Monday, October 23, 2006

postheadericon Jeffrey Skilling given 24 Years

Former Enron CEO Jeffrey Skilling was sentenced to 24 years of prison. This will likely translate to 20 years and four months if he is good in prison. Skilling was seen as not very cooperative and possibly even worse from a sentencing perspective not very humble or apologetic during questioning.

Cooperative CFO Andrew Fastow was given a six year term for cooperating with prosecutors in the case. Founder Kenneth Lay died before his own sentencing and his conviction was overturned due to his death, which prevented any potential appeals.

By comparison Bernard Ebbers, the CEO of WorldCom, received a 25 year sentence for his role in that Fraud.

So what is the lesson of these convictions?

  1. Company Officers of US Companies are accountable to US Law
  2. If you die, you don't need to appeal to the courts (but maybe you will to a higher power)
  3. If you cooperate, you may still go to jail, but you may get out before you die of old age.
  4. Don't cook the books!
  5. Ignorance is no defense!
  6. If you are guilty of number 4, then you better apologize loudly before sentencing.

Honestly, I'm not certain if too many other lessons have or will be learned from this affair. Sorbanes Oxley has been created and strengthened. Unfortunately, that legislation is very very flawed and even more unfortunately has very very large loop holes that are being used by Multi-National Corporations every day. From a pessimistic perspective, these convictions may represent an old breed of corporate officers that will do time in prison because they were not smart enough to avoid the loopholes. I say pessimistic because too many companies are looking for the loopholes instead of making changes in the corporation to keep things on the up and up.

In the meantime, I look forward to the next big Public Accounting Firm scandal to hit. Enough attention has been focused on the boardroom, its time to get back to the trenches and root out some of the Accounting Firms that are endorsing the loopholes and showing corporate officers around the world how to navigate these loopholes.

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