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Bernie Ebbers: 25 Years, a Life Sentence

By Jeralyn, Section Crime in the News
Posted on Wed Jul 13, 2005 at 08:55:45 AM EST
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WorldCom former exec Bernie Ebbers, 63 has been sentenced to 25 years in prison for fraud. (Note: CNBC which first reported the sentence said 30 years, but later articles are saying 25, so I've changed it.)

This is a ridiculous sentence for a non-violent crime. The judge may have well as imposed the 85 years sought by the government - both are an effective life sentence.

I doubt he'll go to a federal prison camp on a 30 year sentence. To put a 63 year old, first offender behind the walls at a medium security prison for an economic crime is cruel. Hopefully, he'll be sent to a medical facility.

What will they do to Ken Lay? Give him life plus cancer?

America, prison nation.

Update: Where will he serve his time? Maybe here in Lousiana, where Dynergy's Jamie Olis is serving his absurd 24 year sentence.

Update: The judge is allowing Ebbers to self-surrender in October. She's recommending he serve his time in at this Yazoo City, Miss. facility which houses both low and minimum security offenders. The final decision on his placement will be up to the Bureau of Prisons. Judge's recommendations are just that, and they are not binding on BOP.

Update: Other reactions: White Collar Crime Blog by law prof Ellen Podgor.

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    Bernie Ebbers: 25 Years, a Life Sentence | 58 comments (58 topical)
    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#1)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:09 PM EST
    What non-violent crime? What Ebbers did ruined thousands of people's financial security, caused unmeasurable family strife and damaged the economy for years. People were hurt by his actions, more people than would have been if he were running around Denver killing people for 30 years. I have no problem with people who essentially steal millions of dollars by lying, cheating and manipulating doing hard time.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#2)
    by ppjakajim on Sat Dec 17, 2005 at 01:01:09 PM EST
    njdem - Exactly. And Ken Lay - Exactly.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#3)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:09 PM EST
    NJDem and PPJ - then perhaps you'd be happier reading another blog.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#4)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:09 PM EST
    Will the imposition of such a long sentence give people in the business community sympathy for the many others who serve long sentences for nonviolent offenses? It would be nice if that were the case, but somehow it seems unlikely. I think NJDem's comment comes from the feeling that Ebbers' actions created at least as much societal damage as the actions of others who serve long sentences, and that it would be wrong for him to receive a Martha Stewart-style slap on the wrist merely because he is a wealthy corporate defendant. But the best answer to this kind of concern, IMO, is sentencing reform for all, not harsher sentences for all.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#5)
    by roger on Sat Dec 17, 2005 at 01:01:10 PM EST
    NJDEM, "nonviolent", as in, no force, or threat of force. It is different, though others have made similar points; "through all the world I've rambled, I've met lots of funny men. Some will rob you with a six gun, and some with a fountain pen" -Woodie Guthrie, "Pretty Boy Floyd"

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#6)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    TL - if they don't agree, send them away. What fun is that? This is a pattern you've developed on issues you feel particularly strong about. The comment isn't offensive. Why not encourage discussion. Isn't that the point of a blog? Not that I wish Cancer on Ken lay but I'm quite sure a lot of people (Liberal and Conservative alike) would agree with NJDem's (notcie the "Dem" in that username) opinion.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#7)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    LCA - I didn't censor them or stop them from posting. I was pointing out that the purpose of TalkLeft is to support the rights of those accused of crime. If that point of view is so offensive to them, they might be happier reading a different blog.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#8)
    by kdog on Sat Dec 17, 2005 at 01:01:10 PM EST
    I'll save my symapthy for those more deserving. For once; a rich, corporate, million dollar thief got the same justice as a poor, petty thief. The punishment may be excessive, but at least he didn't get the usual rich corporate favors from the justice system.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#9)
    by kdog on Sat Dec 17, 2005 at 01:01:10 PM EST
    Right on Rog...classic quote. I have a lot more respect for the stick-up man as opposed to the corporate scheister...at least the stick-up man has the stones to risk life and limb to do his dirty deed, and he does it eye to eye. The corporate scheister steals over morning coffee without risking his neck...I'd call that cowardly.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#10)
    by ppjakajim on Sat Dec 17, 2005 at 01:01:10 PM EST
    TL - I didn't say it was offensive, I said I think he deserves what he got, which is an opinion. I frankly am surprised at your response.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#11)
    by nolo on Sat Dec 17, 2005 at 01:01:10 PM EST
    In all seriousness, and no sarcasm intended, I'd like to know what TL thinks should be done with respect to criminals like Bernie Ebbers. I mean, sure, he's a first time offender and he's 63 years old, but he's also a sophisticated businessman who engaged in an elaborate pattern of highly lucrative fraud -- and as a result, a whole company went down. The livelihoods and financial welfare of thousands of people were affected. Many of those people were just ordinary schmoes whose jobs got flushed when WorldCom tanked. So the harm to others was great. And Bernie Ebbers profited mightily while he was getting away with it. So what should happen to him? What penalty would be sufficient to convince other sophisticated, experienced businessmen that there's a serious downside to this kind of conduct?

