition. (ph)

July 13, 2005 in WorldCom | Permalink | TrackBack (2)

Tuesday, July 12, 2005

Ebbers Request for New Trial Denied

Bernard Ebbers request for a new trial was denied today, according to AP here (Tampa).  This not only clears the way for his sentencing set for Wed. of this week, but also sets the groundwork for the appeal. 

The appeal is likely to include two issues from the trial.  One is that the defense was not permitted to offer defense witness immunity to three witnesses.  The prosecution can easily offer immunity and obtain testimony from witnesses they would like to have testify.  Although the immunity is "use" as opposed to "transactional" immunity, it allows the prosecution to compel a witness to testify when the government would like the witness to take the stand.  Obviously, should the witness not tell the truth while on the stand, the government has the added ammunition of perjury charges. 

In contrast, the defense seldom has the same ability to offer witnesses immunity and oftentimes the testimony they would like to bring forth into a court can be more limited.  This appeal will likely present this disparity and also the significance of the constitutional provision of compulsory process when witnesses refuse to testify and take the Fifth Amendment. Other issues, such as an issue related to mens rea, is also likely to be raised on appeal in this case.


July 12, 2005 in WorldCom | Permalink | TrackBack (1)

Friday, July 1, 2005

Ebbers Agrees to Settle WorldCom Securities Fraud Class Action

Former WorldCom CEO Bernie Ebbers agreed to settle the securities fraud class action with an immediate $5 million payment and to put the rest of his assets into a liquidating trust.  Under the terms of the agreement reached with the plaintiff class and approved by the U.S. Attorney's Office, Ebbers will sell his remaining assets, including his Mississippi home and investments in various other businesses, with 75% of the proceeds from the sales going to WorldCom investors and 25% back to the company, which is now MCI Inc. and is scheduled to be acquired by Verizon Communications later this year (assuming Qwest doesn't mess up the shareholder vote).  The plaintiff class also obtained personal payments of approximately $25 million from the other WorldCom directors that is not covered by any insurance or company indemnification agreement, a first in corporate litigation.

According to an AP story (on Law.Com here), Ebbers must vacate his home by Oct. 31, and the trust will pay an allowance to his wife.  With sentencing in the criminal case currently set for July 13, this closes out another phase of the litigation in which Ebbers is involved.  I would expect the SEC to settle its case against Ebbers shortly, although it is unlikely there will be any civil penalty after this agreement, and the probable permanent injunction and director/officer bar will be more of an afterthought. (ph)

July 1, 2005 in Securities, Settlement, WorldCom | Permalink | TrackBack (0)

Tuesday, June 28, 2005

Government Files Its Sentencing Memorandum for Ebbers

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) 

Download ebbers_sentencing_usao.pdf

June 28, 2005 in Sentencing, WorldCom | Permalink | TrackBack (0)

Saturday, June 11, 2005

Ebbers Seeks Leniency in Sentencing

Former WorldCom CEO Bernie Ebbers submitted a brief to U.S. District Judge Barbara Jones seeking leniency in sentencing so that the court does not sentence the 63-year old to what would be a life term.  Among the reasons for seeking a shorter sentence cited by the defense are Ebbers' devotion to his family, history of extensive charitable giving, declining health, and personal financial losses suffered when WorldCom collapsed.  While stating he was "profoundly sorry" for the fraud and job losses it caused, Ebbers did not accept responsibility for WorldCom's demise due to the accounting misstatements.  The latter position will not help his cause, although he did submit 169 letters of support on his behalf that may be persuasive with the judge.  Ebbers poses no continuing threat to society, and the testimonials (and health issues) can create a sympathetic scenario.  It's not clear whether any sentence given to former CFO Scott Sullivan will influence Judge Jones' determination for Ebbers. My hunch is that, given the advisory nature of the Federal Sentencing Guidelines, the sentence will be in the 8-10 year range (I would use 100 months as the over/under line). Sentencing is set for July 13.  See a CNN story here about the defense submissions, and thanks to Doug Berman's always comprehensive Sentencing Law & Policy (here) for noting the defense submission. (ph)

June 11, 2005 in Sentencing, WorldCom | Permalink | TrackBack (0)

Saturday, May 28, 2005

Ebbers Sentencing Postponed to July 13

U.S. District Judge Barbara Jones postponed the sentencing of former WorldCom CEO Bernie Ebbers from June 13 to July 13 to give the parties more time to file briefs on the new trial request and to complete the presentence report.  Any guesses on the fraud loss figure?  Because Judge Jones can treat the Guidelines as advisory, I think she is unlikely to impose the highest sentence even if the loss amount would have triggered a significant term of imprisonment under the Guidelines. See the AP story here.

