CFOs On The Move
Upon the arrival of new CEO Ed Breen, longtime Tyco International Ltd. CFO Mark Swartz announced he’s leaving as soon as a replacement is found. No word on a successor at press time, but Breen has already tapped his former CFO at General Instrument, Eric M. Pillmore, to be Tyco’s first-ever corporate-governance head. Pillmore was most recently CFO at Multilink Technology Corp…. Snap, crackle, pop takes on new meaning for former Kellogg Co. CFO Thomas J. Webb. Webb joined CMS Energy Corp. as CFO in July, amidst an SEC investigation of its energy-trading practices.
A nearby crowd cheered as Scott Sullivan (above, left) and David Myers, former CFO and controller, respectively, of WorldCom Inc., were led, handcuffed, into a Manhattan federal courthouse on August 1. In a world where yesterday’s aggressive accounting is today’s criminal investigation, more finance executives will likely take the “perp walk” before the year is out.
And although it’s unlikely that those accused of massive fraud can stir up much sympathy, some are railing against the “staged media events” of the arrests, the sole purpose of which are to “show what tough guys the federal prosecutors are,” says Webb Hubbell, who pleaded guilty to tax-evasion charges in 1994 as a result of the Whitewater investigation while he was associate U.S. attorney general.
“It’s like your case is being tried in the press on a national stage. I had been mayor of Little Rock; I was a chief justice [of the Arkansas Supreme Court]; I was associate attorney general–and everything that I had ever done that was good was just wiped out.”
Hubbell served 18 months in a federal prison in Cumberland, Md., and 3 months in a halfway house. He is now a senior research fellow at the National Center on Institutions and Alternatives (NCIA), and counsels executives who are facing trial and jail time.
Herb Hoelter, director of the NCIA, calls the sight of executives in handcuffs “preposterous. [Federal prosecutors] put out press releases, hold daily briefings. This is all new in the past decade. They never did these things in the past. It’s abuse of prosecutorial power.”
The sad part is that humiliation and longer prison sentences won’t deter executives from committing fraud in the future, says Hubbell. “It won’t deter them one iota. People don’t think they’re doing something wrong or they don’t think they’re going to be caught. The best way to prevent fraud is to take away the opportunity and the need.” Opportunity, he says, comes from lax internal controls, and the need is fostered by huge executive incentives to hit profit targets at all costs. -Kris Frieswick
Of Memory and Honor
Companies that suffered devastating employee losses in the September 11 terrorist attacks say they have spent the past year remembering, rebuilding, and, improbably, succeeding in a miserable economy.
Cantor Fitzgerald, which lost 658 of 1,050 World Trade Center employees, saw eSpeed, its electronic bond-trading division, hit its first profitable quarter ever following the attacks. The company’s post-9/11 success, says Amy Nauiokas, SVP and director of global marketing at Cantor, is largely due to the renewed motivation of its employees. “Before September 11,” she says, “work was about work. But after, it’s been a way to contribute to families.”
Cantor has pledged to give 25 percent of post-tax profits to the families of lost employees for five years. The company is also planning a private memorial service in Central Park for September 11.
How to honor victims properly has been a difficult issue, though. Nauiokas was one of several employees featured in a television ad campaign that pointed to fallen co-workers as inspiration for the company’s success. The spots, now on Cantor’s Web site, have raised the eyebrows of some observers, who feel that Cantor is using the tragedy for business gain.
Insurance broker Marsh & McLennan Cos., which lost 295 employees and has also seen revenues soar in the post-9/11 insurance market, takes a more stoic approach to its losses. “Out of respect for the families, we don’t say a lot about it,” says a Marsh spokesperson. “We would never use it as a branding tool or a marketing tool.” – K.F.