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#12)
    by Quaker in a Basement on Sat Dec 17, 2005 at 01:01:10 PM EST
    Darn it, Roger, you got here first. "Pretty Boy Floyd" popped into my head also when I read this. Personally, I have a hard time separating my feelings about Mr. Ebbers' sentence from my belief that the judicial system is biased in favor of wealthy, white-collar criminals. I do take a certain satisfaction from the fact that the jury didn't hand him a mild sentence because he's a rich, old, white guy. Tough situation, TL. Guilt has been determined. What do you think is a just sentence for Mr. Ebbers' crime? In a related question, should judges or juries consider the age of a convicted defendant in handing down sentences?

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#13)
    by Quaker in a Basement on Sat Dec 17, 2005 at 01:01:10 PM EST
    Try it on this way: Suppose a petty criminal went to the homes of each WorldCom employee and investor and robbed them of several thousand dollars. What sentence would he deserve? That Mr. Ebbers conducted his theft "with a fountain pen" doesn't diminish the severity of his crime. What's debatable is the fairness of the sentence. So what do you say, TL?

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#14)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    I would have given him a sentence of between 8 and 10 years, something that wouldn't be an effective life sentence. I'm surprised the judge didn't do that. He's already forfeited $45 million and all his assets except a modest home for his wife and $50,000. He didn't commit the crime alone. Scott Sullivan, who engineered and masterminded it, sang for his supper, told the Government's truth for a lesser sentence, was the only witness who said Ebbers knew what was going on, and will be sentenced in August, to a kiss no doubt. Purchased testimony is rotten testimony, and make no mistake, testimony that is purchased with promises of leniency offers a greater incentive to lie. Freedom is a commodity far more precious than money. To give someone 25 years when only one witness, with a motive to lie, implicated him directly in the crime is not right.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#15)
    by Quaker in a Basement on Sat Dec 17, 2005 at 01:01:10 PM EST
    You're more qualified than I am in these matters, but your proposed sentence leaves me with some questions. Ebbers' forfiture was in a civil case, not the criminal trial. Can the judge or jury take the agreement in the civil trial into consideration? Second, shouldn't a prosecutor have the ability to cut a deal to gain the cooperation of a conspirator? That Sullivan may receive a lighter sentence seems appropriate to me. Finally, I'd like to propose my original question in another way: Mr. Smith, age 30, is convicted of holding up the Piggly Wiggly market on Elm. Mr. Jones, age 80, is convicted of holding up the Piggly Wiggly market on Main. Should they receive the same sentence? Or should the judge or jury consider the ages of the defendants?

