- The Washington Times - Monday, February 7, 2005

From combined dispatches

Ex-WorldCom Inc. finance chief Scott Sullivan yesterday implicated his old boss, Bernard Ebbers, in the $11 billion fraud that drove the company into bankruptcy — testifying they and other officials falsified financial statements.

“I falsified financial statements of the company, made adjustments to revenue for the purpose of meeting analyst expectations,” Mr. Sullivan said after taking the stand as the government’s star witness in Mr. Ebbers’s criminal trial.

Asked by Assistant U.S. Attorney William Johnson who else participated in the fraud, Mr. Sullivan answered, “Bernie, David Myers, Buddy Yates, Betty Vinson, Troy Normand.” Mr. Sullivan is the first witness to directly link Mr. Ebbers to the fraud.

Mr. Ebbers was chairman and chief executive officer of WorldCom, and Mr. Sullivan was his top lieutenant. The others named by Mr. Sullivan were subordinates who worked in accounting. In eight days of trial, prosecutors offered testimony from four WorldCom accountants, including Mr. Myers, Miss Vinson and Mr. Normand, who described how they carried out the fraud. They also recounted comments attributed to Mr. Sullivan that suggested Mr. Ebbers knew what they were doing.

Mr. Myers, who was WorldCom’s controller, said Mr. Ebbers apologized to him after company accountants were told to hide expenses. Mr. Myers testified that Mr. Ebbers told him in October 2000 that he was “‘sorry you were asked to do what you were asked to do.’” He didn’t say Mr. Ebbers acknowledged the fraud.

Mr. Myers, Miss Vinson and Mr. Normand testified they artificially boosted revenue and hid expenses to prop up the company’s stock price.

Mr. Sullivan, who has pleaded guilty to fraud, is testifying for the government in a bid to win leniency at sentencing.

Robert Mintz, a former federal prosecutor, said Mr. Sullivan’s testimony “will largely answer the question of whether Ebbers will take the stand.”

Mr. Ebbers, 63, is on trial for securities fraud, conspiracy and filing false reports with the Securities and Exchange Commission. He faces a maximum of 25 years in prison if convicted.

Prosecutors say Mr. Ebbers and Mr. Sullivan, 42, directed subordinates to inflate revenue and hide $3.8 billion in line costs to prop up the company’s stock price.

The 18-month fraud began in September 2000, they contend.

Prosecutors say Mr. Ebbers was under personal financial pressure as WorldCom stock began its slide in 2000. That May, Mr. Ebbers owed Bank of America Corp. $242 million, secured by his WorldCom stock, and the bank repeatedly threatened to sell his shares unless he posted more collateral, according to testimony last week by Mr. Ebbers’s personal banker.

WorldCom emerged from bankruptcy, the largest in the United States, as Ashburn, Va.-based MCI Inc.

In other court action yesterday, Tyco International Ltd.’s one-time lead director testified that Chief Executive Officer L. Dennis Kozlowski had the authority to pay him $20 million in banking and legal fees.

Frank E. Walsh Jr., a Tyco director from 1992 to 2002, said the conglomerate’s board of directors never voted to approve investment banking or legal fees in his time on the board. That authority was instead delegated to Mr. Kozlowski, Tyco’s chief executive officer, Mr. Walsh said.

Prosecutors contend that Mr. Kozlowski, without proper authorization from Tyco’s board, paid $20 million to Mr. Walsh and a charity of Mr. Walsh’s choosing in connection with the acquisition of CIT Group Inc., a financial services company, in 2001.

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