March 15, 2005
the ebbers verdict
Posted by David Skeel

As everyone who's reading this blog probably knows, the Ebbers verdict is now in: guilty on all nine counts.  It's a spectacular victory for the government, by any yardstick. In the final post of my two week stint on Conglomerate a couple of weeks ago, I predicted that Ebbers would be guilty on a few but not all nine counts. It seemed like a reasonable prediction -- I suppose I'll have to stick to law teaching.

My own reaction to the verdict is quite mixed.  On the one hand, I believe Ebbers fully deserves to spend some time in jail, and that his claim that he didn't know what was going on in the CFO's office and elsewhere was a bit hard to believe.  On the other hand, my fear is that the government will point to the verdict as evidence that the excesses of the 1990s were largely the work of a few bad apples, and that nothing more needs to be done.   As noted in my earlier post, the Insull trial in 1934 was part of a larger campaign to clean up the utilities industry, and the Richard Whitney trial a few years later was used to signficantly restructure the New York Stock Exchange.  We're not likely to see any similar reforms (e.g., a change in the tax rules that encourage options-based compensation) in the wake of the Ebbers verdict.

I'll look forward to reading further posts on the verdict.  In the meantime, many thanks to Gordon and Christine for letting me chime back in.

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