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#16)
    by Richard Aubrey on Sat Dec 17, 2005 at 01:01:10 PM EST
    Ebbers didn't make the company go bankrupt--ditto Ken Lay. I hope the defense made the point, differentiating losing your butt in business from criminal activity. Ebbers' crime was, apparently, fraud which hid the extent of Worldcom's troubles, thus misleading those, such as investors, would have liked to know, and been entitled to know, the truth. Instead, like Enron, the company was kept afloat by fraud and hype until it turned phosphorescent with rot and the whole thing came down. Had the truth been known earlier, investors would have shied away and risked their money elsewhere. That includes employees who had their money in the company. By hanging on longer than economically feasible, the company allowed some folks kept their jobs longer than they would have. That Ebbers' business planning could not survive forever is not a crime. Fraud did not kill Worldcom or Enron. But in the public's mind, handily stoked by the liberals, the companies were deliberately ruined--reason not specified--by these guys.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#17)
    by nolo on Sat Dec 17, 2005 at 01:01:10 PM EST
    TL, I just want to point out that the article you referenced earlier about Ebbers' forfeiture indicated that his wife also got to retain some gas and oil assets and what was referred to as a "modest" retirement account. It wasn't just the house and $50,000. That aside, I really appreciate the info regarding the government's case, and your response re sentencing.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#18)
    by Andreas on Sat Dec 17, 2005 at 01:01:10 PM EST
    Kenneth Lay and the other Enron-mobsters are responsible for deaths and health problems which occured due to the "blackouts" for which they were responsible.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#19)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    FirstEnergy, ANOTHER Bush-backer squad of felons, caused the East Coast blackout, and received no punishment. They also had a near meltdown in Ohio in 2001; no punishment. Enron participated in the California energy crisis, scamming the market with other companies like Reliant. Causing ten billion plus in damages and overcharges. Ken Lay, still unpunished. RA as usual can't identify fraud when he sees it. Instead he makes the talking point that fraud didn't destroy the company. Oh, well then. That's different. Just not to all the people who lost their investment. We have pretty good evidence that Cheney's energy meetings were conspiracy to acquire illegal access to resources. 128,000 civilians have died as a result, so far. But that doesn't mean the CEO of BP is guilty of fraud, so that's oK. Ebbers' sentence was punitive; and I say hooray. Spread some more punitive on the rich who are destroying other people's lives -- the world will become a better place.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#20)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    Richard, I was in quandary about this one's harshness myself, then I read your comment. Example: Death sentences in many cases don't deter because they are not usually enacted in crimes where cost-benefit analyses are involved. Or, the perps are continually operating in a zone where the crime is itself, a "function" of doing business. Not so here. Here, we have a subset of individuals who are allowed, because of the abstractions of "merely pushing numbers around", to overhang the bounds of both the letter and the spirit of the law with regularity and often, with great pride. And with far- and downward reaching consequences. In many ways, that marvelous arbiter of capitalist justice--the market--fails us, by offering up its justice too little too late. Holding back the hands of time while putting a hand in front of our face so we can't see the real numbers, are the Ebbers, Kozlowskis, Lays, Fastows and their ilk. No, on this one, and on many more to come I hope (for business' sake alone), 25 years is about right. I'm a capitalist, and liberalism has got nothing to do with this. If trust is to money as freedom is to democracy, I think the punishment should fit the crime.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#21)
    by owenz on Sat Dec 17, 2005 at 01:01:10 PM EST
    I'm generally not a huge fan of the deterrence theory - that is, that others will see the severity of a given criminal punishment and hesitate to commit the same crime out of fear. In the case of soundrel CEO's, however, I think it has some merit. I would think other CEO's employing "creative accounting" would think twice after seeing Mr. Ebbers' sentence. Although I agree the sentence is harsh, the fiduciary responsibility of CEO's like Ebbers is truly staggering when you think about. Not only do they control the savings of thousands of investors and the livelihoods of thousands of employees - they hold the power to throw the U.S. and world economies into disarray if they misbehave. The impact of Ebbers' crimes extended far beyond the employees and investors of Worldcom. It contributed to a global economic recession that rippled around the world. Certainly people died as a result, on this continent and others. A relatively small cadre of multi-billionaire CEO's effectively controls the world economy. These aging white men are not elected or appointed. In most ways they are above the law. While I'm sympathetic to Mr. Ebbers as an individual, I think the importance of a representative government's ability to reign these men in and punish them severely outweighs the risk to liberty presented by a case like this. After all, even if Ebbers was unaware of the fraud occurring at his company, there's a strong argument that society would be served by punishing him under a theory of reckless disregard or negligence. This stuff went down on his watch. He had an affirmative duty to prevent it. It's been said that with great power comes great responsibility. Ebbers abused his power and ignored his responsibility. The repercussions should be severe. If other CEO's look at his punishment and say they don't want the risk, they can quit. I feel confident others will step up to take their place who are comfortable with the responsibility.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#22)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    As a former Worldcom employee... someone who saw this impact the company from up close... I'm not exactly sure how to feel about this sentence. I understand your point that there's a human dimension from Mr. Ebbers side of this, but what he and his accomplices did (and I'm not convinced that Sullivan was the only one in the know) undermined not only the livelihoods and fortunes of a good number of a good many people, it had some fairly high personal cost for me. Losing my job was one. Losing half of my retirement was another. Sure, I'll bounce from losing over 50% of the value in my 401K, but I wasn't all that close to retirement. I can't say the same for a number of other people who worked there. Not to mention that the people that were left behind to fix the mess have been unfairly tainted by the whole scandal, and to this day, it's a struggle to make sales (as one example). It used to be a lot easier to walk into a boardroom when you had MCI on your badge, or on your resume, for that matter. I do believe that it's a bit of an oversimplification to say that Sullivan was the prime mover in this whole mess, and it remains a mystery to me why the prosecution insisted on limiting the scope in this case. David Myers, for example, was former controller who testified at Ebbers trial and had previously pled guilty to fraud & filing false documents with the SEC. And there are people in Ebbers' inner circle who were never part of this public drama. Maybe Bernie is taking the fall when perhaps Diana Day (chief service officer) and Ron Beaumont (chief operating officer) and Bert Roberts (chmn) were fully complicit, but we'll never know. Hell, I'd still like to know what Citigroup's Sandy Weill was up to when he staked Bernie to a $1B sweetheart loan based on the "security" of a bunch of WCOM stock, but we'll never know (thanks largely to a consent decree). There were a bunch of officers who ended their long tenure (Bob Hartnett, among others) once they'd worked with Bernie for a long while, but we'll never know what they knew, presumably since no one bothered to ask. I don't know why they chose to prosecute the case the way that they did, but that's not up to former Worldcom employees/shareholders, and for good reason. There's a lot that's wrong with the way that this case of corporate crime has been handled, and I for one think it went far beyond a single telecom concern. But I still can't look at my separation letter and feel much of a twinge for the sentence Ebbers earned as the result of his malfeasance. (That's for real, by the way. They didn't even have the courtesy to mail merge my walking papers.)

