Wednesday, January 26, 2005

Will Scrushy or Ebbers Testify?

With the opening statements in the trials of Bernie Ebbers and Richard Scrushy out of the way -- on the same day no less -- the question arises whether either one will testify in his defense.  Reports on the opening arguments gave no indication one way or the other, which is not surprising because defense counsel need to keep their options open and do not want to overpromise in the opening statement.  There is no "rule" regarding whether a white collar defendant should (or should not) testify at trial because so much depends on the type of evidence the government will introduce, the defendant's prior statements, and how well the person will come across to a jury.  On the last point, a deep-pocket defendant can afford to have a mock jury observe a test-run of a cross-examination of the defendant to see how the person responds to tough questioning, although that is not fool-proof.  Frank Quattrone came across poorly at his first trial, and was convicted in his retrial, having testified both times.  Neither Martha Stewart nor co-defendant Peter Bacanovic testified in their trial, to no avail there.

The opening statement in the Ebbers trial included the assertion by defense counsel Reid Weingarten that "[t]here are zillions of documents in this case and their ain't one smoking gun."  The clear focus of the defense is on the credibility of the government's main witness, former WorldCom CFO Scott Sullivan, including hints that Sullivan's marital infidelity will be used against him (earlier post here), and Ebbers' lack of involvement in accounting issues.  According to a New York Times article (Jan. 26), Weingarten asserted that Sullivan was the mastermind of the fraud and "is more than a liar, but a poseur." [NB: I think I missed that one, and the definition of "poseur" is "One who affects a particular attribute, attitude, or identity to impress or influence others." Did the jury pick up on it?]  The "honest-but-ignorant CEO" defense that will be offered, coupled with the lack of documentation linking Ebbers to the fraudulent accounting, leads me to think that Ebbers will not be called to testify unless Sullivan comes across especially well in his testimony.  There does not seem to be as much for Ebbers to refute or explain, and of course a defendant asserting that he was ignorant of the happenings at his company risks coming across to the jury as less-than-honest, effectively scuttling the defense.

I think Scrushy's case presents a different calculus.  The government intends to call a number of former HealthSouth executives who are cooperating in exchange for reduced sentences, including all five CFOs the company had since its creation.  The sheer weight of that evidence may compel Scrushy to testify to establish his defense that they are all liars and kept him in the dark. The plea agreements alone are unlikely to undermine the credibility of that many witnesses.  When everyone around you is claimed to be a liar, the jury may well expect that Scrushy will explain how it was possible he never knew about the fraudulent accounting, or at least how he was kept in the dark. 

I don't hold myself out as much of a prognosticator, and this is all armchair lawyering before any of the evidence has come in.  I think it is more likely that Scrushy will testify than Ebbers, but it would not surprise me if both did not testify.  Any thoughts? (ph)

Fraud, Prosecutions, Securities | Permalink

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