law disction 2please answer the two questions in 2 pagesdiscution_2.docx
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RECENT MAJOR WHITE-COLLAR CRIME SENTENCES
Allen Stanford. Sentence: 110 years
Allen Stanford, 63, was a Texan financier accused of running a $7 billion Ponzi scheme. He
had investors invest billions of dollars into his bank, and then spent the money on private
jets, yachts and acres of undeveloped Antiguan land among other expenditures. In December
2008 Stanford International Bank had $88 million in cash, but it fudged its numbers to say it
had $1 billion in assets. In the same month it finally owed investors $7 billion when they
tried to pull out their money, and the bank had no money to cover the costs.
In 2012, a jury found Stanford guilty of conspiracy, along with 12 other criminal charges
including obstruction. He was found innocent of one wire fraud charge. Stanford was
sentenced to 110 years in federal prison.
Bernard Madoff, Businessman. Sentence: 150 years
Madoff, 72, directed one of the largest Ponzi schemes in U.S. history. Madoff, in his role as
CEO of Bernard L. Madoff Investment Securities LLC, stole from his clients in a $65 billion
Ponzi scheme. Despite a continuing decline in the economy, Madoff continued to assure his
clients that his numbers (investment returns) would continue rising. As the economy
continued to decline, Madoffs increases became suspicious and clients began to contact him
to get their money back. When the requests for returned funds reached $7 billion, Madoff
met with his sons and told them that his business was fraudulent. The sons turned Madoff in
to the authorities.
In 2009, Madoff pleaded guilty to, among other things, securities fraud, wire fraud, money
laundering, making false filings with the SEC, and making false statements. He was
sentenced to the maximum 150 years in prison for his offenses. His projected release date is
November 14, 2159. Since Madoffs plea, David Friehling from his accounting department
has pled guilty to securities fraud, investment advisor fraud, and making false filings with the
SEC. Additionally, Frank DiPascali has pled guilty to securities fraud, investment advisor
fraud, mail fraud, wire fraud, income tax evasion, international money laundering, falsifying
books and records, and more.
Joseph Naccio. Sentence: 6 years
Joseph Naccio, 60, was the chief financial officer and chairman of the board for Qwest
Communications International. Qwest is a telecommunications provider in the western
United States. When the economy began to decline, Naccio continued to assure Wall Street
that the company would continue making large returns even though he knew that such returns
would not occur. Based on inside information, Nacchio sold $52 million of Qwest stock just
before the prices fell.
In 2007, Naccio was convicted on 19 counts of insider trading and sentenced to 6 years in
federal prison. Additionally, Naccio was ordered to pay a $19 million fine and restitution of
the $52 million he had made as a result of illegal stock transactions. Although his conviction
was overturned in 2008 because of improperly excluded expert testimony, the conviction was
reinstated in 2009 when he finally began serving his six-year term.
Jamie Olis, Vice President of Finance. Sentence: 24 years
Jamie Olis, 38, was vice president of finance and senior director of tax planning at Dynergy,
a natural gas energy company. Olis attempted to conceal more than $300 million in company
debt from public investors. When the attempted concealment was discovered, millions of
investor dollars were lost, including a $105 million loss suffered by 13,000 participants in the
California Retirement Plan.
In 2004, Olis was sentenced to 292 months in prison after being convicted of securities fraud,
mail fraud, and three counts of wire fraud. The 24-year sentence is one of the longest terms
for fraud in U.S. history, in part because of the large financial losses to thousands of
investors. In addition to the jail time, Olis was fined $25,000. Olis, however, did not act
alone in the concealment. Gene Foster and Helen Sharkey, both former Dynergy executives,
pled guilty to conspiracy and aided in the investigation. They then entered into a plea
bargain under which Foster and Sharkey were to receive sentences of up to 5 years in prison
and $250,000 in fines.
In 2004, Quattrone was found guilty of obstruction of justice. He was sentenced in September
2004 to 18 months prison and 2 years probation. He was also fined $90,000. Near the end
of that year, the National Association of Securities Dealers permanently banned Quattrone
from the securities industry, although he had planned to appeal the ban to the Securities and
Richard Scrushy, CEO of HealthSouth
Richard Scrushy, the founder of HealthSouth, is no stranger to white-collar criminal
allegations. After being acquitted of charges under the Sarbanes-Oxley Act for lack of
evidence in 2005, Scrushy was indicted on new charges a mere four months later. The new
charges were for bribery and mail fraud linked to former Alabama Governor Don Siegelman.