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#23)
    by ppjakajim on Sat Dec 17, 2005 at 01:01:10 PM EST
    Boy, we are getting some strange bedfellows... RA - Hiding poor financial results is not considered to be part of a business plan. Bernie and friends were stealing.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#24)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    Re: the question of facility designation, if the Bureau of Prisons adheres to standard written policy, Ebbers, with slighty more than 21 years remaining to serve when he enters prison (anticipates 15% time off for good time), must be designated to a medium-security facility. There is some disretion in this decision, however. Those male prisoners with more than 10 years remaining to serve but less than 20 qualify for no less than low-security placement. One must typically have less than 10 years remaining to serve to qualify for minimum-security placement (a camp).

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#25)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    Dream on, Jim. You are becoming the party of bedfellows.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#26)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    I have to go with Mark and Owenz on this one. Generally, crimes of violence are committed either in the heat of passion, desperation, or by unstable people. While this doesn't mean these people shouldn't be punished, it means there aren't a lot of real deterrents. However, in the case of these white collar crimes, these people all had a phalanx of attorneys and accountants. I'm pretty at some point they knew, or should have known, they were doing something wrong, yet they did it over and over. They made a risk management calculation hoping they would continue to get away with for a just a little while longer. They pushed it too far, and got caught. I have little sympathy. TL, I too was surprised at your response to njdem and PPJ. I believe very strongly in protecting the rights of the accused, and know something of this firsthand. However, once found guilty, then pay the price. As regards the deal made to solicit testimony, I'm pretty sure that at some point Bernie was offered a deal, at the very least, he could have plead guilty and probably gotten some sympathy from the court. As it was, he decided to roll the dice and lost. I'm certain the jury was made aware that Sullivan's testimony was given as part of plea arrangement, so they got to weigh that. Lots of interesting issues raised here, and I guess I'm responding to a lot of them. I also happen to believe that age shouldn't really matter in sentencing. As another commenter remarked, if a 20 year old and an 80 year old both rob the Piggly Wiggly, do they get different sentences. I just don't think so. At Bernie's age, he should have known better anyway. I can understand 35 year old dot com'er getting caught up in the moment (but he'd deserve the same punishment), but an older person, one would hope, would be even more accountable. Bernie was pretty well off anyway, his greed got him. So, that's my 2 cents worth.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#27)
    by Richard Aubrey on Sat Dec 17, 2005 at 01:01:10 PM EST
    Ebbers and Lay did not commit a crime by going belly-up. The public, as I say, is being encouraged to confuse several issues here. They committed a crime by lying about the state of the company's finances, thus deceiving people who needed accurate figures to make decisions. That would be bankers, investors, suppliers and so forth. A good deal of the complaining comes from people who look at their shares' high point--which may have been the result of fraud and hype--and lament they weren't in a position to pawn it off on some other poor chump who would take the hit. They consider the high point value to have been legitimately theirs. The "stealing" is kind of iffy. The deception probably caused investors to give them money they wouldn't have if the investors had known the truth. The salary and other benefits which these investors made possible could be called stealing. The primary crime is misrepresenting the financial state of the company.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#28)
    by nolo on Sat Dec 17, 2005 at 01:01:10 PM EST
    RA, there's a distinct difference between the following: (a) Corporate officer A, who honestly operates a struggling company that ultimately fails and (b) Corporate officer B, who, rather than trying to honestly operate a company that may or may not have been struggling, vastly inflates the corporation's condition in order to make lots of illicitly-gained money, thereby causing the corporation to go down in flames when the corporation's actual condition is revealed. If you can't see it, I can't help you.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#29)
    by roy on Sat Dec 17, 2005 at 01:01:10 PM EST
    I know the dollar count isn't the only way to measure the justness of the sentence, but it's worthwhile to check out the damage they did. I've done this exercise before. Those who generally find me annoying will want to skip this comment: He helped take $11B. They took 110,000 years worth of salary at a high income bracket, or 1,026,885 years at minimum wage. They took 26,190,476 days of hospital care or 1,017,576 public college educations. So Bernie Ebbers was sentenced to 0.0002 years per college education stolen. And, unless they paid tax on their ill-gotten money (which they might have), they gypped everybody in the U.S. of about $3.89B in taxes. (There are probably some math errors -- all the zeroes started to run together on my scren)

