- The Washington Times - Monday, January 17, 2005

NEW YORK - Jury selection begins tomorrow in the Manhattan criminal trial of Bernard Ebbers, the former WorldCom CEO accused of directing the fraud that drove WorldCom to the largest bankruptcy in U.S. history.

People across the country who suffered in WorldCom’s collapse say they will be watching intently, hoping to determine where the blame lies.

Stephen Teel was the archetype of the loyal employee — two decades with the company, mostly happy with the management, planning for a comfortable retirement with his wife in Texas.

By his early 50s, Mr. Teel said he had amassed more than $1 million in his 401(k) account. He invested every penny in his company’s stock, believing it had a bright future.

The company was MCI — later swallowed up by WorldCom Inc.

In 2003, after WorldCom completed an epic, scandal-spurred collapse, his brokerage mailed him a check for his account balance. It was less than $500.

For Mr. Teel, 56, an almost certain early retirement has dissolved into the realization that he may have to work for the rest of his life.

“I was going to retire before 60,” he said from his home in Allen, Texas. “I was going to be able to draw from the 401(k), maybe work part time. But that’s history. That’s never going to happen now.”

The demise of WorldCom is the story of an almost incomprehensible fraud, with $11 billion in accounting irregularities uncovered by investigators, among the blackest marks in the parade of corporate scandals.

It is also the story of tens of thousands of individuals like Mr. Teel, people who worked for or invested in the telecommunications giant and lost their jobs, their money — or both.

Counting layoffs last year by MCI, about 25,000 WorldCom and MCI workers have lost their jobs since the scandal broke.

In some cases, those people have made up their minds already about what should happen at the upcoming trial.

“I would like to see him in the electric chair,” said Sam Owens, who owns a Mississippi insurance company. He said he and his business partner lost $70,000 as WorldCom stock drifted down from $17 per share in 2001 to pennies in 2002.

Mr. Owens, 55, said he had never invested in stocks before. But WorldCom was “a Mississippi icon,” and he recalls reading and hearing about what a savvy executive Mr. Ebbers was.

“All you ever heard here was WorldCom, WorldCom, WorldCom,” Mr. Owens said. “Everything he touched turned to gold. And we took the bait, thinking it was going to really do good over time.”

At the trial, Mr. Ebbers’ lawyers are expected to argue he was unaware of the fraud, leaving the accounting decisions to Chief Financial Officer Scott Sullivan, who will testify against him.

In recent weeks, with their own trial approaching in a separate civil case, 10 former WorldCom directors agreed to pay $18 million out of their pockets, as part of a settlement with angry investors that totaled $54 million.

In the same case, banking giant Citigroup Inc. agreed in 2004 to pay $2.65 billion to settle investors claims. And other investment banks could reach similar settlements before the case goes to trial in late February.

But the plaintiffs in this case include many state government retirement funds, unions and financial institutions, all backed by a bevy of expensive lawyers. New York state Comptroller Alan Hevesi has estimated lawyers will lay claim to as much as 6 percent of the money.

WorldCom agreed to pay $750 million to settle claims by the Securities and Exchange Commission, including $250 million in stock in MCI, the renamed version of the company after it emerged from bankruptcy.

But that fund for investors has yet to pay any money out because it is accepting investor applications until July 19, SEC spokesman John Nester said. An outside administrator will determine who gets what from the fund.

Many investors doubt they will ever see a dime. Some say they do not plan to try, believing that whatever money forked over will wind up in the hands of lawyers.

“I’ve written mine off,” said John Mosley, a WorldCom investor who owns the Body Shop in Clinton, Miss., where WorldCom was based before it imploded. “I’m sure I won’t get any of it back.”

Mr. Mosley bought $20,000 in WorldCom stock in 2000, around the time the company’s shares — and the market — were peaking. He lost all of it after the accounting scandal broke in the summer of 2002.

Mr. Mosley said he is not certain who is to blame for the WorldCom debacle. He will follow the trial closely, keeping his mind on what he lost. He expects the trial to be monitored daily by other WorldCom victims he knows.

“There are some people who are really bitter about it,” he said.

Mr. Owens, the insurance company executive, noted that the Ebbers trial is far different from the high-profile 2004 obstruction trial of Martha Stewart.

While Mrs. Stewart saved herself about $50,000 with a timely stock trade, the case had few identifiable victims. In the WorldCom collapse, Mr. Owens said, they are legion.

“Everything looked good,” Mr. Owens said, reflecting on his WorldCom experience. “It was all polished on the outside, and nothing but smoke and mirrors, as we all know now.”

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times is switching its third-party commenting system from Disqus to Spot.IM. You will need to either create an account with Spot.im or if you wish to use your Disqus account look under the Conversation for the link "Have a Disqus Account?". Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide