Word: fraud
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...least that's how a Manhattan jury saw it, delivering a guilty verdict in Ebbers' fraud trial and handing the feds a major coup in their crackdown on corporate crime. Convicted of securities fraud, conspiracy and false regulatory filings, Ebbers, 63, is the highest-profile chief executive to be found guilty in the recent wave of accounting scandals. Under federal sentencing guidelines, he faces up to 85 years in prison, and even if he receives about 20 years, as some legal analysts predict, when he's scheduled to be sentenced in June, he could spend the rest of his life...
...crime. The prosecution's star witness, former CFO Sullivan, admitted in court to drug use, lying to WorldCom's board and filing false financial statements. Yet while most of the jurors didn't find Sullivan very credible, it was even less plausible that Ebbers would not have detected accounting fraud on such a massive scale right under his nose. As the jury heard, this was a man so obsessed with saving a buck that he sniffed out $18,000 in cost overruns in a $3 billion budget, fretted about coffee-filter expenses and wanted the bottled-water machine filled with...
...calculus for corner-office occupants: that corporate crime may finally equate to lengthy prison terms. Many of the most notorious white collar villains of a generation ago received light sentences compared with what Ebbers faces. Junk-bond king Michael Milken, for instance, served only 22 months for securities fraud. Now CEOs must recognize the risks of an "I didn't know" defense and face the prospect of monumental consequences to go along with their monumental pay packages. That Ebbers lost hundreds of millions himself in the WorldCom collapse--buying more stock even as the company imploded--did nothing to insulate...
...beat. From a budget of just under $400 million in 2000, the Securities and Exchange Commission's haul this year is estimated to be $900 million, paying the salaries of an additional 1,000 accountants, lawyers and economists. No one expects those changes to eliminate corporate fraud entirely. But CEOs may no longer claim, like the old joke about the drunk driver who gets in a car crash, that they were sitting in the backseat. --With reporting by Barbara Kiviat/ New York
That's not to say there's nothing wrong with what AIG is alleged to have done. "Jiggling the numbers may have become commonplace, but that doesn't mean it's legal," Spitzer says. And if Greenberg misled investors intentionally, it would be fraud. But most believe he was swallowed by the shifting sand. Ethical lapses that regulators all but ignored yesterday now get their full attention--which should give executives everywhere pause. Even squeaky-clean Warren Buffett, whose Berkshire Hathaway owns Gen Re, has been sullied. Buffett is not under investigation, but TIME has learned he will be interviewed...