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#30)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    They committed a crime by lying about the state of the company's finances, thus deceiving people who needed accurate figures to make decisions. That would be bankers, investors, suppliers and so forth. It's a little convoluted here, however. In this case, the head of Citigroup (Sandy Weill) personally vouchsafed a one billion dollar guarantee to Bernie Ebbers based on the security of Worldcom stock. Citigroup's investment arm, Salomon Smith Barney, had their chief telecom analyst (Jack Grubman) out pimping the virtues of the company, sometimes in boutique transactions to select corporate fat cats. So here you have a bank which has a vested interest in making sure that the value of the stock stays high. Maybe nothing was inappropriate in the letter of the law, but if you ask me, that arrangment stinks to high heaven, and thanks to the repeal of Glass-Steagall, and thanks to the consent decree from Spitzer's office absolving Citigroup from further investigation... ugh, it just makes my head hurt.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#31)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    Richard, now you're projecting, AKA: Treading water. Business is not some no-fault abstract game. Business, and businesspeople, can do wrong, my friend, and mightily so. You misread the brochure: what's temporarily and illegally good for balance sheets, is bad for America and not part of the IPO.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#32)
    by Richard Aubrey on Sat Dec 17, 2005 at 01:01:10 PM EST
    Some of you guys really are confused, aren't you? The losses happened for two reasons: One was that the company failed. The other was that, instead of the company failing as of a given date, its status was fraudulently presented to the public and it didn't actually fall apart until later. During the interval, people made decisions--in some cases to give the company money as investment or loan--based on deliberately false information. That was the crime. Had the businesses not been on the way to failing in the first place, the second issue would not have arisen. BTW. What's the name of the company in which Terry McAulliffe made $18 mill for zilch? Did they survive? What's up with them?

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#33)
    by roy on Sat Dec 17, 2005 at 01:01:10 PM EST
    Would giving older offenders preferential treatment in the form of shorter sentences even be legal under the 14th Amendment? It might discriminate against younger offenders, depriving them of equal protection under the law. I don't know if TL was actually proposing that, as opposed to shorter sentences for crooks of all ages. Just curious.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#34)
    by nolo on Sat Dec 17, 2005 at 01:01:10 PM EST
    RA, your position presumes that the company would necessarily have failed catastrophically regardless of the fraud -- to which I say, prove it.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#35)
    by kdog on Sat Dec 17, 2005 at 01:01:10 PM EST
    Nice job roy, puts the massive greed in perspective a bit. I especially like the over 1 million years of minimum wage earning.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#36)
    by Richard Aubrey on Sat Dec 17, 2005 at 01:01:10 PM EST
    Nolo. The fraud was designed to stave off folding. There would have been no reason to get all mixed up with several sets of books, or (Enron) screw up a big CPA firm as a sideline. Or are you suggesting the guys wanted to fold? And took positive steps to do so?

