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Benefits of Distance Learning

This US Department of Justice opinion might be useful to you: Principles of Federal Prosecution of Business Organizations

Do the company’s actions fit the definition of a crime? If so, what kind, a felony or a misdemeanor? Why or why not?

In both the cases given for reviews, “Ex-WorldCom Chief Ebbers Convicted of Fraud” and “Reliant Energy Services, Inc. and Four of its Officers Charged with Criminal Manipulation of California Electricity Market”, the companies/individuals actions fit into the definition of a crime.

After reviewing both the articles, it can be said that both the cases are serious crimes that was performed by the companies/individuals to gain advantages and profit against the law, which should be followed. Because of this many number of people affected/suffered and this is the case of the crime against the Government and falls under felony types.

Ex-WorldCom Chief Ebbers Convicted of Fraud

Bernard Ebbers, who built WorldCom from a humble Mississippi long-distance firm into one of the nation’s biggest telecommunications conglomerates, was convicted Tuesday of engineering the colossal accounting fraud that sank the company.”

 “A federal jury in Manhattan deliberated eight days before returning guilty verdicts on all counts – one count of conspiracy, one count of securities fraud and seven counts of false regulatory filings. The crimes carry up to 85 years in prison.”

From the above two sentences taken from the article, it can be said that Bernard Ebbers has done a serious crime for which he can be sentenced up to 85 years of imprisonment. This is a case of serious crime of type felony, which is against the Government. Because of Bernard Ebbers actions, the investors in the company, stock market and the government suffered. The star witness against Bernard Ebbers, Scott Sullivan (pleaded guilty to fraud, admitted to essentially masterminding the fraud and cooperated with prosecutors in the WorldCom case ), the former finance chief, claimed Ebbers repeatedly ordered him to “hit our numbers” – a command,  to falsify the books to meet Wall Street expectations.

In addition, prosecutor William Johnson said, “Pressure from the loans, the money he stood to lose and the power of the CEO’s job combined to form a ‘perfect storm of corruption’ that drove Ebbers to commit fraud”. Because of Ebbers act, The Company struck a $750 million settlement with federal regulators to repay aggrieved investors, which is a small sum compared to the tens of billions of dollars of market capitalization that evaporated in the scandal. At last, in the WorldCom case, five executives, pleaded guilty and cooperated with prosecutors.

Reliant Energy Services, Inc. and Four of its Officers Charged With Criminal Manipulation of California Electricity Market

 “The indictment alleges that in June 2000, Reliant Energy Services and its officers and employees intentionally drove up the price of electricity in the state by shutting off its power generation to create the false appearance of a shortage. According to the indictment, the plan worked, and Reliant Energy Services allegedly reaped millions in illegal profits.”

“According to the criminal indictment, the defendants engaged in a conspiracy and scheme to defraud the California electricity market and its participants, and to manipulate and attempt to manipulate the price of electricity in California.”

The above two remarks from the article shows that, Reliant Energy Services and its officers and employees intentionally drove up the prices by shutting off its power generation to create the false appearance of a shortage. The company and its officers and employees were accused for Conspiracy, Commodities Manipulation and Wire Fraud. Now, if convicted, the maximum penalty for the corporation, Reliant Energy Services, for each count of conspiracy and wire fraud is the greater of $500,000, or twice the gross gain or gross loss to the victims of the scheme, and up to five years probation.

In addition, the maximum statutory penalty for the individual defendants charged with a violation of conspiracy to commit wire fraud and commodities manipulation and with each violation of wire fraud is five years imprisonment and a $250,000 fine, or twice the gross gain or gross loss to the victims of the scheme. Now it is clear from above remarks and fact that this is a crime of type felony, which is committed by the Reliant Energy Services and its officers and employees.

Reference:

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Ex-WorldCom Chief Ebbers Convicted of Fraud, Erin McClam (2005), retrieved on 26 November 2006 from http://accounting.smartpros.com/x47410.xml.

Reliant Energy Services, Inc. and Four of its Officers Charged With Criminal Manupulation of California Electricity Market, Press Release – Department of Justice – April 8, 2004, retrieved on 26 November 2006 from
http://www.fbi.gov/dojpressrel/pressrel04/energy040804.htm

Felonies & Misdemeanors, retrieved on 26 November 2006 from http://www.lawinfo.com/index.cfm/fuseaction/Client.lawarea/categoryid/137

[1] A standard definition of a felony is any crime punishable by more than one year in prison or by death for capital offenses like first-degree murder.

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