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At least a dozen former finance executives are preparing to sing for prosecutors; NASA still hasn't found that $2 billion; CFOs on the move.
CFO Staff, CFO Magazine
July 1, 2004
Hell hath no fury like a prosecutor scorned. Just ask Jamie Olis. The former vice president of finance at Dynegy Inc., a Houston-based energy company, pleaded not guilty to multiple counts of conspiracy and securities, mail, and wire fraud, and refused to testify against his co-workers. He was sentenced to more than 24 years in prison for reporting a $300 million loan as revenue.
Olis was one of the few finance executives accused of fraud who wouldn't cooperate with investigators. In fact, former finance execs are singing like canaries this summer, with at least a dozen preparing to rat out their former bosses in exchange for judicial leniency.
One of them is the man who helped make "CFO" a household word: Andrew Fastow. Fastow chose to plead guilty and turn on his CEO, Jeffrey Skilling, who faces conspiracy, wire fraud, securities fraud, and insider-trading charges. In exchange for Fastow's cooperation, prosecutors agreed to recommend a 10-year prison term.
Taking a similar route is Scott Sullivan, former CFO of WorldCom, who pleaded guilty to fraud, conspiracy, and filing false documents with the Securities and Exchange Commission. He faces up to 25 years in jail, and will soon tell tales on former CEO Bernard Ebbers. Ebbers has been indicted on multiple counts of filing false documents with the SEC, securities fraud, and conspiracy, and faces more than 90 years in prison.
Meanwhile, Cosmo Corigliano, former CFO of CUC International, is expected to testify against Walter A. Forbes, former CEO, and E. Kirk Shelton, former president and COO, both of whom face conspiracy as well as mail- and wire-fraud charges. Corigliano pleaded guilty to conspiracy and wire fraud, and his testimony is in exchange for up to five years per count.
But perhaps the biggest Canary Chorus will be found in Alabama, where a long line is forming to testify against Richard Scrushy, former CEO of HealthSouth, who has been charged with masterminding a multi-billion-dollar fraud. So far, none of the HealthSouth finance executives has received any significant jail time as a result of a guilty plea, and former CFO Malcolm McVay even got considerably less than prosecutors had recommended: six months of house arrest. —Kris Frieswick
It's been seven months since the National Aeronautics and Space Administration discovered that it was missing $2 billion in taxpayers' money, and the agency still doesn't know what happened to it. That was the testimony of NASA CFO Gwendolyn Brown at a May 19 hearing before the Subcommittee on Government Efficiency and Financial Management of the House Committee on Government Reform.
The subcommittee convened to investigate the cause of a disclaimed audit opinion on NASA's 2003 financial statements from former auditor PricewaterhouseCoopers. (PwC chose not to rebid on the auditing contract for 2004.) NASA's financial troubles were first made public in the May issue of CFO ("NASA, We Have a Problem").
In her testimony, Brown assured subcommittee members that the missing $2 billion was not the result of "fraud, waste, or abuse." But when pressed on what did cause the money to go missing, she admitted that the agency wasn't sure. Retorted subcommittee chair Rep. Todd Platts (RPa.): "If my checkbook is off by 10 cents, I'll stay up all night until I find that 10 cents. Your checkbook is off by $2 billion."
Brown said that the agency is in the process of re-reconciling all of its bank balances back to 2000 to find the cause of the discrepancy. That alone won't be enough to get the agency back on the financial track to a clean audit opinion, according to NASA inspector general Robert Cobb.
Cobb warned the subcommittee that given the troubles that the agency is having getting an integrated financial-management system up and running, NASA probably won't get a clean audit opinion until at least 2007. —K.F.
CFOs on the Move
IBM's new CFO is Mark Loughridge, formerly head of IBM Global Financing. He replaces John Joyce, who takes over as SVP and group executive of IBM Global Services.... Cantor Fitzgerald LP has named Jay Ryan as CFO. He succeeds Jeffrey Chertoff, who resigned to pursue other opportunities.... SBC Communications Inc. CFO Randall Stephenson has been named to the new post of COO. Replacing him is Rick Lindner, formerly CFO of Cingular Wireless.... Dollar General Corp. has named David Tehle as CFO, replacing James Hagan, who announced his resignation in March.