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#37)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    What's the name of the company in which Terry McAulliffe made $18 mill for zilch? Did they survive? What's up with them? Global Crossing? Still around. Or was that Level 3? Still around. Struggling, but so's everyone in telecom since May of 2002.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#38)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    Richard, one word: Ponzi. Two words, Shell game. Companies fail due to lack of foresight resulting in obsolescence or due to the The Ostrich Rule--averting ones eyes from known untruths so as to preserve the semblance of innocence. For the first, you're guilty of stupidity or timidity and you will pay for your incompetence in the marketplace. For the latter there the Sgt Schultz types who "know nothing, nothing!" There are the true malefactors who engineer the environment of self-dealing, and there are, of course, the truly innocent bystanders--workers, customers, shareholders, and sometimes, creditors. That company you said "failed" is a paper entity. The failure was in the humans crafting the content. Their intent was not pure, however nobly they may claim otherwise. The *losses* happened due to a market reposessing its good will. As Alex noted, many wise people such as Weill forgot themselves and their sense, viewing worldcom an iffy deal but one too big to fail. (Ego in business? I'm shocked.) The failure was one of character, in massive proportions. The dominoes fell from there. As to Terry McCauliffe.... please.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#39)
    by nolo on Sat Dec 17, 2005 at 01:01:10 PM EST
    RA, the fraud was designed to stave off a decline in stock prices, which is not *quite* the same as folding. Though a decline in stock prices can lead to a lot of things that are bad for the corporation's management (like, for instance, a decline in the value of stock options, or an ouster by the shareholders), a decline in stock prices does not necessarily meant that the corporation is in danger of actually folding. Indeed, one could easily argue that *actual* information about the company's condition, if it had reached the shareholders and investors in a timely fashion, would have allowed investors and shareholders to take the steps necessary to preclude an actual failure of the corporation.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#40)
    by txpublicdefender on Sat Dec 17, 2005 at 01:01:10 PM EST
    I think a 10 or 15 year sentence would have been appropriate. I do think there should be less harsh penalties because it wasn't violent. But, I also think the total amount of the fraud, along with his position of trust, are severe aggravating factors. I also think it is important to distinguish between Enron and Worldcom. Worldcom was a failing firm. Ebbers, Sullivan, et al. engaged in fraud to cover that up. That fraud caused a lot of people to put billions of dollars into their company--billions that they never would have put in if they had known the true financial position of the company. Enron, on the other hand, was not merely an accounting scandal to try to keep a failing firm afloat. It involved much more complex self-dealing on the part of certain executives who "negotiated" deals between so-called subsidiaries of the same company. These executives made substantial personal profits with these sham transactions. They also engaged in manipulation of the energy markets in California in order to ratchet up their profits. They also, like WorldCom, ultimately engaged in blatant accounting fraud in order to mislead the public about the true financial status of the company. But, they did much, much more than that. I am not saying Ken Lay was involved in these things. I'm just pointing out that Enron and WorldCom are two different apples.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#41)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    We are taking away a man's liberty for the rest of his life for fraud? It's funny how people can advocate for such a sentence while not even understanding what a fraud statute requires the government to prove. I would be amazed if anyone can point to a broader statute (outside of money laundering and obstruction of justice). Fraud requires only that the government prove a deliberate plan of action in which someone intends to deceive or cheat another." They need not prove anyone actually lost money, nor that the vistims relied on any misrepresentation by the defendant. Justifiable reliance and damages are non-existent. To describe fraud as braoad may be the understatement of the century. A developer can claim simply his homes are "good investments," and be sentenced to prison. See 79 F.3d 1550. Someone asked what is the proper punishment, since lots of people lost their fortunes. The proper avenue hasn't changed for 500 years. Sue them! Take them to court, and get your money back. This provides the victims with restitution. When the government seizes the assets and imprisons someone for violating one of these fraud provisions, no one is returned to the position they were previously in. They are stuck with the "satisfaction" of knowing he is behind bars. This I'm sure is of great comfort to the man who just lost $25,000 on his stock investment. Are laws should be designed to deter crime, give restitution, and prevent recidivism. Nothing does this better than the tort system, a method of law that has survived 500 years. By granting government wide latitutde, to imprison people for things that do necessarily have to wrongs, we are avoiding the problem. Sure, Ebbers did horrible acts, but let's let the victims get their day, not punish the rest of society by creating overly broad laws that restrict the free market, increase our overbulging prison system, dillute personal liberty, and take money out of my pocket.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#42)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:10 PM EST
    We are taking away a man's liberty for the rest of his life for fraud? It's funny how people can advocate for such a sentence while not even understanding what a fraud statute requires the government to prove. I would be amazed if anyone can point to a broader statute (outside of money laundering and obstruction of justice). Fraud requires only that the government prove a deliberate plan of action in which someone intends to deceive or cheat another." They need not prove anyone actually lost money, nor that the vistims relied on any misrepresentation by the defendant. Justifiable reliance and damages are non-existent. To describe fraud as braoad may be the understatement of the century. A developer can claim simply his homes are "good investments," and be sentenced to prison. See 79 F.3d 1550. Someone asked what is the proper punishment, since lots of people lost their fortunes. The proper avenue hasn't changed for 500 years. Sue them! Take them to court, and get your money back. This provides the victims with restitution. When the government seizes the assets and imprisons someone for violating one of these fraud provisions, no one is returned to the position they were previously in. They are stuck with the "satisfaction" of knowing he is behind bars. This I'm sure is of great comfort to the man who just lost $25,000 on his stock investment. Are laws should be designed to deter crime, give restitution, and prevent recidivism. Nothing does this better than the tort system, a method of law that has survived 500 years. By granting government wide latitutde, to imprison people for things that do necessarily have to wrongs, we are avoiding the problem. Sure, Ebbers did horrible acts, but let's let the victims get their day, not punish the rest of society by creating overly broad laws that restrict the free market, increase our overbulging prison system, dillute personal liberty, and take money out of my pocket.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#43)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:11 PM EST
    TB is absolutely correct, and a legal expert, much like Peter G. Welcome, TB, I hope you continue to inform TL readers when you have the time. TxPublicDefender gives a really comprehensible rendition of WorldCom and Enron, I hope you all read it. Thanks, Txpd.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#44)
    by Quaker in a Basement on Sat Dec 17, 2005 at 01:01:11 PM EST
    I can appreciate the view that a 25 year sentence is unsupportably harsh under the circumstances. However, I can't get too enthusiastic about some of the arguments presented. For example:
    To give someone 25 years when only one witness, with a motive to lie, implicated him directly in the crime is not right.
    One might argue that the evidence for conviction was thin, but once the conviction is achieved the sentence has to be determined on the severity of the crime, not the quality of the evidence. The rights of the accused are better served when the quality of evidence plays no part in sentencing. If you allow the "only one witness" thinking to creep into sentencing, you've created a legal gray area where the defendant is only sort of guilty. That could prove a dangerous temptation for juries to find a defendant guilty on flimsy evidence, counting on the judge to go easy on the sentence.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#45)
    by Jlvngstn on Sat Dec 17, 2005 at 01:01:11 PM EST
    Simple to me really, there is one guy singing like a canary to save his arse and pointing the finger at the other guy. Giving someone a lighter sentence to testify against someone else only perpetuates and encourages distortions and untruths. I am not saying Ebbers is innocent, but give someone the opportunity to save their hide at the expense of another and they will admit to killing kennedy for petes sake. Forfeiture of assets and a 10-15 year sentence would have done me just fine.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#46)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:11 PM EST
    But, TXPD, isn't what we are talking about here--and I haven't mentioned Enron thus far, a matter of chronology? Those are BOTH failing firms, Enron seemingly doomed to failure from the get-go, ready, willing and able to fudge in order to keep the illusion of their model going, and Worldcom, resorting to the same tactics when their own particular reality and overreach grabbed them eventually. Same tactics, same outcome, same motive, different inception dates. I'm not a lawyer, but my previous statement about the necessity of public trust relative to faith in business still holds true. If, as you say, Ebbers only deserves 10-15 and, as you say, Enron being a far more egregious, malicious, and insidous (enough -ous's?) case, well, as someone wrote elsewhere, do Lay and Skilling deserve life + cancer? Somehow non-violent has been construed to mean less socially impacting. Under that premise, I'll take getting beat up over investing large sums of money in a company. At least with the mugging I know I'll get some semblance of proportional justice, and I'll still have the money that wasn't in my wallet.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#47)
    by Richard Aubrey on Sat Dec 17, 2005 at 01:01:11 PM EST
    Nolo. You're correct. The folks looking to make decisions about WorldCom deserved the truth and the laws are designed to see they get it. It is the law about the truth that Ebbers broke, and that cost a lot of people money. That the stock price was tanking beforehand, as you point out, was not a crime. I must be simple. If I had, say forty bazillion dollars and it turned out one year that I might have only thirty bazillion dollars until things turned around, I don't think I'd lose much sleep, much less burn the midnight oil cooking up a second set of books. I could still afford my cheap port. What is it with these guys? It's probably not money. It's competition, with their peers,with their demons, with their inadequate parenting, with something, and the scorecard is kept in money.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#48)
    by Peter G on Sat Dec 17, 2005 at 01:01:11 PM EST
    Richard A's comments are right on the mark. The defense expert (a Ph.D. economist who often testifies on the measurement of stock market fraud losses in civil class action suits) proved that the actual dollar loss due to fraud in the Ebbers/WorldCom case, separated out from the losses due to business failure, was negligible. The stock had lost 98.7% of its value between July 3, 1999 and July 3, 2002 -- weeks before the fraud was disclosed. Only when the fraud is disclosed can the fraud cause any losses in the market -- until then the commission of the nondisclosure fraud causes the stock price to remain, if anything, higher than it would have been had the truth been known. Prior to that date, everyone who bought a share of stock at an inflated price (and thus "lost" money in the purchase due to the undisclosed fraud) was exactly offset by an equally innocent and ignorant person who sold that share at the same inflated price and thus profited unjustly (but didn't "steal"). There is and can be no net loss to innocent investors before disclosure. Ebbers didn't "steal" the amount that investors lost. He only "stole" to the extent he profited by selling stock at prices he knew were inflated, or looted excessive benefits from a company that he knew wasn't profitable (a la Enron gang).

