- The Washington Times - Wednesday, March 16, 2005

WorldCom founder Bernard Ebbers yesterday was convicted of orchestrating the largest accounting fraud in history, marking the biggest victory to date in the government’s campaign against corporate crime.

The guilty verdicts on all nine conspiracy and fraud charges in a Manhattan district court came after eight days of deliberations in which jurors weighed testimony from top WorldCom financial officers who said they hid $11 billion in expenses from investors at Ebbers’ behest against the former chief executive’s vehement denials.

Because the case relied largely on testimony provided by former Chief Financial Officer Scott Sullivan under a plea-bargain arrangement, pitting his word against Ebbers’, it was viewed as risky and high-stakes for the government.

Other major cases still pending — notably the trial of Enron Corp. founder Kenneth Lay next year — are expected to follow a similar script, with subordinates testifying that the CEO ordered them to commit fraud to meet earnings expectations on Wall Street.

“Today’s verdict is a triumph of our legal system,” said U.S. Attorney General Alberto R. Gonzales. “We are satisfied the jury saw what we did in this case: that fraud at WorldCom extended from the middle-management levels of this company, all the way to its top executive.”

The once-renowned mogul, who took jobs as a milkman and teacher before creating the world’s largest telecommunications empire through massive acquisitions, faces up to 85 years in prison.

Ebbers, 63, a towering figure, stood stoically and reddened as the verdict was read, then left the U.S. District Court in Manhattan on bail without speaking to reporters.

Reid Weingarten, Ebbers’ lead defense attorney, said he was confident his client would be vindicated on appeal.

“The captain of the ship is responsible for the ship, but is not criminally responsible unless he acted with criminal intent,” he said. “I don’t think Mr. Ebbers ever acted with criminal intent … despite the verdict.”

During the six-week trial, prosecutors portrayed Ebbers as focused on propping up WorldCom’s sagging stock, as well as panicked over pressure he was getting from bankers over $400 million in personal loans backed by his own WorldCom shares.

From late 2000 to mid-2002, the government charged, Ebbers intimidated Sullivan into covering up billions of dollars of costs for leasing telephone lines from smaller companies, hiding them in the capital account and improperly recognizing revenues.

“He was WorldCom, and WorldCom was Ebbers,” prosecutor William Johnson told jurors. “He built the company. He ran it. Of course he directed this fraud.”

The defense claimed that the fraud was masterminded by Sullivan, who testified that Ebbers instructed him quarter after quarter to “hit our numbers” as expected on Wall Street. The government’s star witness, one of four former WorldCom officers who testified, was the only one to directly implicate Ebbers.

Ebbers took the witness stand in rebuttal, flatly denying any role in the fraud. He said his role was to be a visionary and cheerleader, while leaving complex accounting measures to Sullivan.

“He’s never told me he made an entry that wasn’t right” in the company’s books, Ebbers testified. “If he had, we wouldn’t be here today.”

The largely blue-collar jury engaged in unusually long deliberations for a white-collar case. Mr. Weingarten said he probably would have won the case in Mississippi, where WorldCom was based, indicating venue may be an issue on appeal.

The fraud drove WorldCom into the largest bankruptcy in history, from which it has re-emerged as MCI Inc., the Ashburn, Va., long-distance company that WorldCom once gobbled up in an acquisition binge.

The company agreed to pay a record $750 million to investors in an earlier settlement with the Securities and Exchange Commission, a fraction of the estimated $60 billion in stock losses caused by the scandal.

WorldCom’s directors, its underwriters and auditing firm, Arthur Andersen, face an investor class-action lawsuit that is scheduled to go to trial this month.

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

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide