Edward Renehan: Bernard Ebbers Is No Jay Gould

[Edward Renehan is the author of The Dark Genius of Wall Street.]

This week Judge Barbara Jones slapped Bernard Ebbers with a 25-year sentence for his profiteering at WorldCom. Ebbers is 63 and nurses a heart problem. Therefore his sentence may actually be life. Add to this the separate civil settlement in a case brought by a host of defrauded WorldCom investors which has left Ebbers and his wife, Kristie, stripped of almost all their assets (some $45 million). Harsh though it may seem, in the end this is justice plain and simple. "The harm that Ebbers did was dramatic," says Lawrence Mitchell, a professor at the law school of George Washington University, "and the kind of impact that that behavior has on our financial and economic system is significant."

Some commentators have recently cited Ebbers as a "modern-day robber baron." Furthermore, at least one writer has compared him directly with the most reviled of those Gilded Age gentlemen, Jay Gould. In this regard, as Gould's most recent biographer, I feel compelled to speak up in Jay's defense. Gould (1836 - 1892) was dubbed the "Mephistopheles of Wall Street" in his own day, but he was nevertheless a Boy Scout compared to Ebbers. He was also, I should add, both an Einstein and a business-Charlemagne as compared to Ebbers.

In the unregulated era after the Civil War, when New York State Supreme Court justices could be bought for as little as $100, Gould gained infamy through two audacious bids for financial dominance. During their "war" for control of the Erie Railroad in 1868, Gould and his partners Jim Fisk and Daniel Drew hired scores of judges and legislators to do their bidding, while their nemesis Cornelius Vanderbilt adopted the very same strategy. Later on, after the Erie wars had been won, Gould used the rampantly unprofitable railroad -- already well-known as the "Scarlet Woman of Wall Street" -- as a financial shell for manipulation of stocks and bonds. In this he mimicked nearly every single Erie CEO that had come before him.

One year following the height of the Erie Wars, Gould and Fisk worked in collusion with other parties (including a brother-in-law of President Grant) to corner the market in New York's Gold Exchange. Their bid failed, but triggered the "Black Friday" panic of September 24th, 1869, during which thousands of investors were ruined. The juggernaut of negative press launched in late September of 1869 has yet to stop, as is evidenced by annual "Today in History" blurbs that routinely damn Gould's soul in newspapers nationwide. In Gould's own era, images of ruined men (with their implicit corollary of once-prosperous families demoted to lives of destitution) formed the bedrock for a lasting reputation as a jackal and betrayer....

For the rest of his life, Gould's motives -- which, after all, were simply to make money the same as any other capitalist -- would be suspect. And to him a higher standard of virtue would always be applied. In time, the press and public came to view the petty ruses and gambits regularly employed by a host of Wall Street speculators as despised tools of fraud and monopoly when adopted by Gould. In part this was because of his reputation for treachery, but it was also because Gould used the common tools of the Street in strikingly new ways, putting together previously unimagined and fantastically profitable combinations with a dexterity that spawned frustrated envy on the part of bystanders.

Truth be told, Gould, in the final analysis, was an exemplary, successful, long-term CEO. The highly imaginative, ruthless, and easy-to-vilify manipulator of securities was also a detail-oriented owner of companies: a workaholic who painstakingly consolidated dying firms, transformed them into highly profitable monoliths, and then steered all his concerns through choppy economic seas in the 1880s, leaving an estate conservatively appraised at some $72 million at the time of his death in 1892. In short, Jay Gould was no Bernie Ebbers. Quite the contrary.