May 28, 2005 in Sentencing, WorldCom | Permalink | TrackBack (0)

Monday, April 18, 2005

Ebbers Seeks a New Trial

Lawyers for Bernie Ebbers filed a motion on Friday for a new trial under Federal Rule of Criminal Procedure 33.  According to a report in the Wall Street Journal (here), Ebbers asserts that the court's refusal to grant immunity to three witnesses -- all former executives of WorldCom -- denied him a fair trial.  He also argues that the jury instruction on conscious disregard for the securities fraud counts was in error.

The immunity issue is usually a non-starter because the court does not have statutory authority to grant it without a government request, and will not grant it on its own independent authority absent evidence of government misconduct in refusing to authorize immunity.  Regarding the second ground, given that the judge decided to give the intent instruction once already, it is unlikely the court will second-guess itself now, especially when the so-called "ostrich instruction" is widely accepted in the circuits if there is evidence that the defendant refused to pursue information in light of the circumstances.  The defense motion is the usual step in the appellate process. (ph)

April 18, 2005 in WorldCom | Permalink | TrackBack (0)

Tuesday, April 5, 2005

Media Views of Attorneys in WorldCom Cases

Bruce Carton has an interesting post on the Securities Litigation Watch blog (here) about the different media views of attorneys in litigation related to WorldCom.  Jay Kasner of Skadden Arps was counsel to J.P. Morgan, and has been criticized for his advice to the client in settling the WorldCom securities fraud civil class action case for $630 million more than it could have been settled a year earlier.  Reid  Weingarten of Steptoe and Johnson, who was lead defense counsel for former WorldCom CEO Bernie Ebbers -- who was convicted on all counts -- is featured in a Washington Post article that is quite flattering.  Paul wonders about the different media perceptions.  Of course, Weingarten established his reputation before the Ebbers prosecution by successfully defending former Secretary of Agriculture Mike Espy and former Tyco general counsel Mark Belnick.  Still, it is worthwhile to think about the vagaries of media perceptions of the lawyers in high-profile cases. (ph)

April 5, 2005 in Defense Counsel, WorldCom | Permalink | TrackBack (0)

Thursday, March 31, 2005

What Was Andersen's Role in WorldCom's Problems?

What exactly was Arthur Andersen's role in the problems of WorldCom? The answer to this question may be forthcoming as civil litigants are proceeding against  Andersen for an alleged failure to question issues at WorldCom. According to the Wall Street Journal, "Andersen denies that it failed in its responsibility to audit WorldCom's books properly from April 1999 through June 2002, and says it was defrauded, along with investors." Looking at this statement in light of the recent conviction of Bernard Ebbers, former CEO of WorldCom, one has to wonder several things:  Was the CEO manipulating the accountants?  Were the accountants failing to provide information to the CEO of what underlings were doing in the company? Were the accountants failing to provide sufficient transparency to the outside world of what was happening at the company? 

The bottom line is that there is a problem somewhere, and someone is going to have to take the blame.


March 31, 2005 in WorldCom | Permalink

Saturday, March 19, 2005

WorldCom Directors Try Again to Settle

Eleven former WorldCom board members have reached another settlement with the plaintiffs in the securities fraud class action.  The first settlement was virtually identical to this one but U.S. District Judge Denise Cote did not approve it because of objections raised by the investment banks who were also defendants.  With the last of those firms (J.P. Morgan here) having reached a settlement, the way is clear for the judge to approve the settlement.  The amount of the settlement is small -- $55.25 million -- compared to the approximately $6 billion paid by the investment bankers.  The key though is that while $35 million comes from a D&O insurance policy, the other $20.25 million comes from the pockets of the individual directors.  This is one of the few cases in which individual directors who did not gain personally from the alleged fraud (aside from their fees) will contribute to the settlement from their personal assets.  This portion of the WorldCom settlements has sent a powerful message to corporate board members about their responsibilities, and the risks of ignoring the operation of the company or passively accepting information provided by management.

