Blow dealt to 'Aw Shucks defence'

By Stephen Evans BBC North America business correspondent

When the jury finally returned in the trial of Bernie Ebbers, the verdict was listened to and analysed particularly keenly in two places far from the courtroom in Lower Manhattan.

Just another chief executive in the limelight?

You could almost hear the gasps of relief at the Justice Department in Washington and of disappointment in Houston, Texas.

That is because Mr Ebbers has used a defence that could be replicated in the trials of the two men at the top of Enron where corrupt schemes were hatched to hide the true, empty nature of the company.

Jeff Skilling and Ken Lay, the chief executives of the Texas company at the relevant times, have both indicated that they simply did not know what was going on in the finance department.

Destroying that argument is the key to success for the Justice Department.

Restricted duties

The legal strategy is now called in legal circles the "Aw Shucks Defence", a term coined by the prosecutor, Assistant US Attorney William F Johnson, as he concluded the argument against Mr Ebbers in court.

Mr Skilling's defence will have been watching the Ebbers case closely

Prosecuting the founder and former head of Worldcom, he told the jury that the essence of Mr Ebbers' argument was: "Aw shucks, I'm just not that sophisticated".

Mr Ebbers had painted a picture of himself as a chief executive who did not know the details of the accounts - a former milkman, teacher and bouncer from Mississippi who restricted his duties at Worldcom, the company he built from nothing, to motivating the sales force and cutting costs.

He left the financial detail to sophisticated deputies like Scott Sullivan, Worldcom's chief financial officer, who has already admitted his part in the fraud.

Financial performance

The government attorney tried to convince the jury differently.

"It was no coincidence," he claimed, that the conspiracy started just after Mr Ebbers' bank started calling in his personal loans, at a time when the company's stock price was falling.

"Ebbers faced a choice of admitting Worldcom's financial position or lying to cover it up, but the truth would have wiped him out," Mr Johnson said.

"He chose to commit a crime."

And then Mr Johnson put it in a very personal way to the jury. "It insults your intelligence that Ebbers could have built this company up from nothing in 10 years and still be clueless about its financial performance."

Setting a precedence

Of course, Mr Ebbers, Mr Lay and Mr Skilling might have chosen to use the "Aw Shucks Defence" because they really did know nothing.

They may be speaking the truth. It is for the juries to decide.

Mr Lay might adopt a similar line of defence as Mr Ebbers

And, of course, Enron is not Worldcom.

Different cultures have different ways of communication. Different companies have different ways of management.

But the Ebbers jury's take on the "Aw Shucks" defence will enable the lawyers in the Enron case to decide how to try to counter it.

None of the chief executives on trial were big e-mail people. Hard evidence of complicity in the frauds is hard to find. The fingerprints are not there.

Much turns instead on how credible it is that a chief executive of a big company could be aware of gaps of billions of dollars in the accounts.

No knowledge

The Justice Department has to rely mostly on motive, such as preserving stock price when the market turns down, and circumstantial evidence.

The Ebbers jury simply did not believe that a man at the top of a company he created could be ignorant of its internal workings - and that conclusion cannot give hope to the Enron chief executives.

So the failed "Aw Shucks Defence" is very important for the way past crimes are dealt with.

However, it has little application for the future.

Under the post-Enron-Worldcom Sarbanes-Oxley law, chief executives are held responsible for the company accounts.

It will no longer be possible for the people at the top to say: "Aw Shucks. It wasn't me. I was just the chief executive. I knew nothing."