The charges involved fraud through exchanging campaign funds for political favors.
Scrushy was ultimately found guilty by a federal jury in 2006 for bribery, mail fraud, and
obstruction of justice. He was sentenced in 2007 to almost 10 years imprisonment, in
addition to having to pay a fine of $150,000 and an additional $267,000 in restitution to the
United Way. Scrushy is currently in jail.
Walter Forbes, CEO of Cendant Corporation
In 2004, Walter Forbes went on trial for fraudulently inflating the companys revenue by
$500 million to increase its stock price. Forbes was charged with wire fraud, mail fraud,
conspiracy, and securities fraud. In addition, Forbes was also accused of insider trading of
$11 million in Cendant stock only weeks before the accounting scandal was discovered. The
former vice president was also charged with similar crimes. The Cendant CFO testified
against both the vice president and Forbes, saying that he was asked to be creative in
Despite his persistent use of the dumb CEO defense (I did not know about the
wrongdoing), Forbes was found guilty in his third trial, which lasted all of 17 days. In
January 2007, Forbes was sentenced to 12 years and 7 months in federal prison. He was also
required to pay $3.275 billion in restitution.
Kenneth Lay, CEO of Enron
In 2004, Kenneth Lay went on trial, pleading not guilty to 11 felony counts, including wire
fraud, bank fraud, securities fraud, and conspiracy, for his part in falsifying Enrons financial
reports, and denying that he profited enormously from his fraudulent acts. The extent of the
fraud was discovered when the energy company went bankrupt in late 2001. As a result of
the accounting fraud, Enrons stock plummeted, leaving thousands of people with nearworthless stock, hitting retirement funds especially hard.
The Securities and Exchange Commission also filed a civil complaint against Lay, which
could have led to more than $90 million in penalties and fines. Lay was accused of selling
large amounts of stock at artificially high prices, resulting in an illegal profit of $90 million.
On May 25, 2006, Lay was found guilty of 10 of the 11 counts against him. Each count
carried a maximum 5- to 10-year sentence, which would have amounted to 50 to 100 years
maximum, with most commentators predicting a 20- to 30-year sentence. On July 5, 2006,
however, Lay died of a heart attack before the scheduled date of his sentencing. Due to his
death, the federal judge for the Fifth Circuit, pursuant to Fifth Circuit precedent, abated
Lays sentence. The abatement made it as if Lay had never been indicted.
Bernie Ebbers, CEO of WorldCom
In 2004, Bernie Ebbers, former CEO of the bankrupt phone company WorldCom, pleaded
not guilty to three counts of fraud and conspiracy. The accounting fraud, which involved
hiding expenses and inflating revenue reports, left $11 billion in debt at the time of the
bankruptcy. The former CFO of WorldCom, Scott Sullivan, pleaded guilty to fraud and
agreed to assist in the prosecution of Ebbers. Sullivan faced up to 25 years in prison for his
role in the accounting scandal. In addition, MCI sued Ebbers to recover more than $400
million in loans that he took from WorldCom, now called MCI.
Bernie Ebbers, in one of the longest prison sentences given to a former CEO for white-collar
crimes, was sentenced in 2005 to a 25-year prison term in a federal prison. Ebbers, 63 years
old at the time of his sentencing, began serving his term in federal prison in 2006.
Dennis Kozlowski, CEO of Tyco International
In a second trial in early 2005 after a mistrial, Dennis Kozlowski faced charges of corruption
and larceny for stealing more than $600 million from Tyco International and failing to pay
more than $1 million in federal taxes. Kozlowski had Tyco pay for such over-the-top
expenses as a $15,000 umbrella holder and a $2,200 garbage can. Kozlowskis sentence
could have been up to 30 years in prison.
Kozlowski, as well as former Tyco CFO Mark Swartz, was sentenced to 8 years and 4 months
to 25 years. Unlike other CEOs convicted for white-collar crimes, such as Bernie Ebbers,
Kozlowski was convicted in state court. In addition to his prison sentence, to be served in a
New York state prison, Kozlowski, with Swartz, was also ordered to pay $134 million to
Tyco. In addition, Kozlowski was also fined an additional $70 million. Kozlowski is currently
serving his term in prison.
Select three of these “criminals,” and discuss their offenses,
punishment, and how it is affecting ongoing business today.
When the next edition of this text is published in 2016, who do
you think will have been added to this list of the convicted?
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