Homepage

News > Newsmakers
    SAVE   |   EMAIL   |   PRINT   |   RSS  
Ebbers: Wrong place, wrong time
The ex-WorldCom chief's big mistake? He didn't break the law 20 years ago.
July 13, 2005: 2:53 PM EDT
By Krysten Crawford, CNN/Money staff writer

NEW YORK (CNN/Money) - Bernard Ebbers picked the wrong time to commit a crime.

Convicted of multiple charges and due to be sentenced Wednesday, the former WorldCom chief executive, who lost in recent days a bid for a new trial, could receive a life term at a time when stiff sentences for corporate cons seem routine.

John Rigas, the Adelphia Communications founder, just got 15 years. Timothy Rigas, his son, landed a 20-year prison term. Jamie Olis, a former Dynegy executive, is serving a sentence of more than 24 years.

And following their convictions last month, Tyco executives Dennis Kozlowski and Mark Swartz could be sentenced to up to 30 years apiece for looting the company out of $600 million.

Two decades ago, such severe punishments for what are broadly known as "white-collar" crimes -- such as fraud, bribery, insider trading, or embezzlement -- were unheard of.

Back then, said University of Missouri-Columbia law professor Frank Bowman, "there's a significant chance (Ebbers) might have done no prison time at all." Or, he would not have been incarcerated for very long.

Today, Ebbers, 63, faces spending the rest of his life behind bars for his role in an $11 billion accounting scandal that pushed WorldCom, now known as MCI, into the largest bankruptcy in U.S. history.

His sentencing Wednesday comes almost four months after a federal jury in New York convicted him on nine felony charges. Ebbers has already given up the bulk of his cash and assets to MCI and Worldcom shareholders -- a forfeiture worth as much as $45 million.

Ebbers has asked for leniency, citing his declining health, history of charitable giving and the steep financial losses he suffered when WorldCom collapsed.

Legal experts were reluctant to predict Ebbers' fate. They said, however, that U.S. District Court Judge Barbara Jones, a former prosecutor herself known to be tough, isn't likely to go easy on Ebbers, especially in light of the 15- and 20-year prison terms given last month to John and Timothy Rigas.

"The Rigas sentences are going to put pressure on (Jones)" to give Ebbers a comparable term, said Peter Henning, a white-collar crime expert who teaches at Wayne State University Law School.

No more slaps on the wrist

This much is certain: Ebbers' day of reckoning in court follows nearly two decades of increased focus on white-collar crimes and the punishments doled out by judges.

Up until the mid-1980s, sentences for white-collar crimes tended to be lax, legal experts said. Professional perps were seen as non-violent. The sentencing judges often walked in the same social circles as the defendants. There were no rules for judges to follow when it came to appropriate punishments.

"A judge would say 'He's a good citizen and unlikely to do this again'," said Douglas Berman, a law professor at Ohio State University and an expert in criminal sentencing. Probation or a light prison term was common. White-collar lockups were dubbed 'Club Fed' for their amenities and other privileges not available to other criminals.

The laxity given to corporate criminals began to change when a series of insider trading scandals shook Wall Street in the mid-1980s. The financier Ivan Boesky got 3 years. Michael Milken, a.k.a. 'The Junk Bond King' at Drexel Burnham Lambert, was sentenced to 10 years.

Their sentences rocked the securities industry at the time. Still, Boesky and Milken got off relatively easy: They each served 22 months.

It wasn't until the Savings and Loan crisis of the late 1980s, and the many prosecutions that followed, that prison terms for professional perps started to pop, said Henning, of Wayne State University. In the most high-profile prosecution of that era, Lincoln Savings & Loan honcho Charles Keating served more than four years of a 12 1/2-year sentence before an appeals court set him free in 1999.

Henning traced the stiffer sentences to a roadmap that Congress put into place in part to stop judges from going easy on white-collar criminals. The new federal sentencing guidelines, which applied to crimes committed after 1987, linked prison terms to the financial losses caused by a scam. They also abolished parole and allowed prosecutors and defendants to appeal sentences.

Then came Enron.

The Houston energy giant's shocking implosion in late 2001 turned out to be the first of many accounting scandals to hit corporate America. In response, Congress significantly upped the civil and criminal penalties that corporations and their top managers face for cheating investors.

Given that parole was no longer an option, the prospect of an executive spending most, if not all, of his life behind bars became real.

In perhaps the starkest example of how times changed: Olis, a relatively unknown former Dynegy executive, was hit last year with a sentence of 24 years and four months for his role in a $300 million accounting scandal at the company.

Twenty years ago, Henning said, Olis probably would not have been prosecuted or, if he had been, received probation "or a very short sentence in a halfway house."

Today, however, sentencing rules are in flux. In January the Supreme Court ruling that gave courts a lot more discretion to give lighter -- or harsher -- punishments than those dictated under the guidelines.

It's too soon to know yet how the Supreme Court ruling will affect white-collar sentences. But some legal experts think John and Timothy Rigas escaped automatic life terms because of it.

Henning said Ebbers too could dodge a life sentence with a prison term in the same range as the Rigas duo. If so, he said the three sentences could serve as a benchmark for judges in similar corporate fraud cases in the future.

"Judges like to be consistent," he said.

--------------------------

Why does Ebbers think he deserves a light sentence? Clickhere.

To learn why prosecutors want Ebbers put away for a long time, click here.

To read all the latest corporate scandal news, click here.  Top of page

graphic


YOUR E-MAIL ALERTS
Bernard J. Ebbers
Punishment
Crime, Law and Justice
Manage alerts | What is this?