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#49)
    by s5 on Sat Dec 17, 2005 at 01:01:11 PM EST
    Ask the poor and middle class who have suffered at the hand of these "non-violent" offenders how stiff the sentence should be. Ask the poor neighborhoods in San Francisco who lost electricity they could barely afford because of Ken Lay, or the middle class families whose houses were seized by the IRS when their nest egg flipped into an enormous tax liability overnight. I doubt you'll see much sympathy. OldWhigClassicLiberal, suing them doesn't go anywhere. I am a victim of a convicted corporate criminal, and unfortunately restitution doesn't happen. The cases get locked up in class action suits that, at best, return pennies on the dollar of actual damages. In reality, the cases sit in limbo for years, while those of us who were harmed are left to deal with the consequences with no help from anyone. 25 years isn't stiff enough. The government should force the criminals and their associates to return every lost dollar to every victim.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#50)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:11 PM EST
    I think most people have totally forgotten how the market system works. For someone to buy shares of stock as in Worldcom, they go into the market and basically buy if from someone else. The money they lose is turned into a profit by someone else. For every dollar lost by one investor, is a dollar earned by another. People that invest in the stockmarket by purchasing individual shares and not through a mutual fund, do so at great risk unless they have great expertise and trading. I'd suggest that if people are willing to invest in stocks that they are after a larger rate of return than they would get if doing so through a mutual fund. The poor 37 year old fromer Worldcom employee must have been trying to get rich quick. Perhaps he will now have learned that a balance is required in investment strategies and that there are no true get rich quick schemes. To come up with a loss that can be attributed to one person is riduculous in this case. This loss was generated by every huckster that was pitching Worldcom's stock. The wrong person is being prosecuted!

