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Prosecutors Gone Too Far, Say Some

CFOs being led off in handcuffs, flashbulbs popping, crowds cheering. Is this justice -- or show biz?
Kris FrieswickSeptember 1, 2002

A nearby crowd cheered as Scott Sullivan and David Myers, former CFO and controller, respectively, of WorldCom Inc., were led, handcuffed, into a Manhattan federal courthouse on August 1. In a world where yesterday’s aggressive accounting is today’s criminal investigation, more finance executives will likely take the “perp walk” before the year is out.

And although it’s unlikely that those accused of massive fraud can stir up much sympathy, some are railing against the “staged media events” of the arrests, the sole purpose of which are to “show what tough guys the federal prosecutors are,” says Webb Hubbell, who pleaded guilty to tax-evasion charges in 1994 as a result of the Whitewater investigation while he was associate U.S. attorney general.

“It’s like your case is being tried in the press on a national stage. I had been mayor of Little Rock; I was a chief justice [of the Arkansas Supreme Court]; I was associate attorney general–and everything that I had ever done that was good was just wiped out.”

Hubbell served 18 months in a federal prison in Cumberland, Md., and 3 months in a halfway house. He is now a senior research fellow at the National Center on Institutions and Alternatives (NCIA), and counsels executives who are facing trial and jail time.

Herb Hoelter, director of the NCIA, calls the sight of executives in handcuffs “preposterous. [Federal prosecutors] put out press releases, hold daily briefings. This is all new in the past decade. They never did these things in the past. It’s abuse of prosecutorial power.”

The sad part is that humiliation and longer prison sentences won’t deter executives from committing fraud in the future, says Hubbell. “It won’t deter them one iota. People don’t think they’re doing something wrong or they don’t think they’re going to be caught. The best way to prevent fraud is to take away the opportunity and the need.” Opportunity, he says, comes from lax internal controls, and the need is fostered by huge executive incentives to hit profit targets at all costs.

Update: In late August, both Scott Sullivan and David Myers were indicted on seven counts of fraud for their alleged role in the accounting malfeasance at WorldCom. Sullivan pleaded not guilty to the charges, while Myers is reportedly negotiating a deal with Federal prosecutors.

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