After Stewart, Higher Stakes

What Martha Stewart spent for a Baja getaway ($1,500 per night) and what an angry Stewart sounds like (a lion roaring under water, according to one witness) is dynamite stuff for talk show hosts but has little bearing on the corporate meltdowns that helped to trash the stock market and tens of thousands of employee pensions. All the world knows about “Martha’s” conviction, but she’s small potatoes compared with the principals in trials underway or about to start -- trials involving Adelphia Communications, Tyco International, HealthSouth, WorldCom and Enron.

These trials, some being conducted within a stone’s throw of the Manhattan courtroom where Stewart was found guilty of lying about the sale of her ImClone Systems shares, must do more than dish. They represent the best chance to assign blame for the white-collar crime spree that exploded as the dot-com and high-tech boom of the late 1990s foundered.

There will be plenty of gossipy testimony about what former Tyco CEO L. Dennis Kozlowski spent for the maid’s shower curtain ($6,000) and what former Adelphia Chairman John Rigas’ son blew on a golf club membership ($700,000). The juicy stuff might keep jurors awake as prosecutors explain the accounting schemes that were concocted to mislead securities regulators. And, unlike in Stewart’s case, the dishing is germane because investors had to pick up the tab. But extravagance was a symptom, not the cause, of the accounting scandals. Prosecutors must unravel what went wrong and clarify what role the corporate chieftains played, or the shower curtain will end up as just an arcane answer in a trivia board game.

That’s why federal and state prosecutors have been pressing hard for guilty pleas from highly placed and well-compensated subordinates. Former WorldCom Chief Financial Officer Scott D. Sullivan, for example, pleaded guilty last week to three fraud charges, and former Enron Chief Executive Jeffrey K. Skilling earlier pleaded guilty to fraud charges. Testimony from Sullivan and Skilling largely will determine what history remembers about former WorldCom Chief Executive Bernard J. Ebbers and former Enron Chairman Kenneth L. Lay.

Stewart’s trial stemmed from a cover-up of a stock trade that netted about $50,000. The former stockbroker who founded a publicly traded company clearly should have known better. That said, the fiendishly complicated trials of Ebbers and friends are the main event. Even those who mock Stewart’s chinchilla scarf hope she won’t end up alone in wearing prison blues.