Tuesday, May 22, 2012

CEO’s Are Not Exempt From Jail Time

            White collar crime and mismanagement have consistently been the biggest of the 16 broad crisis categories the Institute for Crisis Management tracks year after year.

The first year for the Annual ICM Crisis Report in 1990 Mismanagement led the list accounting for 24 percent of all crisis types and White Collar Crime was right behind totaling 20 percent of crises that year.
            The new 2011/2012 Annual ICM Crisis Report has White Collar Crime in first place with 19 percent and Mismanagement in second place with 11 percent.

In 2009 Mismanagement was in second place with 16 percent and White Collar Crime was in first place with 18 percent.  On average, people in decision making/management positions are credited with triggering half of all business and organizational crises.

247wallst.com has just published an article “10 CEOs Who Went From The Boardroom To the Cell Block” and identified their top ten list of Fortune 500 CEOs who have been arrested and ousted in the past 12 years.

Martin Grass, son of the founder of the drugstore chain Rite-Aid and several other executives were indicted on charges of conspiracy to defraud, making false statements and accounting fraud. He reached a plea agreement that called for 8 years in prison, a half-million dollar fine and giving up $3-million salary.  The company survived, barely.

  Joseph Nacchio, CEO of telecommunications giant Qwest was charged by the Securities Exchange Commission with inflating revenue estimates, lying about non-existent contracts and profiting from his illegal deeds. He was sentenced to six years and fined $19-million and forfeited $52-million in profits from illegal trading.  The company was sold.

Another of the top ten CEO crooks was Richard Scrushy, longtime CEO of HealthSouth.   In 2003 he was indicted on charges of conspiracy, securities fraud, money laundering and mail fraud. At trial he was acquitted.  Four months later he was indicted on 30 counts of extortion, obstruction of justice, money laundering, racketeering and bribery.  He was sentenced to six years in prison.

The company survived but its reputation was tarnished.

Bernie Ebbers, former CEO of WorldCom and Jeffrey Skilling of Enron were both accused of “cooking the books” and both companies did not survive.

Another example of misbehaving executives and their terrible impact on the company that trusted them was John Rigas who was forced at as CEO of cable TV provider Adelphia after he and six others, including two of his sons were convicted of securities, bank and wire fraud. The company ended up in bankruptcy and Rigas ended up in prison and is not scheduled to get out until 2018.
     You can read the whole report at: http://247wallst.com/2012/05/17/top-ten-ceos-sent-to-prison/   
      And download the latest ICM Annual Crisis Report at: http://crisisexperts.com/CR_Signin.htm  

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