- The Washington Times - Friday, July 28, 2006

From combined dispatches

NEW YORK — A federal appeals court yesterday upheld the conviction of former WorldCom Inc. Chief Executive Bernard Ebbers on charges related to a multibillion-dollar accounting fraud.

The ruling by the three-judge panel of the Second U.S. Circuit Court of Appeals could clear the way for Ebbers to begin serving a 25-year prison sentence for his actions as head of the telecommunications company.

Ebbers, 64, the ex-milkman and bouncer who built a small telephone company into the second-largest U.S. long-distance provider, has been free on bail at his Mississippi home pending the outcome of his appeal since he was sentenced a year ago.

“There is an element of tragedy here in that it was not a lack of legitimate entrepreneurial skills that caused Ebbers to resort to fraud,” the appeals judges said in a 47-page opinion.

The ruling by a three-judge panel of the New York court means Ebbers isn’t likely to stay out of jail much longer. The judge in charge of the case is likely to revoke Ebbers’ bail, said Robert Heim, a former Securities and Exchange Commission lawyer and now a partner at Meyers & Heim in New York.

Ebbers can appeal to the full appeals court and has the right to appeal his conviction to the U.S. Supreme Court after that, Mr. Heim said. It’s unlikely he will be free while he conducts a high-court appeal.

Bureau of Prisons spokeswoman Traci Billingsley wouldn’t say where Ebbers would be incarcerated.

Ebbers’ lawyer, Reid Weingarten, said he was “deeply disappointed” by the decision.

“We didn’t expect the Second Circuit to bless the prosecution’s cynical manipulation of witnesses that prevented the jury from hearing important, persuasive and exculpatory evidence,” Mr. Weingarten said. “We are not giving up and won’t stop fighting until Bernie Ebbers is completely vindicated.”

Convicted in 2005, Ebbers had argued on appeal that he had been denied a fair trial and that his lengthy prison sentence was unreasonable.

Writing for the court, Judge Ralph K. Winter acknowledged that 25 years is a long sentence for a white collar crime, “longer than the sentences routinely imposed by many states for violent crimes, including murder.”

But he added that Ebbers’ actions to hide WorldCom’s financial problems were substantial and had cost investors dearly.

“The securities fraud here was not puffery or cheerleading or even a misguided effort to protect the company, its employees, and its shareholders from the capital-impairing effects of what was believed to be a temporary downturn in business,” Judge Winter wrote. “The methods used were specifically intended to create a false picture of profitability even for professional analysts that, in Ebbers’ case, was motivated by his personal financial circumstances.”

When the extent of the $11 billion accounting fraud was revealed, WorldCom collapsed and declared bankruptcy.

Ebbers was convicted of conspiracy, securities fraud and seven counts of making false filings to the SEC. The government’s star witness, former WorldCom Chief Financial Officer Scott Sullivan, testified that he briefed Ebbers on efforts to hide costs at WorldCom and inflate revenue. Sullivan, who pleaded guilty, is serving a five-year prison term in Jesup, Ga.

In June 2005, Ebbers agreed to pay as much as $45 million — almost all his assets — to help settle claims in related civil suits. He and his wife were left with about $50,000 and a “modest” home in Jackson, Miss., a lawyer for the plaintiffs said.

WorldCom filed the largest bankruptcy in U.S. history in 2002 after Ebbers was ousted as CEO. It emerged from bankruptcy as MCI Inc. and moved to Ashburn, Va. Verizon Communications Inc. later acquired MCI.

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