Horton Hears a Who?

Today Jim Horton, former President of CyberNET and Barton Watson's right hand man, waived his right to have his case presented to a grand jury and agreed to be charged without having to be indicted. This process -- called being charged "by information" -- is almost always used when a plea agreement has been reached, or at least when the defendant's strategy is to eventually plead guilty, either with or without a plea agreement. Today, however, Horton pleaded not guilty.

Horton had been cooperating with the federal prosecutors to some extent through the last year. The fact that Horton pleaded not guilty to the information suggests that some problem with his cooperation has developed. By agreeing to let the prosecutors skip grand jury leaves the door open for a plea deal where Horton would agree to testify against the other as yet unidicted co-conspirators.

One possible problem could be that after spilling his guts, Horton didn't like the deal he was offered. How sweet a deal can the prosecutors give to a guy who was primarily responsible for stealing almost 100 million dollars? Certainly he was acting on Barton Watson's orders, but the Nuremburg Defense doesn't fly in this case.

The fact of the matter was that for the last two years of CyberNET's operation, Horton spent virtually all his time in a panic, scurrying around getting loan and lease deals as quick as he could set them up. He was Barton's private full-time financier, solely responsible for keeping the millions of dollars of borrowed money flowing to fund CyberNET's US operations and Barton's schemes in Asia. The burn rate was between two and four million dollars a month between 2003 and 2004.

On the other hand, by 2002 Barton's wife Krista had retreated to her new horse farm and was spending very little time with the business. Her involvement in the fraud was mostly signing where Barton told her to and spending the money. She occasionally presided over "Executive Committee" meetings, but as a business woman she had become a dilettante. (In years prior to the start of the massive frauds she really did have significant involvement in the operation of the legitimate side of the business.)

Barton on the other hand was off on constant trips to Asia. He had almost completely ignored the legitimate side of CyberNET's operations since 2002, and was spending all his time and energy on trying to buy companies in the Far East for cheap. Bored with running an unsuccessful IT company, Barton's new hobby was shopping for companies. It was a costly one that required even more massive infusions of cash.

The result of this kindergarten fire-drill management style was that no one was at the wheel of the CyberNET bus. Despite massive expenditures on a top-notch marketing and HR department, and a pretty decent new sales operation, CyberNET's traditional IT business was hopelessly unprofitable.

Barton killed himself. The moral judgment with regard to him is easy (although maybe too easy). But what to do with the remaining players? Horton actually did the nuts and bolts of the fraud, but profited very little. Krista's head was in the clouds, had little personal involvement in the fraud, but profited greatly. Who is more criminally culpable?