- The Washington Times - Wednesday, February 2, 2005

NEW YORK (AP) — A former top accountant at WorldCom Inc. testified yesterday she was told to make improper accounting entries because Chief Executive Officer Bernard Ebbers did not want to lower expectations on Wall Street.

Betty Vinson, testifying for the prosecution at Mr. Ebbers’ fraud trial, described making false entries quarter after quarter from 2000 to 2002, including fudging some numbers that she said she pulled “out of the air.”

“I felt like if I didn’t make the entries, I wouldn’t be working there,” said Miss Vinson, who went so far as to draft a resignation letter in 2000 but stayed with the telecommunications company.

Miss Vinson said she took her concerns in October 2000 to WorldCom Chief Financial Officer Scott Sullivan, who told her that Mr. Ebbers knew accountants were unhappy about what they were asked to do.

“Scott said Bernie didn’t want to lower third-quarter expectations, so that we needed to make the entry,” Miss Vinson testified. “He told us not to jump out of the plane, hang in there, help him get through the quarter.”

Miss Vinson is one of five former WorldCom executives who have pleaded guilty in the $11 billion accounting scandal and agreed to help the government in its case against Mr. Ebbers, who is charged with ordering the fraud.

During about three hours of questioning by a federal prosecutor, Miss Vinson did not cite any direct interaction with Mr. Ebbers or direct orders from him to falsify the books.

Prosecutors contend that Mr. Ebbers, who took out $400 million in personal loans secured by WorldCom stock, was obsessed with keeping earnings and revenue figures high and in line with what Wall Street wanted.

Lawyers for Mr. Ebbers contend that Mr. Sullivan, not Mr. Ebbers, ordered the fraud, and that Mr. Ebbers preferred to stay out of complex accounting matters.

Miss Vinson’s testimony came on the same day that a $54 million settlement by 10 former directors of WorldCom in an investor class-action lawsuit collapsed after a federal judge barred a key portion of the deal.

The ruling by U.S. District Judge Denise Cote could have reduced possible awards against other defendants, including investment banks, said New York state Comptroller Alan Hevesi, who acts as lead plaintiff.

In her ruling released yesterday, the judge threw out a part of the settlement that adjusted the directors’ liability based on their personal finances. The directors had been set to contribute $18 million to the settlement out of their own pockets in addition to $36 million from insurance.

In other court action yesterday:

• A former finance chief for HealthSouth Corp. testified yesterday that he was ordered by aides of then-Chief Executive Officer Richard Scrushy to continue a huge fraud because he planned to sell $100 million in stock and “didn’t want to get sued.”

The ex-chief financial officer, Bill Owens, also described Mr. Scrushy as a master salesman who ruled with fear and intimidation that was great enough to make others go along with a scam prosecutors have described as a $2.7 billion earnings overstatement.

• A former director of Tyco International Ltd. testified yesterday that the company’s board gave finance chief Mark Swartz a $50 million severance payment weeks after learning about four bonuses that prosecutors say he stole from the company.

Defense lawyer James Mitchell elicited the statement from John Fort, testifying in the fraud and larceny retrial of Mr. Swartz and former Tyco Chairman L. Dennis Kozlowski, in an attempt to show that the board continued to trust his client after learning about the reportedly stolen bonuses.

Mr. Swartz remained finance chief through the summer of 2002 after Mr. Kozlowski resigned and was indicted on tax-evasion charges, Mr. Fort testified.

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