Friday, May 20, 2022

Ebbers convicted of conspiracy and fraud

A jury has convicted Former WorldCom Inc. Chief Executive Officer Bernard Ebbers of conspiracy and fraud in the gargantuan US$11 billion WorldCom Inc. scam – the largest in U.S. corporate history.

On Tuesday Ebbers was found guilty of all charges of against him, including securities fraud, conspiracy to commit securities fraud and filing false information with the U.S. Securities and Exchange Commission.

The jury deliberated eight days before handing out a verdict.

The conspiracy and fraud charges carry maximum prison sentences of five and 10 years respectively.

During the high-profile trial, the former WorldCom CEO took the stand in his defense, trying to fend off prosecution attempts to link him with the gross accounting misstatements that led to WorldCom’s downfall.

He said he left accounting to experts and had no knowledge of financial irregularities at WorldCom while he was CEO.

WorldCom, Ebbers said, had a tripartite management structure focusing on technology; sales and marketing; and finance and accounting. He argued that owing to his lack of technical training, he focused on sales and marketing.

The prosecution, however, produced e-mails showing Ebbers had questioned subordinates about financial presentations. It grilled the former WorldCom chief about corporate decision-making to demonstrate he was a hands-on manager.

Former WorldCom chief financial officer, Scott Sullivan, had earlier pleaded guilty in the case and was the key witness against Ebbers.

WorldCom, now operating under the name MCI Inc., filed for bankruptcy in July 2002 after disclosing that employees had falsified records to conceal losses and inflate earnings. MCI emerged from bankruptcy last April after agreeing to a $750 million settlement for accounting irregularities with the U.S. Securities and Exchange Commission (SEC).

The company is now the subject of an acquisition battle between Verizon Communications Inc., with which it announced a $6.7 billion deal two weeks ago, and Qwest Communications International Inc., which last week offered a counterbid.

Ebbers was repeatedly asked and repeatedly denied that Sullivan had ever told him about improper accounting or revenue-booking entries.

“He never told me he made any accounting entries ever that were not right,” Ebbers said. “If he had we wouldn’t be here today.”

Prosecutor David Anders had grilled Ebbers on his acquisition strategy to show he was familiar with financial matters, demanded data from managers, and exercised ultimate authority in corporate matters.

With files from IDG News Service

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Jim Love, Chief Content Officer, IT World Canada

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