The idiot defense is a satirical term for a legal strategy where a defendant claims innocence by virtue of having been ignorant of facts of which the defendant would normally be expected to be aware. Other terms used for this tactic include "dumb CEO defense", "dummy defense", "ostrich defense", and "Sergeant Schultz defense".
The term was popularized as a result of a number of high-profile corporate accounting scandal defendants claiming that all wrongdoing was performed by others, without the defendant's knowledge or consent. Attorneys for these defendants claimed that their skill was in valuation and deal-making, and that they lacked the training to recognize fraudulent accounting practices they claimed that they would have needed. However, in many cases the defendants' subordinates testified that the defendants ordered them to falsify the accounts.
No major instances of the idiot defense being successful in criminal proceedings have been reported in American jurism to date. Instead, all such uses are widely believed to have resulted in the defendants employing idiot defenses being found guilty on at least some if not all counts.
John J. Rigas
John J. Rigas, the founder of Adelphia, was charged with conspiracy, bank fraud, and securities fraud. Rigas's defense asserted that he expected the Adelphia board, lawyers, and external accountants to provide him warning of any possible abuse. In his closing statements, Rigas's lawyer asked "Does [John Rigas] have a right to believe that things would be done properly, that adequate and appropriate disclosures were made, that the lawyers and the accountants and the personal accountants would make sure of that?"
Rigas was convicted on July 8, 2004.
Walter A. Forbes
Walter Forbes, former CEO of CUC International, was charged with 16 counts in relation to inflated earnings statements from CUC before it merged with HFC Inc. to form Cendant. During his trial, Forbes testified to working on "the strategy vision part, talking to key clients ...." He also claimed he was "much more valuable to shareholders doing that than being in day-to-day operations." Forbes's attorney, Brendan Sullivan Jr., summarized: "The defense of Walter Forbes is that he didn't know about it."
The jury in the case against Forbes returned on January 4, 2005. While they did convict another defendant, they failed to reach a verdict on the charges against Forbes.
Forbes was found guilty of conspiracy to commit securities fraud and two counts of making false statements at a third trial on October 31, 2006.
Bernard J. Ebbers
In this case, Bernard J. "Bernie" Ebbers, former WorldCom CEO, claimed that $11 billion in fraud was committed by the company's CFO, Scott Sulivan, and other subordinates without Ebbers's knowledge. During his criminal trial, Ebbers testified, "I was shocked. I couldn't believe it, I never thought anything like that would have gone on. I put those people in place. I trusted them. I had no idea they would do anything like this."
The prosecutor referred to this as the "aw shucks defense." Bernard J. Ebbers was convicted of all charges on March 15, 2005.
Richard M. Scrushy
Richard M. Scrushy, founder and former CEO of HealthSouth, became the first CEO to be charged with violating the Sarbanes-Oxley Act. Scrushy's defense lawyer, Jim Parkman, asked during the trial, "That's what y'all did and how you planned it, so (Scrushy) wouldn't know what the whole picture was?"
Scrushy was found not guilty of all charges on June 28, 2005. But the idiot defense was not believed to have been the reason he was acquitted; instead, the prosecution apparently lacked enough courtroom-admissible evidence to make its case against him.
Kenneth L. Lay
Kenneth L. Lay was indicted on charges of securities fraud, wire fraud, and making false and misleading statements in relation to the Enron collapse. In a 60 Minutes interview before his trial, Lay said, "I don't think I'm a fool. But I think I sure was fooled." He also added, "But I can't take responsibility for the criminal conduct of someone inside the company."
- Pulliam, Susan (14 October 2004). "CEOs Under Fire Employ The 'It Wasn't Me' Defense". The Wall Street Journal.
- O'Brien, Tim (19 January 2005). "'Dumb CEO Defense' Spares Cendant Chairman From Prison". New Jersey Law Journal.
- "'I was shocked,' Ebbers says of being told about WorldCom irregularities". The Clarion-Ledger. 28 February 2005.
- "Enron's Lay says he was duped, not dumb". Houston Chronicle. 14 March 2005.
- Reeves, Jay (9 March 2005). "Scrushy Defense: Fraud Hidden From Ex-CEO". Associated Press.
- Christoffersen, John (31 October 2006). "Jury Finds Ex-Cendant Chairman Guilty". Associated Press.
- United States of America vs. Bernard J Ebbers, United States District Court Southern District of New York, Indictment S3 02 Cr. 1144 (BSJ)
- United States of America vs. Kenneth L. Lay, et al., United States District Court Southern District of Texas Houston Division, Cr. No. H-04-25 (S-2). (7 July 2004)
- United States of America vs. Richard M. Scrushy, United States District Court Northern District of Alabama Southern Division, Case No. CR-03-BE-0530-S. (29 October 2003)
- Syre, Steven (18 January 2005). "The 'idiot' defense". The Boston Globe.
- "The Idiot Defense". Los Angeles Times. 6 March 2005.
- Harrigan, Susan (16 March 2005). "'Embattled CEOs wise up to dummy defense". Newsday.