The Corner Office as a Hot Seat

Article excerpt

Last week's Enron verdict marked both an end and a beginning. By holding the once-proud company's top two officials liable for engaging in illegal activities, and then lying about them, it reached an important conclusion. But it also set a vital precedent.

Nearly five years after Enron went from No. 7 in the Fortune 500 to bankruptcy, and after a four-month trial, jurors had no trouble making up their minds: Both founder Kenneth Lay and chief executive Jeffrey Skilling were guilty on numerous counts of conspiracy and fraud.

The long-awaited decision sums up recent successful prosecutions against wayward business executives, including Bernard Ebbers of WorldCom and John Rigas of Adelphia, who were convicted of fraud in bankrupting their companies; and Martha Stewart, who served five months for lying about a stock sale.

The verdict also brings some closure to thousands of aggrieved former Enron employees, who lost their jobs and retirement savings. With this criminal case decided, and unlikely to be overturned on appeal, they now have a better chance of winning civil suits against the company, even if they eventually receive only pennies on the dollar.

The trial also proved that top executives, no matter how deep their pockets or how skillfully defended, could be successfully prosecuted. Corporate czars cannot simply plead ignorance of company wrongdoing. As Harvey Pitt, a former chairman of the federal Securities and Exchange Commission put it, the Enron verdict "demonstrates to everyone that the 'three monkey' defense is dead, namely I didn't see anything, didn't do anything, and I certainly didn't understand anything. …