"Hit the Numbers," Part II
I've been thinking a lot about the following question and answer from Scott Sullivan's cross-examination in the Ebbers criminal trial discussed in the post below:
"You were a member of the board. You had been named CFO of the year. You had cashed in some $30 million in [stock] options, and you felt you had no choice but to interpret Mr. Ebbers's words 'we have to hit the numbers' as a command to go out and commit accounting fraud?" Weingarten asked.
"Yes, that is my testimony," Sullivan said.
My thoughts:
1. That is a brilliant, possibly devastating question.
2. Really? That's it? Ebbers said "hit the numbers" so Sullivan started engaging in fraudulent accounting on a massive scale in order to let WorldCom do so? You'd think there would have to be more there. But you'd also think that if there were, it would have come out during Sullivan's direct examination.
3. The question highlights something important--Sullivan was not some line accountant living paycheck-to-paycheck who was allegedly ordered to do something he knew to be improper. He was a member of the WorldCom Board. He was a nationally renowned and honored CFO. He had tens of millions of dollars in the bank. If "hit the numbers," was an order to commit fraud, how hard would it have been for him to just say "no" under those circumstances?
4. Hindsight is 20-20, but under those circumstances, when one has been told to "hit the numbers" and has interpreted these words as a directive to commit massive accounting fraud, isn't some kind of follow-up question necessary?
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Comments
I think it all depends on the context. If you tell the COO or the sales force to "hit the numbers" halfway through the quarter, then there is no reason to interpret this as a request to commit accounting fraud. If you tell the CFO at or after the end of the quarter to "hit the numbers" then that could easily be interpreted as a request to cook the books.
Posted by: Chris | February 18, 2005 8:02 PM
Weingarten's question is an old trick, a falacy. Divert attention from the defendant by putting someone else on trial. Like a magician we are asked to ignore the fact that Sullivan worked for Ebbers. Ebbers not only had the power to issue commands to Sullivan, but the right and duty to supervise Sullivan. If Sullivan repeatedly cooked the books, why didn't Ebbers catch him. Because, indeed the only reason to tell Sullivan, "We have got to hit the numbers," is to reveal an expectation. What did Ebbers think a CFO could do about hitting the numbers. As Chris said, the context reveals what was required as a response by Sullivan. He was not to question Ebbers, but to hit the numbers. Its clear to me why Ebbers said it to this subordinate.
Posted by: Ron Groeber | February 18, 2005 10:24 PM