The Morning Line

All summer, people have been speculating about which of America’s Most Wanted ceos will get off and which will spend time in the pokey. I’ve consulted my white-collar contacts, including many former Harvard Law School classmates, some of whom may be involved in the various defenses and prosecutions, and I’ve put together the definitive fall betting guide to who’s going to be eating the “loaf” next year and who will still be getting good tables at Da Silvano.

A note on the rules. First, all players are innocent until proven guilty. Second, inclusion in this article implies no guilt, but we can still place odds – and the betting windows will remain open – on those involved in the criminal-justice system until the juries return their verdicts. And finally, the odds can change at a moment’s notice.

So, let’s start handicapping, beginning with the favorites. The most heavily favored to do hard time are the Rigas folks, the ones who ran Adelphia, the cable company, the way Tony Soprano runs the Bada Bing. (The difference, of course, is that Tony Soprano cares more about shareholder rights than the Rigases did.) I would hate to be the lawyers for these guys. When the case began, they were dealing with two hick grand juries, one out in western Pennsylvania and another in western New York. Suddenly, in a bid to get the Feds involved (to appease Wall Street), the authorities booked the Rigases in Manhattan. Instead of facing juries in which half the members would probably know someone who worked for Adelphia, they are facing a pool that’s dealt with the Dolans and got screwed out of their Yankees broadcasts – in other words, a jury that probably hates cable magnates with a passion – and that could cost the Rigases a few minimum-ten-year terms. If they are lucky. So they’re even money: 1–1.

The next person most likely to have a dramatic long-term change in lifestyle is Doc Sam, Dr. Samuel Waksal, the former ImClone CEO who stands accused of letting every other Waksal know to sell ImClone ahead of the public. Waksal got offered an incredibly unattractive deal by the Feds and turned it down, but I think he’ll come around, if only to give himself better bunking terms at sentencing. Odds on Waksal’s doing some solid time in the pen: 5–4.

You also have to expect some major jail time for the clowns who ran WorldCom into the hole. Scott Sullivan, the former chief financial officer, had the good sense to wear a suit and tie for the perp walk, and he looks to be serving a serious chunk of time for trying to hide a $7 billion fraud. Sullivan: 3–2.

I expect Sullivan will try to deliver Bernie Ebbers, the former CEO, as a way to keep his sentence down to less than a decade. Ebbers is the big kahuna, the man the Feds want more than anyone else. Ebbers claims total innocence, not to mention total ignorance, of everything from the way telecom works to what margin buying is. Weirdly, Ebbers has spent the last seven years telling us how he is the smartest telecom operator in the business and knows more about debt than anyone alive. His “I am stupid” defense seems downright foolhardy, which is why I think he’s doomed to spend as much time as Sullivan, if not more, behind bars. He’s only a moderate payoff, though, because he’s the consummate actor and might convince a jury. Ebbers: 3–1.

V???ing the folks from Enron makes for some tricky lines, ones that any bookie would want to lay off. Former chief financial officer Andrew Fastow’s got a canary for an assistant, so he seems likely to spend his forties not having to worry about what he’s going to wear in the morning. The case is airtight, so you can’t expect a big payday. Fastow: 3–2.

Higher up, grave disparities of intellect at the CEO level of Enron mean tougher line-making. For example, it’s not clear if former CEO Kenneth Lay understood what Fastow was doing; he seems like a nice guy, but a political doofus. Enron’s other former CEO, Jeffrey Skilling, understood all too well, but he’s just slippery enough that he might get away with it, the “it” being the bankrupting of Enron. If no one will rat out Lay and Skilling, the case might be too hard to build. Too bad that August numbers-certification stuff happened a year after Skilling left the company, because his Sergeant Schultz defense – “I knew nothing! I saw nothing!” – may work in his favor. Of course, he probably did know, because he was known for running the company with a hands-on style that makes his denials seem perfectly foolish, but if Fastow doesn’t cooperate, Skilling’s probably home free.

The Feds might try to bring an insider-trading case against Lay, running CNBC tapes that have him hyping the stock at the same time he was dumping it, but proving that Lay knew the company was falling apart will be hard; he seemed to have no knowledge of anything whatsoever. He’s the anti-Ebbers, seemingly completely befuddled by it all, but he still should have known better than to accede to all of his underlings’ bizarre wishes. Lay: 3–1.

The state’s case against Tyco’s former CEO Dennis Kozlowski is tougher to handicap. The pursuers are all grit, but the charge, tax evasion, doesn’t lend itself to much jail time. Kozlowski: 10–1.

And finally, there’s the matter of Martha Stewart, who’s still a no-show at the betting window because she’s been charged with nothing. Martha’s problem has to do with an initial interview she may have given to the Feds about her ImClone transaction. She apparently insisted that she had entered a stop-loss order if ImClone dropped below $60. That would be terrific for her if there were only some sort of corroboration. But no one can find it. These matters tend to get written down, hence the feebleness of the alibi. I guess Martha simply didn’t take the investigating process seriously enough, and by the time she had a real lawyer, Robert Morvillo, the alibi was given. Now, my sources say, the Feds simply feel lied to. They hate that stuff; they take it personally. And so now they want justice, or at least they want to prove to a jury that Martha obstructed them. If they bring that case, a white lie to the wrong guys, she goes down for some short but hard time. If they go after her for insider trading, though, they won’t get it. Too many he-said-she-saids to gain any jury traction. Let’s call a guilty verdict on obstruction for Martha: 15–1.

Now it’s time to place your bets, and let the games begin!

James J. Cramer is co-founder of TheStreet. com. He often buys and sells securities that are the subject of his columns and articles, both before and after they are published, and the positions that he takes may change at any time. E-mail:

The Morning Line