Fraud Verdict Is Ominous for Toppled CEOs

A federal jury found Ebbers, 63, guilty of securities fraud, conspiracy and filing false documents with regulators. He was convicted on all nine counts that he faced. It was the government's biggest win yet in a string of victories against top corporate figures, including Silicon Valley financier Frank Quattrone and lifestyles entrepreneur Martha Stewart. He faces a possible prison term of more than 30 years.

There was little hard evidence against Ebbers -- no smoking-gun e-mails or paper trails -- and the defendant insisted the fraud was masterminded by Scott D. Sullivan, his onetime finance chief who became the federal government's star witness.

But it came down to this: Jurors couldn't see how the man who had built WorldCom from a small phone company in Clinton, Miss., to a global telecommunication colossus could not have known about the accounting scams that triggered the company's 2002 bankruptcy filing -- the biggest in U.S. history.

"When you start a company

Legal experts said the jury's decision boded poorly for toppled executives Kenneth L. Lay of Enron Corp. and Richard Scrushy of HealthSouth Corp., who are employing variations of the above-the-fray defense.

Lay faces trial in Houston in January on fraud and conspiracy counts stemming from Enron's 2001 collapse. Scrushy is on trial in Birmingham, Ala., for an alleged $2.7-billion fraud at HealthSouth.

"These guys are shaking in their boots now," said Andrew Genser, a white-collar criminal defense lawyer at Kirkland & Ellis in New York.

If anyone seemed poised to pull off the "know-nothing" defense, others said, it was Ebbers.

The former high school basketball coach and milkman twice flunked out of college. He disdained e-mail, denying prosecutors a weapon they had used effectively against Quattrone and others. And Ebbers almost never sold his WorldCom shares, testifying that he even had bought $5.3 million in stock a few weeks after he was forced to resign in 2002 under the cloud of a federal investigation.

In an interview, juror Aran Nulty said that the panel weighed the evidence carefully during eight days of deliberations, and did not rely on Sullivan's testimony alone.