Expert View: Bully-boy Ebbers makes Martha look almost ethical

"Which one are you going to?" There was a carnival atmosphere in New York the day Martha Stewart came out of jail. "Coming-out" parties sprung up all over Manhattan and the media descended into saturation coverage. We not only knew what she had for breakfast but even who did her hair that morning.

"Which one are you going to?" There was a carnival atmosphere in New York the day Martha Stewart came out of jail. "Coming-out" parties sprung up all over Manhattan and the media descended into saturation coverage. We not only knew what she had for breakfast but even who did her hair that morning.

To some extent, this simply reflected the cult of celebrity that reigns supreme in the States, as well as on Wall Street. The stock price of Martha's company soared, inevitably peaking on the very day of her release. But this phenomenon was not just the usual celebrity fodder; it reflected a strong feeling that she had been wronged - that she was a scapegoat.

The authorities could not convict Martha for insider trading - they'd got her instead for merely tampering with the evidence. More importantly, Martha, so far, has been the only executive to go down after a string of corporate disasters that made anything she had done pale into insignificance. Adelphia, Health South, Enron, WorldCom, Tyco - major scandals where hundreds of thousands lost their jobs, billions of dollars of savers' money was wiped out, and the reputation of arguably the whole US capitalist system tarnished, and yet this celebrity cook was the only scalp? Incredible.

Until now. No sooner had the Martha bunting come down than the first conviction of a major chief executive took place. And it couldn't have happened to a nicer person. For Bernie Ebbers was the very epitome of the tough-talking, testosterone-fuelled boss typifying the 1990s boom. An ex-sports coach who wrestled bulls for pleasure, he had a hectoring manner that became clear as the trial progressed. The sheer scale of the fraud he directed is breathtaking, in fact the largest in history - some $11bn in false accounting.

Ebbers' conviction had immediate implications. The next day, JP Morgan, the last big bank still holding out in a class action lawsuit filed by WorldCom investors, settled for a colossal $2bn. Defendants in other executive trials now under way shifted nervously. The defence counsel in the Tyco retrial was worried enough to get the judge to instruct jurors not to be prejudiced by the Ebbers' verdict.

Post-Ebbers, the role of the chief executive, and shareholders' justifiable expectations of him/her, may have changed for ever. A duty of care and the issue of conscious avoidance of a crime have come to the fore. It is crucial that Ebbers' "I didn't know" defence, the so-called "aw shucks stratagem", was resoundly rejected.

The defendants in the upcoming Enron trial had better take note. This trial may not have the media interest of Martha's, but make no mistake. It will be the most comprehensive exposure yet of 1990s corporate immorality.

I'm looking forward to Andrew Fastow, the finance chief who concocted the off-balance-sheet entities that destroyed Enron, defending his appalling chutzpah. He even demanded a multi-million-dollar severance package when finally sacked. It will also be interesting hearing Enron's ex-chief executive, Jeffrey Skilling, explain his claim that: "We are as pure as the driven snow."

Hopefully, another result of Ebbers' conviction may be a strengthening of nerve among the prosecution authorities to hunt these criminals down. It's good to see the WorldCom prosecutor, David Anders, emerging as leader of an A-Team against corporate crime.

It would be nice to think that investors have learnt their lesson, and will never again allow executives to compromise corporate ethics in pursuit of short-term gain. One thing disturbs me, though. When Martha came out of jail, she made a speech stating that her business would in future have a much stronger ethical dimension. The stock immediately fell 8.5 per cent.

christopher.walker@tiscali.co.uk