Executives finally getting their comeuppance

Ebbers, Rigas, Kozlowski get prison time; more could follow in 2006

Louis Lanzano / Ap File	Former WorldCom boss Bernard Ebbers was sentenced to 25 years in prison this year for orchestrating the $11 billion accounting fraud scandal that toppled the telecom.

updated 5:12 p.m. ET Dec. 18, 2005

NEW YORK - The scene said everything about the year in white-collar crime: Bernard Ebbers, the jocular, folksy former boss of WorldCom Inc., hunched forward in a courtroom chair, quietly crying.

He had just been sentenced to 25 years in prison for orchestrating the record $11 billion accounting fraud at the toppled telecom — essentially a life term for a man 63 years old and with a history of heart trouble.

It was a startling punishment, but far from extraordinary in 2005: In the cavalcade of recent corporate scandals, this was the year the hammer finally fell on top executives. Hard.

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And the trend toward harsher sentencings for corporate crooks comes just as the curtain goes up on what's expected to be the most complex of the white-collar cases to date, the fraud trial of Enron founder Kenneth Lay and two other former officials.

Set to get under way Jan. 17, the Enron trial brings the corporate crime era full-circle: Enron's crash into bankruptcy in 2001 predates scandals at WorldCom, Adelphia Communications Corp. and Tyco International Ltd.

It also promises to be intriguing: Lay has already mounted a public defense that rivaled Martha Stewart's, including a blitz of television appearances and interviews. He claims he trusted the wrong people and valiantly tried to save the energy giant.

For Lay, former CEO Jeffrey Skilling and former top Enron accountant Richard Causey, the consequences of conviction are dire. Consider the fates met by convicted corporate executives in 2005 alone:

Ebbers' sentence, which followed a trial in which he took the witness stand and flatly denied any knowledge of the massive book-cooking at WorldCom, was the toughest to date in the business scandals.

John Rigas, the white-haired founder of cable giant Adelphia, got 15 years in prison for looting his company. His son Timothy, the former chief financial officer, got 20.

L. Dennis Kozlowski, the former Tyco chief whose $6,000 shower curtain and lavish parties made him almost a caricature of the boomtime CEO, finishes the year in a maximum-security prison that will allow him three showers a week.

He and his own former finance chief, Mark Swartz, will serve at least 8 1/3 years — and perhaps as many as 25 — after they were convicted of stealing $600 million from Tyco.

And former Cendant Corp. Vice Chairman E. Kirk Shelton was slapped with 10 years in prison for his role in an accounting scandal that cost investors and the company more than $3 billion.

For judges considering the staggering harm done to investors and employees of these scandal-scarred companies, the sentences were not close calls, said Eric Chaffin, a securities lawyer at Seeger Weiss LLP and a former white-collar prosecutor in New York.

"The judges, when they really see the real victims and see that there's really strong fraud in these companies, they're going to make somebody pay the price," he said.

CONTINUED : Paying the price ... literally

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