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#51)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:12 PM EST
    Posted by prowler: "I think most people have totally forgotten how the market system works." Ah, the market system. Sounds so clean, so impersonal, winners and losers, tough luck kid. Bush goes around telling investors that T-bills are just printed paper, and some Wall Street schm*k always comes around telling the victims that they have, after all, been permitted to participate in a Grand Economic Adventure. Capitalism is theft, without regulation, and regulation of the market requires fiduciary duties be HARSHLY protected. Civil lawsuit is one thing. The State owes the People justice. Probably Bernie will LOVE prison the way they do in Guantanamo.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#52)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:12 PM EST
    Let's review what Bernie Ebbers really did. Worldcom was a Ponzi scheme, not a real company. He depended on using the transaction costs of bigger and bigger acquisitions to shuffle numbers and hide the fact that his core business, telecommunications, wasn't really making the huge profits that the corporation claimed. Consequently, Worldcom drove down the cost of long distance and telecommuncations services to unprofitable levels. Other companies tried to compete but simply couldn't because they couldn't figure out how Worldcom could rack up such huge profits at such low prices. This led to the telecommunications boom in the mid-nineties where everyone was laying cable and selling services like there was no tomorrow and stock prices shot through the roof, all based on illusion. But to keep the scheme going, Worldcom had to keep getting bigger to increase revenues so it could continue to cook the books. That all ended when DOJ nixed the Sprint deal. The whole edifice collapsed and so did the entire industry. There is no doubt that WorldCom conducted massive criminal accounting fraud. There was plenty of documentary evidence at trial to prove it. The only question was did Bernie Ebbers know about it or was he some ignorant hick duped by his subordinates. True, only one witness tied him directly to the fraud. But the jury obviously didn't buy Bernie Ebbers' innocent rube act and Saergent Schultz defense. And why should they? He built WorldCom from the ground up. He was known as a workaholic and a micromanager. To ask a jury to believe he didn't know what was going on in his own company was desperation on the part of the defense team, and probably came damn close to suborning perjury on their part.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#53)
    by Jlvngstn on Sat Dec 17, 2005 at 01:01:13 PM EST
    Peter G, excellent post and explanation, thanks.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#54)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:14 PM EST
    Only when the fraud is disclosed can the fraud cause any losses in the market -- until then the commission of the nondisclosure fraud causes the stock price to remain, if anything, higher than it would have been had the truth been known. This is a completely bogus argument. The collapse of the stock was caused by the failure of the Sprint merger. Once the Sprint merger failed, WorldCom's profits took a hit because the pyramid was collapsing. The exposure of the fraud was merely the final nail in the coffin. If the fraud hadn't actually caused the collapse of the company, I could buy this argument. If someone works at a bank and has been stealing $1,000 a day out of the vault and is caught on the 100th day of their theft, they have stolen $100,000, not $1,000. Just because the reason for Worldcom's collapse was discovered at the end of its slide doesn't mean that it didn't cause the slide.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#55)
    by Peter G on Sat Dec 17, 2005 at 01:01:14 PM EST
    Presumably, the total lack of analogy between FF's bank vault hypothetical and the circumstances of a false-filings securities fraud case will be evident to anyone who is actually still following this thread.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#56)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:15 PM EST
    The fact remains that it was the fraud that caused the business failure. To somehow say that the loss attributable to the fraud is only that loss in stock value after the fraud is made public ignores the fact of the reasons why the stock collapsed in the first place. I think my analogy is perfectly appropriate. If an ongoing criminal activity causes harm, you don't charge the person with the damage caused only after it is discovered. That is what happened in this case.

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#57)
    by Andreas on Sat Dec 17, 2005 at 01:01:17 PM EST
    Everyone jumped to condemn the corporate executives. Even the Wall Street Journal editorial page, which is hardly known for its anti-corporate rhetoric, called for prosecutions. This was seen as a way to show that the system was working, that problems were being addressed, and that there was nothing wrong with the economy as a whole. This is itself a giant fraud. The problem is systemic. Individual characteristics no doubt played a role. There were certainly greedy people who committed individual criminal acts. However, the ability of these people to rise to the heights of corporate America, to win the praises of the corporate, financial, media and political establishment, must itself be explained. Bernie Ebbers is a clear example of the promotion of a certain social type who proved capable of serving the interests of the ruling elite as a whole.
    The rise and fall of Bernie Ebbers By Joseph Kay, 16 July 2005

    Re: Bernie Ebbers: 25 Years, a Life Sentence (none / 0) (#58)
    by Talkleft Visitor on Sat Dec 17, 2005 at 01:01:40 PM EST
    First time offender??? Right. He just finally got caught. Like Martha Stewart, they just never got at what they did.

    Bernie Ebbers: 25 Years, a Life Sentence | 58 comments (58 topical)