- The Washington Times - Thursday, February 17, 2005

NEW YORK (AP) — The star witness against former WorldCom Chief Executive Bernard Ebbers testified yesterday that a desire to meet Wall Street expectations eclipsed his own obligation to follow the law.

Scott Sullivan, who was finance chief under Mr. Ebbers, said he knew altering the books was illegal but did it anyway because, “I thought we would make it through.”

During cross-examination, Mr. Ebbers’ defense attorney, Reid Weingarten, asked Sullivan, “Was there ever an occasion when you said, ‘Numbers be damned, I’m just not booking it?’”

Sullivan answered, “No, because I went along with hitting the earnings-per-share number.”

Mr. Weingarten pressed, asking whether Sullivan’s desire to “hit the numbers” overwhelmed his obligation to obey the law.

“I thought we were going to get through it in a short period of time,” Sullivan said, adding later: “I knew it was wrong and I knew it was against the law, but I thought we would make it through.”

The exchange came as Sullivan completed more than eight hours of questioning from Mr. Weingarten, who hopes to convince jurors that Sullivan, not Mr. Ebbers, was behind the $11 billion accounting fraud at WorldCom Inc.

Mr. Weingarten also played audiotape of a conference call with analysts in 2001 ” well into the fraud ” in which Sullivan said he believed WorldCom was in a “phenomenal” position in its industry.

Sullivan has testified that Mr. Ebbers pressured him quarter after quarter to “hit our numbers,” meaning to make revenue and earnings figures match what Wall Street expected.

The former finance chief says he interpreted the remark as a command to alter the books. On cross-examination, he said no one else was present when he repeatedly told Mr. Ebbers he thought it was wrong.

While the cross-examination touched on Sullivan’s past drug use, his $15 million Florida home and his generous compensation, it did not touch on the issue of marital infidelity.

Mr. Weingarten had pressed in pretrial hearings ” and Judge Barbara Jones said she would allow him ” to question Sullivan about infidelity.

Asked in a second round of questions from a prosecutor whether Mr. Ebbers had ever threatened to fire him, Sullivan said Mr. Ebbers occasionally said jokingly when they disagreed: “We’ll just get a new CFO.”

“He said it in a kidding way, but I didn’t take it as a joke,” Sullivan said.

Prosecutors told the judge they plan to rest their case late Tuesday or early Wednesday after calling four more witnesses. Court will be out of session today and Monday.

Judge Jones of Manhattan federal court blocked prosecutors from calling to the stand a former WorldCom employee who lost retirement savings when the company went bankrupt.

She ruled his testimony would be repetitive because prosecutors already have questioned a securities analyst and an institutional investor about how they relied on statements from Mr. Ebbers in making investment decisions.

Mr. Ebbers, 63, faces charges of fraud, conspiracy and making seven false filings with the Securities and Exchange Commission. The charges carry up to 85 years in prison.

Sullivan, 43, has already pleaded guilty to fraud in the case and hopes to win a lighter prison sentence by cooperating with the government. He will be sentenced after Mr. Ebbers’ trial ends.

In other corporate trials yesterday:

• Richard Scrushy’s lawyers tried to discredit the testimony of a former HealthSouth executive, portraying him as a participant in a huge fraud rather than the innocent outsider he claimed to be.

Attempting to undercut Leif Murphy’s testimony that he quit the rehabilitation giant after Mr. Scrushy flew into a rage when confronted about inflated earnings, defense attorney Jim Parkman brought out that Mr. Murphy once attended a meeting with eight persons identified as being in on the scheme.

The defense for Mr. Scrushy, HealthSouth’s former CEO, in his corporate fraud trial contends a group of executives called “the family” conspired to inflate earnings at HealthSouth and hid it from Mr. Scrushy.

Prosecutors say Mr. Scrushy was the driving force behind a conspiracy to overstate earnings by some $2.7 billion from 1996 through 2002 to make it appear HealthSouth Corp. was meeting or beating Wall Street forecasts.

• Tyco International Ltd.’s former head of finance testified that the company’s lead auditor initially raised concerns that Tyco didn’t disclose in Securities and Exchange Commission filings millions of dollars in relocation loan forgiveness and other payments to top executives L. Dennis Kozlowski and Mark H. Swartz in 2000.

However, Mark D. Foley, the Bermuda conglomerate’s former senior vice president of finance, said PricewaterhouseCoopers LLP partner Richard Scalzo dropped his objections after telling him Mr. Swartz had consulted outside lawyers and they had concurred the bonuses didn’t need to be in the proxy statement because they were associated with relocation loans.

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