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74 Tenn. L. Rev. 47 (2006-2007)
Corporate Complicity Claims: Why There Is No Innocent Decision-Maker Exception to Imputing an Officer's Wrongdoing to a Bankrupt Corporation

handle is hein.journals/tenn74 and id is 55 raw text is: CORPORATE COMPLICITY CLAIMS: WHY THERE IS NO INNOCENT DECISION-MAKER EXCEPTION TO IMPUTING AN OFFICER'S WRONGDOING TO A BANKRUPT CORPORATION JONATHAN WITMER-RICH AND MARK HERRMANN* I. INTRODUCTION Allegations of misconduct by high-ranking corporate officers have surrounded many of the most notorious recent bankruptcies.' In 2006, former Enron CEOs Kenneth Lay and Jeffrey Skilling were convicted of charges including securities fraud, and sixteen former Enron executives have pled guilty to similar charges.2 In 2005, former WorldCom CFO Scott Sullivan pled guilty to accounting fraud, and former CEO Bernard Ebbers was convicted on similar charges. Similarly, in 2004 Adelphia founder and CEO John Rigas and his son, former Adelphia CFO Timothy Rigas, were convicted of various fraudulent acts.4 A multitude of legal claims, brought by several different parties, invariably follow in the wake of such scandals, including securities fraud claims on behalf of shareholders,5 fraud and other claims brought on behalf of creditors,6 and * Mr. Witmer-Rich (Goshen College, B.A. 1997; The University of Michigan Law School, J.D. 2000) is a Research and Writing Specialist for the Office of the Federal Public Defender for the Northern District of Ohio. Mr. Herrmann (Princeton University, A.B. 1979; The University of Michigan Law School, J.D. 1983) is a partner at the Cleveland office of the international law firm Jones Day. Jones Day regularly represents both debtors and creditors in bankruptcy proceedings, and Mr. Herrmann represents clients affected by the legal issues discussed in this article. The views set forth in this Article are those of the authors and not necessarily those of their clients or employers. 1. See In re WorldCom Inc., No. 02-13533 (AMG) (Bankr. S.D.N.Y. filed July 21,2002); In re Adelphia Commc'ns Corp., No. 02-41729 (REG) (Bankr. S.D.N.Y. filed June 25,2002); In re Enron Corp., No. 01-16034 (AJG) (Bankr. S.D.N.Y. filed Dec. 2, 2001). 2. See Mark Babineck, Mary Flood & John Roper, Enron Jurors Find Lay, Skilling Guilty, HOUSTON CHRON., May 26, 2006, at Al, available at http://www.chron.com/disp/story.mp/front/3893599.html; Alexei Barrionuevo, Enron Executive Points a Finger at Former Chiefs, N.Y. TIMES, Mar. 8,2006, at Al. Lay's conviction was vacated on October 17, 2006, due to his sudden death on July 5, 2006, before his sentencing. See Tom Fowler, Judge Vacates Ken Lay's Enron Conviction, HOUSTON CHRON., Oct. 17, 2006, available at http://www.chron.com/disp/story.mpl/special/enron/4265806.html. 3. See Jennifer Bayot & Roben Farzad, WorldCom Executive Sentenced, N.Y. TIMES, Aug. 12, 2005, at Cl. 4. See Ken Belson, WorldCom Head Is Given 25 Years for Huge Fraud, N.Y. TIMES, July 14, 2005, at Al. 5. See, e.g., Hallisey & Johnson Profit Sharing Plan v. Citigroup Global Mkts., Inc. (In

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