A String of CEOs Fall From Grace
June 13, 2002 -- Samuel Waksal, former head of the biotech firm ImClone, was arrested Wednesday on charges of securities fraud. Federal authories accused him of insider training, alleging that he tried to sell shares of ImClone, and encouraged family members to do the same, after learning that the federal government planned to reject the company's pending application for a cancer treatment drug.
Outside business circles, Waksal cultivated friendships with the likes of Martha Stewart and Mick Jagger. His name popped up in the gossip columns. Now, he faces up to 15 years in jail.
But he is just one in a long line of the bad boys of business, corporate rock stars who have been falling from grace — and sometimes into the hands of the law — right and left, lately.
Living the High Life
Just last week, another high-profile CEO, Dennis Kozlowski, head of the Tyco conglomerate, was arrested for tax evasion.
The son of a Newark police detective, Kozlowski rose to become one of the world's highest paid CEO's, making more than $100 million a year.
He spent his money flamboyantly, racing yachts, flying helicopters and a private plane, and buying a stake in the the New Jersey Devils and Nets.
It was his taste for expensive goods that got Kozlowski into trouble. New York prosecutors say he evaded more than $1 million in New York sales tax on the purchase of $13 million in paintings, including a Monet and a Renoir.
The paintings were to adorn his his $13.1 million, 13-room Fifth Avenue apartment in Manhattan.
Prosecutors are also investigating whether Kozlowski used shady Enron-style accounting techniques at Tyco, and whether he used company money for personal expenses.
Former Heroes Under Scrutiny
During the economic boom of the 90's, CEO's were American heroes. But, post-Enron, that may no longer be so.
"When Ken Lay and Enron imploded, the entire way CEO's were though of changed," said Dylan Ratigan, a Bloomberg News anchor. "Post-Enron, you have a more dynamic environment in terms of the scrutiny, regulators looking, the public looking."
Even the man who may be the most widely admired CEO in the nation has had his troubles. In March it was revealed former General Electric CEO Jack Welch had an affair with Harvard Business Review Editor-in-Chief Suzy Wetlaufer.
Welch's wife, Jane, filed for divorce, and the split could cost her husband a bundle. The couple's prenuptial agreement expired in 1999, so she could claim as much as half of Welch's estimated $900 million fortune.
But the true scandal may be that a lot of bad CEO behavior isn't punished — at least not financially.
Bernie Ebbers, former ceo of worldcom, is likely to receive $1.5 million for the restof his life, even though worldcom stock sank down by 95 percent in two years.
And for Kozlowski, even if he's convicted, his contract may entitle him to as much as $135 million in severance pay.