Post-Script on Corporate Scandal: Where are they now?
Post-Script on Corporate Scandal: Where are they now?
Cooking up crab apple jelly behind prison walls, changing from power suits into prison garbs, meeting in courtrooms instead of boardrooms. Just what are those execs up to who were caught invading the corporate cookie jar? Let's look in on some high profile corporate cases.
Adelphia Communications: The Rigas clan certainly knows how to have a good time and live well. John Rigas and his sons in fact were charged with multiple counts of fraud and conspiracy after using $2.3 billion in company "loans" to finance their lifestyle. Though the senior Rigas and his son Timothy were found guilty, Michael's trial ended in a jury deadlock. Sentencing - John and Timothy face a maximum of 30 years - will not occur until the charges against Michael are resolved.
Enron:The fall-out is still reverberating three years later. Conspirators include not only Enron's CEOs but also execs from Arthur Andersen and Merrill Lynch. The tangled charges of conspiracy, fraud, and obstruction of justice all stem from schemes to cook the books so that profits looked high. Why? So executives could line their pockets before the company tanked in 2001 when Enron lost $68 billion in market value. The real losers: employees and investors. Five thousand employees lost their jobs, and $800 million in pension investments went up in smoke. The sheer scale of the fraud led the Justice Department to set up an Enron Task Force. More than 30 people have been charged. Fourteen have pleaded guilty.
Arthur Andersen,auditor for Enron,was convicted of tampering and destroying evidence while the SEC was investigating their client Enron. Though Andersen's lawyers argued that shredding documents was routine housekeeping, the company was eventually convicted of obstruction of justice in July 2004. The result: Andersen was sentenced to the maximum $500,000 fine and five years' probation. The company has since dropped after leading the pack as one of the world's big five accounting firms. A company that once employed 28,000 people has whittled its numbers down to 250 employees, mostly dedicated to litigation and to operating a training center.
Merrill Lynch & Co. Four Merrill Lynch executives were convicted of fraud on November 3, 2004 after the U.S. government discovered that Enron's "sale" of energy generating barges to Merrill Lynch was a disguised loan "cooked up" to look like $12 million in profit. The real cost? Investors lost over $13 million. The four execs face up to 12 years in prison. Sentencing is scheduled for March 2005.
Former Enron financial chief Andrew Fastow pled guilty to conspiracy, agreeing to serve 10 years and to testify against former Enron chief executives. Fastow's wife Lea pled guilty to filing a false tax return and was sentenced to a year in prison after she agreed to help the prosecution and persuaded her husband to do the same. For her cooperation, the prosecution dropped six original felony charges against her.
Enron trials pending:
The date still isn't set for the top 3 Enron executives: Kenneth Lay (Enron founder) faces charges of fraud and conspiracy, and taking over the conspiracy when Skilling quit three months before Enron's collapse.Lay will have a separate trial for bank fraud, lying to banks, and using loans to buy Enron stock on margin. Jeffrey Skilling (former CEO) and Richard Causey (top accountant) face more than 30 counts. Among the charges are fraud, conspiracy, insider trading, lying to auditors, and knowing or participating in schemes to deceive investors.
RiteAid:Martin Grass,former CEO and the son of its founder, was sentenced to eight years in prison by a federal court in May 2004. Grass was convicted for conspiring to inflate the value of the company.
Martha Stewart, Inc: Our favorite home-maker Martha is cooking up crab apple jelly while serving her five month sentence at "CampCupcake" in Alderson, West Virginia. After being convicted of lying to investigators, Martha decided to begin her sentence while appealing, so that her company could begin its rebound. Martha's broker, Peter Bacanovic, was given the same sentence but is awaiting his appeal before serving. Imclone founder, SamWaksal, was sentenced to seven years in prison for insider trading. He tipped investors that the FDA rejected the company's application for Erbitux, which would cause stock to drop.
Tyco:The most serious criminal chargeagainst Dennis Kozlowski,enterprise corruption, was dropped by a judge in early November and the criminal case ended in a mistrial. Kozlowski and finance chief, Mark Swartz are accused of manipulating corporate loan programs and making improper stock sales, involving more than $600 million. Kozolowski also faces separate charges for not paying sales tax on $23 million of artwork he purchased. Other personal items purchased with corporate funds? A $6,000 shower curtain, $18 million in apartment décor, a $2.1 million trip to Sardinia, and a $19 million Boca Raton home.
WorldCom:Former CEO, Bernard Ebbers, is awaiting trial for conspiracy, securities fraud, filing a false document, and improper accounting to inflate profits. The defense requested a delay until January 2005.
Citicorp:A federal judge held that Citicorp is liable for a $2.575 billion settlement of a class-action lawsuit. The suit is being filed by WorldCom investors who claim they were defrauded by Citicorp when it hid WorldCom's risks.
The moral of these stories? Policing corporations is an industry in itself, and it's one that can't be outsourced.