The remaining defendants in the case are former WorldCom board chairman Bert Roberts and former company accountant Arthur Andersen.  Any finding of liability against Andersen will trigger an interesting process of trying to collect from insurers and perhaps from the worldwide Andersen organization that was separate from the U.S. entity that was convicted of obstruction of justice and ceased to exist in 2003. See the AP store here about the settlement. (ph)

March 19, 2005 in Securities, WorldCom | Permalink | TrackBack (0)

Thursday, March 17, 2005

Ebbers Revisited

This morning's Wall Street Journal has a wonderful article describing the commentary by the jury on the trial and the deliberation.  According to the article it did not come down to Sullivan versus Ebbers, but rather the paper in the trial - - that is the documents.  This may actually make it a more interesting appeal.  If it had been the credibility of the witness, then the favor would go to the winning party - the government.  In the case of admission of documents and instructions to the jury, the court will be looking at the legal issues.  This is definitely an appeal to watch.  See more here on the issues to consider on appeal.


March 17, 2005 in WorldCom | Permalink

J.P. Morgan Succumbs and Agrees to Pay $2 Billion in WorldCom Securities Fraud Class Action

The last of the bond underwriters, J.P. Morgan, threw in the towel the day before jury selection was to start in the WorldCom securities fraud class action by agreeing to pay $2 billion.  That brings the tally to approximately $6 billion paid by a slew of investment banks that brought WorldCom bonds and stock to the market while the company engaged in a massive accounting fraud that led to the conviction on Tuesday of former CEO Bernie Ebbers.  The last defendants left standing are former WorldCom auditor Arthur Andersen -- which is not exactly standing tall these days but may have insurance policies out there to cover some of the claims -- and 12 former directors of the company whose earlier settlement was rejected by U.S. District Judge Denise Cote.  The directors will likely take another shot at settling, which likely will include personal payments from each and not just amounts covered by D&O insurance.  A New York Times article (here) discusses the settlement. (ph)

March 17, 2005 in WorldCom | Permalink | TrackBack (0)

Wednesday, March 16, 2005

Comparing Ebbers and Lay

Bernie Ebbers offered the "honest-but-ignorant CEO" defense, and the jury rejected it.  Ken Lay, former CEO of Enron, has advanced a similar position, asserting his innocence because he did not know about the complex financial chicanery at the company (check his personal website at An interesting post at TalkLeft (here) notes that while the key witnesses in both cases are former CFOs (Scott Sullivan of Worldcom and Andy Fastow of Enron) who have agreed to cooperate with the government in exchange for lower sentences, Fastow may have more credibility problems.  Part of Fastow's deal included delaying his ten-year sentence until his wife could complete her sentence for a tax violation related to Enron, giving him a powerful incentive to seek the best deal for himself by incriminating others.  Of course, a ten-year sentence is substantial, and may bolster the government's contention that Fastow is truthful because he did not receive a "sweetheart" deal.

Lay's "honest-but-ignorant CEO" defense may be stronger than Ebbers' because Lay was less of a hands-on manager, unlike the Ebbers portrayed to the jury as a micromanager who had tap water put into the company's water coolers to save money.  If nothing else, Lay went first-cabin at Enron, and the company did not scrimp on perks.  Lay has a more significant problem, however, arising from his stock sales, including a number of transactions during 2001 -- as the company was collapsing -- in which he sold shares back to Enron to repay a $77 million line of credit from the company.  The SEC's civil complaint (here) summarizes the transactions:

From January 25, 2001 to November 27, 2001, Lay took advances on his line of credit in the total amount of $77,525,000. Thereafter, despite having other assets at his disposal, Lay repaid balances on the line of credit by selling $70,104,762 worth of Enron stock to the company twenty times, at prices he knew did not reflect accurately Enron’s true financial condition. For example, after learning of Enron’s undisclosed plan to hide over $500 million in EES losses in ENA, Lay sold 1,086,571 shares of Enron common stock back to the company, in 11 transactions, for a total of $34,081,558. Following Skilling’s resignation on August 14, 2001, at a point when Lay was learning more about Enron’s deteriorating financial condition, Lay sold 918,104 shares of Enron common stock back to the company, in five transactions, totaling $26,066,474. As Lay learned more negative information following Enron’s third quarter earnings release on October 16, 2001, Lay sold 362,051 shares of Enron stock back to the company, in four transactions, totaling $6,050,232.

