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42 opinions for AOL Execs face fraud charges

• M Sciblo
  May 20, 2008 at 11:18 am

  Four years of jail time does seem fitting for attempting to steal $5 million.

  BUT

  It does seem ridiculous that those AOL execs will manage to escape any jail time simply by paying the $4 million fine. People invest their money based on earnings and other items on a company’s financial statements. When those numbers are incorrect, all employees involved are guilty of fraud.

  This IS a criminal offense and in the case of AOL the punishment doesn’t fit the crime.

• Steve Baxter
  May 20, 2008 at 11:21 am

  While Tim Montgomery’s punishment seems appropriate, the AOL executives got off very easy. They deceived thousands of employees and investors. Even after the $4 million penalty, they probably still came out on top after their salaries, bonuses and stock options.

  After WorldCom, Enron and the introduction of Sarbanes-Oxley you would hope that the punishment for this inflation of revenue would be much more severe and include some jail time.

• Adam Miller
  May 20, 2008 at 11:23 am

  Fraud is definitely a serious crime, but for the AOL execs to get off the hook like that is a crime itself. Especially when considering the amount of people (stockholders) misled by the padded revenues.

• Kristen Abernethy
  May 20, 2008 at 11:29 am

  I think that those individuals who are in leadership positions and running publicly traded companies, such as AOL, have an even greater liability than, say, a former athelete. They are liable to shareholders and if they are abusing their power, than I think they should get jailtime as well as the 4% fine.

• Brittany Estrain
  May 20, 2008 at 11:31 am

  I do not think that its fair that this is their punishment. It is pretty obvious that these men are guilty considering the 4 who already agreed to settle. These men inflated the online reported revenue by more than $1 billion– paying back $4 million is in no way an acceptable punishment.

• valerie rojas
  May 20, 2008 at 11:41 am

  it really just comes down to how the SEC evaluates the facts and charges the parties. civil cases will just require the defendant to REPAY damages, whereas criminal cases become a little more complicated and offer sentences to the defendant, if found guilty.

  the clincher between distinguishing between civil and criminal would be INTENTION.

  perhaps, they found that the AOL executives had not intended to inflate the ad sales; therefore, just requiring them to pay the damages.

  in the case of Montgomery, it is pretty clear he intended to fraudulently produce the checks.

  civil vs. criminal? we have to kind of hope that the justice system knows what they are doing.

• Lindsay Smith (section 13)
  May 20, 2008 at 11:44 am

  I’m definitely with you Prof Silver– these punishments are nowhere near what they should be for the frauds committed. A billion dollar overstatement and cashing $5 million in stolen checks deserve more than a slap on the wrist. These people shouldn’t be allowed to operate in the business world again– let alone only receive a fine that’s a fraction of what they’ve done, or a mere 4 years in prison. There should be some type of law governing these crimes that allows the criminals to get the right penalties.

• Mike Breitman
  May 20, 2008 at 11:46 am

  That’s ridiculous. The punishment for the AOL exec’s should match if not exceed the punishment for the “worlds fastest man”. Ten years without the title of director? How about forever banished from the corporate world How about some prison time (more than four years)?

  I stopped using AOL years ago anyway, so I could care less what happens to the company.

  On a side note, the class was great and I definitely learned a lot from it. Thank you!

• Laura Voltz
  May 20, 2008 at 11:54 am

  I think these high-powered execs get off way too easily. Just because the execs in this case were taking the easy way out by inflating their financial statements to prove their already under pressure financial viability does not mean they should get off easily as well. If the SEC really wants to put force behind their regulations, they need to enforce harsher punishment.

• Andrew Kramer
  May 20, 2008 at 11:57 am

  No I don’t think the punishment fits the crime. When you are involved in deceiving stockholders for personal gain you are essentially lying and stealing from them. These executives never seem to have enough money and deserve harsh jail sentences.

• Matthew Fisher
  May 20, 2008 at 12:41 pm

  I think that the punishment does not match the crime in both the AOL executives and also in Tim Montgomery’s situation. How is it possible that the AOL Execs face such little penalties? Whenever I think of fraud in business I always think of the Enron scandal, and after that occurred I feel that “civil” fraud charges are not be harsh enough. I think that because these people have either very prestigious positions or are celebrities they are treated differently and there is a double standard.

• Brian Elfand
  May 20, 2008 at 12:48 pm

  Fraud is a serious crime, but how can our government expect its citizens to conform and obey the law when penalties are so minimal. Ken lay’s family is swarming in millions, Stewart got a publicity stunt of a wristslap as is the case here. In order for corporations and individuals to act responsibly, we as a country need to take these matters more seriously.

• Andrew Fernandez
  May 20, 2008 at 1:21 pm

  Professor Silver, I completely agree with these findings. I thought after the Enron scandal, the U.S. Govt would crack down on these white-collar crimes. The AOL executives stole not only from the company but from the people investing their hard earned dollars into it. Then again, in today’s world with the right amount of money you seem to be able to buy your freedom.

• John Paul LaFrance
  May 20, 2008 at 1:25 pm

  Everyone seems to share the same opinion here, which is that this is clearly not an appropriate punishment for this crime. Everyone makes good points but one that has not been mentioned is that the 8 execs are not the only ones who should be at fault in this situation. UD’s own Charles Elson wrote the book on corporate governance and mapped out how these issues should not arise if the board of directors is doing their job. So not only do I think that this punishment should be increased but also there needs to be some blame put on the board of AOL for letting this matter slip by for the past 3 years.

  “If your not cheating your not trying”

  “Its not cheating if you don’t get caught”

  jk

• Kevin Shalley
  May 20, 2008 at 1:29 pm

  These guys make so much money. It doesn’t make sense why they always have to lie in order to get ahead. There are so many restrictions and laws, especially after the Enron crisis, that it doesn’t pay off to even try and fudge numbers. For being CEO’s, they obviously let the money get to their head and let greed take over their lives.

• Robert Cavigliano
  May 20, 2008 at 1:57 pm

  I believe cashing fraudelent checks should deserve more than just 4 years in prison, but don’t think it’s a fair comparison to AOL execs padding numbers. AOL execs are also fooling inverstors!! It should be mandatory that they pay back 0.4 percent of the padding with additional jail time. Hope I have the opportunity to commit white collar crime and get off so easy ;)

• Joey Peragallo
  May 20, 2008 at 2:28 pm

  First off it doesn’t make any sense how these falsified numbers made it all the way to the financial statements. These statements, under full disclosure, must be checked by many sources- audits, management, all the way up to the board of directors. According to the SEC all of these people are liable for falsifying their statements and all should be charged. The punishment in no way fits the crime. It’s not just a few people that are affected by this, there’s thousands of shareholders that are being taken advantage by AOL “dressing” their financial statements. If the SEC wants to stop problems like this from happening, then their going to have to do a lot more than what they did here.

• Merrick Heller
  May 20, 2008 at 4:37 pm

  The point of the SEC is to protect investors and the public in securities transaction. How can investors feel good about investing their money when financial statements can easily be fudged? Being fined $4 million is not sending a clear message to other companies that this behavior is not acceptable. Furthermore the Board of Directors are legally required to be informed on corporate matters so how did they avoid getting in trouble? Obviously there is more to this story then we will probably ever know.

• Michael Zimmerman
  May 20, 2008 at 4:55 pm

  I disagree with some of these comments. I do not feel that four years jail time is anywhere near fair for attempting to steal 5 million dollars. If you attempted to steal five million dollars from a bank, you would receive much more than four years in jail.
  Just because it was done in a seemingly more intelligent manner does not mean that the punishment should be much less harsh. As for the AOL execs, I cannot say much more than that ruling is insane. That amount of money may not even have that large of an impact on these people’s lives.

• Marc reda
  May 20, 2008 at 5:32 pm

  Typically in these types of situations small investors are hurt the most. When top execs do these things they potentially ruin peoples lives and for that i believe that the punishments should be harder. Furthermore when fraud like this occurs it makes people loose faith in the system which is bad for the economy and society in general.

• Jasmin Zirino
  May 20, 2008 at 5:51 pm

  A fine to top execs is equivalent to a slap on the wrist. Either they are agreeing to settle out of court or they are getting a fine.

  Tim Montgomery deserved his 46 month sentence, he is physically paying for the crime he commited. The AOL execs hurt the investors of the company and hurt the reputation of AOL, something you can not buy back.

  I think those involved in this scandal should be an example to others, instead it shows they can pay their way out.

• Nicole Corra
  May 20, 2008 at 6:04 pm

  After such high profile cases as Enron and Worldcom, it seems unacceptable that such a lenient punishment be issued for this crime. These CEOs clearly allowed their greed to get the best of them and should 100% be charged with jailtime. With all the money they make, this .4% payback is not nearly enough punishment to compensate the deception of thousands of employees and shareholders. It is the responsibility of the SEC to enforce harsher punishment than a ridiculously minimal payback and a 10 year suspension in order to get the message out that this is unacceptable business practice.

• Dave Bigelow
  May 20, 2008 at 7:04 pm

  It still makes no sense to me that all of these head honcho’s of major corporations still try to beat the system. After all of the financial scandals that have taken place in the past few years (Enron, Tyco, etc) why they think their actions will go unnoticed baffles me. I’m sure there are those out there that get away with it, but the SEC seems to be getting really good at what they do.

• Weston Lou
  May 20, 2008 at 8:52 pm

  It does seem ridicolous that these execs at AOL aren’t being subject to harsher punishment. I mean these guys are in positions of relative power, and they have abused that priviledge. It doesn’t make sense why the execs wouldn’t recieve criminal penalties…which would be effective be deterring people in the future from engaging in these activities.

• Weston Lou
  May 20, 2008 at 8:57 pm

  Honestly these execs should be subject to criminal penalities. We’ve heard stories like this before and we’ll probably continue to hear similiar stories. Something should be done, and I think if these execs were subject to criminal charges rather then fines, that would deter people in the future from engaging in similiar crimes.

• Carolyn Hershler
  May 21, 2008 at 7:03 am

  It is sad to see that even in a post-Enron Scandal world, white collar crime is not given the proper punishment it deserves. The inflated sales of 1 billion dollars will not only affect AOL’s reputation but the investors who believed in the stock’s success. I believe the damage that has been done by these AOL Execs deserves MUCH harsher of a punishment that a mere 4% payback. When criminals in the corporate world can get away with fraud with such a pathetic punishment, who will stop them from trying again?

• Kat Thompson
  May 21, 2008 at 11:17 am

  I believe that Tim Montgomery’s punishment certainly fits the crime. As for the AOL Executives, they are getting off way too easily. Paying $4 million is merely a slap on the wrist that is setting a bad example for companies everywhere. If they can get off so easy, who’s to say someone else won’t give it a try, knowing that paying a fine will be the extent of their punishment?

• Ashish Ahuja
  May 21, 2008 at 12:19 pm

  I think they should also attach and sell of their properties to recover whatever amount they can

  Regards,

  CA Ashish Ahuja, FCA
  A Roaming Blogger and a CA
  Indian Chartered Accountants New Delhi India
  Company Formation India Private Limited

• Matt Behounek
  May 21, 2008 at 12:53 pm

  I agree that four years in prison is a fair punishment for attempting to cash in on 5 million dollars using fraudulent checks. However, it is not fair for the AOL executives to get off the hook without any jailtime at all. The one thing I do agree with however is that the sentence for the AOL executives should be a lighter one than the sentence for fraudulent checks. I think that the AOL executives should at least get a sentence of 2 to 3 years.

• Jordan Wolfson
  May 21, 2008 at 1:58 pm

  I think that execs think hay have way to much power and can do what they want and not get caught, similar to a teenage but on a much larger scale. The punishments should be more sever, I mean think about it 5 million dollars in FRRAUDulent activity may seem minor to the business as a whole but a lot of people could use that 5 million. I think that fraudualent activity should be considered criminal and not civil for the purpose that you are commiting a criminal act and stealing from someone you work for.

• Charlie Kim
  May 21, 2008 at 6:28 pm

  How does the SEC believe these fraudulent actions will cease to happen, unless they start handing out serious consequences? These executives are weighing out the pros/cons of committing these crimes and are willing to because they are willing to accept the consequences. Start handing out bigger sentences, and they’ll think twice of committing fraud.

• Mark Berman
  May 21, 2008 at 6:36 pm

  The fact that the difference in penalty arises primarily from the wording of the crime (civil vs. criminal) is kind of ridiculous. I think that the 4 year punishment is kind of harsh, while the slap on the wrist given to the executives was not nearly harsh enough.

• Adam Wetcher
  May 21, 2008 at 6:40 pm

  It is rediciulous that the harshest penalty is to give back 4 million dollars and refrian from being a director for 10 years. The punishment does not fit the crime because they defrauded thousands of investors. They should never be able to become executives again, and be fined their bonuses/salaries for those 3 years. However, this kind of story does not surprise me at all.

• Wes Pitman
  May 22, 2008 at 2:16 pm

  Fraud is a nasty crime in my opinion. The problem with these findings is that we look at athletes as being role models to our young ones therefore the court feels compelled to hand down the maximum sentence to set examples. The problem I have is that today corporate leaders are also leaders for kids therefore simply paying a fine should not be the end of it. An example should be made of these people as well. The punishment does not fit the crime at all.

• Nicole Mangiaracina
  May 22, 2008 at 2:36 pm

  I agree that the punishment does not fit the crime. It always seems that when companies commit a crime they basically get a slap on the wrist. If anything they are the ones that CAN pay back the money and should be liable for every penny of the inflated sales figures. I also feel jail time should be equal to that of an individual who commits a crime on their own such as the check fraud.

• Aubrey Wisler
  May 22, 2008 at 9:40 pm

  When it comes to addressing the issue of a civil vs a criminal conviction many questions arise. Can one really put a price tag on a year in jail? a lifetime? Although paying for actions that one may have wrongly committed is a necessity, how can we compare years in prison to monetary fines? Don’t get me wrong, the situation is undoubtedly an unfair one; however, laws and regulations involving the aformentioned parties are in place for a reason. Arguing whether they are wrong or not should be left to those involved in legislation and policy, and not the judges or attorneys involved in participating in these preceedings

• Mike Shevlino
  May 23, 2008 at 12:14 pm

  I think that the punishment definitley does not fit the crime in this situation. These AOL executives who are padding their financial statements, are effecting many people who have an interest in the company. This punishment is merely nothing in comparison to the damage that they have done. $4 million is a little slap on the wrist, and is only going to make executives at other companies consider trying to get away with acts like this.

• Max Wise
  May 23, 2008 at 2:00 pm

  I think that Tim Mont. got the raw end of the deal in this situation. It is feasible that his punishment fits the crime, but when others do something of the same nature and get much less penalties it seems unfair. The only argument could be that the SEC charged this employees with a crime not as clear cut as check frauds. Maybe since all 8 members may not have been as guilty as others they lowered the penalty. Either way their needs to be a more clear cut difference between civil and criminal actions

• Lauren Manchester
  May 23, 2008 at 9:10 pm

  I think that the punishment does not fit the crime for either case. For the AOL execs it is a question of simple math; $4million does not make up for a $billion hit. For Montgomery’s case it is a question of how much you are willing to suffer. I think anyone would got to jail for 46 months for $5million dollars.

• Lauren Manchester
  May 24, 2008 at 8:41 am

  I do not think that the punishment fits the crime for either of these cases. For the AOL execs it is a question of simple math; $4million dollars does not replace $1billion. For Montgomery it is a matter of how far someone is willing to go for money. I am sure there are many people who would tolerate 46 months of time for $5million.

• Drew Libby
  May 24, 2008 at 3:51 pm

  I feel the punishment does not fit the crime. Companies also get off easy is situations like this. Fraud should be punished much more harsh then the penalties these companies face. The acts affect the investors directly and the punishments are just slaps on wrist.

• Melissa Forte
  May 24, 2008 at 5:05 pm

  I hate to sound repitetive but this topic does really get me revved. I know that one of the previous comments said that teh real crime here is letting him off just my paying back $4 million. I don’t understand how this is some for of penalty. Its not money they earned themselves, its money they lied about! It’s like saying sorry you got caught but for second prize we’ll still let you walk away with 60% of what you took. Its disgusting what greed will drive people to do and how much they can get away with

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