No Idiots in the Jury Box
Last summer, we questioned former Enron Chairman Kenneth L. Lay’s decision to set ignorance as the cornerstone of his legal defense against charges that he helped to orchestrate the massive accounting fraud that sank his company, destroyed investors’ wealth and cost thousands of employees their jobs. It didn’t seem plausible that jurors would buy into a powerful executive’s claim to be incompetent.
Apparently, lawyers don’t always heed newspaper editorials. Defense teams for former WorldCom Chief Executive Bernard J. Ebbers and former HealthSouth CEO Richard M. Scrushy also signed on to the “idiot defense,” claiming that their clients’ subordinates had pulled off the sham accounting on their own while the bosses was busy with more important things.
Early returns suggest that jurors aren’t buying it. On Tuesday, a New York jury determined that Ebbers was guilty of all nine criminal counts of securities fraud, conspiracy and lying to regulators in orchestrating the largest accounting fraud in U.S. corporate history. Ebbers had made a bold bid to clear his name by taking the witness stand. The strategy backfired as jurors refused to believe that a savvy executive who built a huge, complicated telecommunications company was so detached that a massive scam occurred without his knowledge.
The total breakdown of Ebbers’ idiot defense should send a powerful message to Scrushy and Lay. Scrushy, the first corporate executive to be tried under provisions of the federal Sarbanes-Oxley Act, sparked by Enron’s failure, is pressing on with the “I knew nothing” defense in a Birmingham, Ala., courtroom. Lay, who will go on trial early next year on fraud and conspiracy charges, is so far taking the same tack. His lawyers had best scramble for a Plan B.
The Ebbers verdict could put the 63-year-old former executive in prison for the rest of his life. It is a harsh reality, but then again, so was the staggering fraud that wiped out $11 billion in investor wealth, 20,000 jobs and $600 million in employee retirement funds. Ignorance may be bliss in some quarters, but not in the executive suite.