While Ebbers never sold his stock, Lay engaged in a number of transactions in Enron shares that were not publicly disclosed until after it filed for bankruptcy.  The focus of the government case is likely to be on the period from Aug. 14, 2001, when Jeff Skilling resigned as CEO and Lay assumed that position again, until the company's collapse in November 2001.  Rather than link Lay to the accounting, which is far more complex than the fraud at WorldCom and more susceptible to a claim of ignorance, the government will use Lay's knowledge of the company's burgeoning problems during the last few months and his stock transactions to overcome a claim of ignorance.  On these issues there is more of a paper trail, including a number of public statements and private meetings which Lay attended.  Fastow remains a key witness, but perhaps more for Skilling and Richard Causey, Enron's former chief accounting officer, than for Lay. (ph)

March 16, 2005 in Enron, Prosecutions, WorldCom | Permalink | TrackBack (0)

Tuesday, March 15, 2005

Let The Second-Guessing Begin

One of the first questions asked of Reid Weingarten after he left the courthouse was whether having Bernie Ebbers testify was a mistake.  Weingarten responded, in effect, that he thought it was a good decision then and, if given a second chance, would make the same decision.  The question about whether a client should testify is always very difficult, and no doubt the second-guessing of Weingarten will focus on that decision because Ebbers' testimony was, no doubt, crucial to the jury's decision. Weingarten may have boxed himself in when he described former CFO Scott Sullivan in the opening statement as "the most impeachable witness ever to hit a witness stand" (no hyperbole there).  Conceding that the fraud took place and placing the blame squarely on Sullivan turned the case into a credibility battle.  Once Sullivan did a decent job testifying, it was almost impossible for Ebbers to avoid testifying.  Unlike cases in which the focus is more on the quality (and quantity) of the government's proof and the inferences that can be drawn from that proof -- e.g. the prosecution of Martha Stewart and Peter Bacanovic -- here the question was purely one of intent/knowledge based on witness credibility.  Whether there are any lessons to be drawn in the next "honest-but-ignorant" CEO case -- Ken Lay -- remains to be seen.  The defense there may want to avoid making the credibility of one witness, such as Andrew Fastow, the key to the trial. (ph)

March 15, 2005 in WorldCom | Permalink | TrackBack (0)

Ebbers Found Guilty

After deliberating over eight days, the jury found Bernie Ebbers guilty on all counts this afternoon.  Ebbers was charged with conspiracy, securities fraud, and seven counts of false filings with the SEC.  Judge Barbara Jones set sentencing for June 13.  Because everyone looks ahead to the next step, two things that will be discussed are grounds for an appeal and the potential sentence.  One issue that is likely to be raised is the presence of the supplemental counts that the judge did not strike from the indictment after the Booker decision made those factual issues that relate to sentencing irrelevant for jury consideration (see earlier post here).  The defense moved for a mistrial when the jury asked the court whether they had to agree unanimously on those and the judge said they need not be considered.  That type of information in an indictment will be argued to have been prejudicial, and there's no question the jury considered the allegations.  Another issue mentioned in the press accounts concerned the government's refusal to grant immunity to witnesses the defense wanted to call, including WorldCom's former president, who indicated he would assert his Fifth Amendment privilege if he did not receive immunity.  Claims of this type are very difficult to win, but the defense will likely argue that, combined with other evidentiary errors, the judge's rulings were prejudicial.

For sentencing, Booker has thrown a shroud of uncertainty around the sentence.  The Guidelines range will likely be quite significant because of the amount of loss caused by the fraud, and adding in possible enhancements for leadership role and obstruction of justice (if the Judge determines Ebbers was untruthful in his testimony) will would make for an even longer term of imprisonment if the Guidelines are applied strictly.  Whether (and how closely) the Judge follows the Guidelines, and whether she can be persuaded to give a downward departure if she does, can't be predicted at this point.  In an earlier high profile case involving an extortion of Bill Cosby by his daughter Autumn Jackson (her conviction was ultimately reversed), Judge Jones sentenced Jackson to 26 months while the Guidelines range was 57-71 months.  (See article here). An AP story here discusses the jury's verdict. (ph)

March 15, 2005 in WorldCom | Permalink | TrackBack (1)

Friday, March 11, 2005

Allen/Dynamite Charge?

As the jury in the Bernie Ebbers prosecution spends more time deliberating, the possibility of a deadlock certainly increases.  If the jury indicates that it cannot reach a unanimous agreement on one or more charges, the court may give an Allen charge -- also known as a dynamite charge -- to break the deadlock.  A decision by the D.C. Circuit on March 10 (U.S. v. Yarborough) reverses a conviction because the trial judge gave an improper Allen charge (in a gun possession case).  This is yet another area fraught with danger on appeal if there were to be a conviction after such a charge. (ph)

March 11, 2005 in WorldCom | Permalink | TrackBack (0)