How does a jury react when a company’s ex-CEO and ex-CFO both face civil accounting-fraud charges, and the panel must decide who’s liable: one of them, both, or neither?

Such a jury deliberation — similar to those in the cases of Enron, Worldcom, HealthSouth, Tyco, and others — played out in a much lower-profile courtroom drama last week in Detroit. There, federal jurors returned a verdict in a case involving automotive wheelmaker Hayes Lemmerz International Inc. and its former CEO Ranko Cucuz and ex-finance chief William Shovers. The Securities and Exchange Commission had alleged that the two senior executives were part of a scheme from 1999 to 2001 to hide declining operating results and achieve corporate earnings targets.

More specifically, the SEC had charged both men with making “affirmative misrepresentations” to auditors after they had learned of the scheme deeper in the organization, concealing the abuses as well from the Hayes Lemmerz board and its audit committee. At trial, prosecutors introduced a June 2001 memo to Shovers from then-controller Michael Pozsar, for example, saying of the accounting issues he observed at a company division: “It has never been as bad as it is today — must stop now!!! — They’re committing fraud.”

In the end, after a two-week trial, the jury found ex-CFO Shovers liable on all three claims he faced. Cucuz, on the other hand, was found not liable on two of the claims, though liable for violating the antifraud provision of securities laws. Essentially, that one liability finding said that the ex-CEO had been negligent in his handling of accounting issues, according to Cucuz’s attorney, Theodore Low.

An attorney for Shovers didn’t respond to CFO.com’s request for comment on the case. (Any penalties against Shovers and Cucuz have yet to be decided by the court.)

But in a statement, Cucuz himself said the verdict illustrated “that the SEC had overreached in pursuing me in this matter,” adding that “I always knew I did nothing intentionally wrong and I am pleased the jury has agreed.”

The SEC’s assistant chief litigation counsel, David Gottesman, takes issue with any suggestion that the jury verdict gave Cucuz a pass. The verdict “demonstrates that even if a CEO instructs financial executives to handle the problem, he must make sure that they follow through with appropriate action,” he says. More broadly, “the outcome of this case shows that senior management must be completely forthcoming about any significant problems in the company’s financial reporting,” he says. “Once they learn or have reason to know of financial wrongdoing, they must take prompt action and make full disclosure. Hiding the problems, or putting them on the back burner, just exposes management to liability.”

The jury, however, clearly saw the CFO as more culpable in the case. The two men were the last two defendants remaining from what has been a much broader SEC action involving Hayes Lemmerz. Previously, the commission had settled with the company and with former executives of two divisions involved with wheel products.

The prosecution’s approach in the trial of Shovers and Cucuz was to show that information, including that from controller Pozsar, should have led both CFO Shovers and CEO Cucuz immediately to report the problems. Instead, earnings statements were signed by the two men and filed, and a $300 million bond offering was made by Hayes Lemmerz in June 2001.

The SEC contrasted Shovers’s and Cucuz’s actions to the prompt response given the matter by the CEO who had replaced Cucuz after he left that post in August 2001. (The company later filed for bankruptcy, with one factor being its accounting revelations. It emerged from bankruptcy in 2003.)

For their part, attorneys for Shovers and Cucuz tried to show in the courtroom that an investigation was put in place, but, as Cucuz’ attorney Lowe puts it, “both Cucuz and Shovers believed to the best of their knowledge that the books were in accord with GAAP.”

Adds Lowe, “Despite the obvious chance here for finger-pointing, that didn’t happen” between Cucuz and Shovers. The two men, who had worked together for several years, “remain friendly,” Lowe said.

Still, Cucuz’s defense did involve an explanation of how a CEO must rely on a CFO for advice, Lowe notes.

As he describes his closing argument: “I said to the jury: [Imagine] you’re the president of the company, and you’re presented with a report to sign that contains some accounting mumbo jumbo.” You can either get an accounting degree before signing, or you can “turn to your CFO and say, ‘Is this okay to sign?’ Which is what Cucuz did. In that sense, he relied on the CFO.”

While Lowe had hoped that the jury would exonerate Cucuz entirely, “obviously the jury viewed things differently, although Shovers took a much harder hit than we did.”

When the jury looks at a CFO’s role at a company where accounting problems occur, Lowe notes, there are things a finance chief will have to explain that a chief executive generally can’t.

Still, Cucuz’s attorney says of the CFO, “We didn’t throw him under the bus; we kept him between us and the bus.”