WorldCom's founder indicted
By Leon Lazaroff
Chicago Tribune
NEW YORK — Former WorldCom CEO Bernard Ebbers was charged yesterday with securities fraud and conspiracy, accused of orchestrating what became the largest corporate accounting scandal in U.S. history.
Associated Press
The telecom giant's former chief financial officer, Scott Sullivan, also pleaded guilty to the same charges and agreed to testify against his former boss.
WorldCom founder and former Chief Executive Officer Bernard Ebbers, seen here in 2002, has been indicted on federal charges stemming from the huge accounting fraud at the telecommunications giant.
"The message to CEOs is that integrity is very important, and the falsification of any documents that relate to your company is a serious matter that will be taken very seriously," said U.S. Attorney General John Ashcroft, who announced the charges in Manhattan.
"America's economic strength depends on the integrity of the marketplace," he added.
The indictment comes two weeks after the Justice Department filed fraud charges against Jeffrey Skilling, the former chief executive of failed energy trading giant Enron Corp. Indeed, Ashcroft's decision to announce the indictment himself was seen as an effort to counter criticism that the Bush administration has been slow to prosecute corporate malfeasance.
Ebbers, 62, who founded the telecommunications upstart in the early 1980s in Clinton, Miss., is expected to appear in federal court today to plead innocent. If convicted, Ebbers could face up to 25 years in prison.
Orin Snyder, a former federal prosecutor who practices at Manatt Phelps & Phillips in New York, observed that the length of time it took the Justice Department to bring its case against Ebbers — nearly 18 months after WorldCom filed for bankruptcy in July 2002 — should not be seen as a sign of a sluggish prosecution.
"What the government wanted is to have all its ducks in a row before it indicted Ebbers," Snyder said. "The lapse of time is not a reflection of a weak case but rather a bad omen for Ebbers."
In a 31-page indictment, the government alleged that between September 2000 and June 2002, Ebbers and Sullivan routinely falsified the company's financial results to prop up its stock price.
In March 2001, for example, the government says Ebbers and Sullivan realized that WorldCom's performance for the quarter would fall short of Wall Street estimates.
Both men reportedly then agreed to enlist subordinates on a campaign of fraud to conceal the company's true financial condition. A company investigation would eventually put the total fraud at $11 billion.
Ebbers' attorney, Reid Weingarten, released a statement shortly after the indictment.
"We know the evidence in this case, we know our client and we know that Bernie Ebbers never sought to mislead investors, never sought to improperly manipulate WorldCom's numbers, never improperly took any money and never sought to hurt the company he built," the statement said.
Appearing before U.S. District Judge Barbara S. Jones, Sullivan, 41, said his plea came with "sincere remorse and a deep sense of contrition."
He said his actions were not motivated by personal wealth but by a "misguided attempt to preserve the company to allow it to withstand what I believed were temporary financial difficulties."
Sullivan was due to go on trial in April. In recent months, though, Sullivan had begun working closely with federal prosecutors toward building a case against Ebbers, said sources close to the investigation.
WorldCom's rapid ascent during the 1990s both stunned and thrilled investors.
Ebbers, a former high school basketball coach, was regularly profiled as the outsider cowboy beating industry heavyweights such as AT&T Corp. and Sprint Corp. at their own game. Successfully using his own stock as currency, Ebbers acquired companies, including MCI Communications Corp., as he built WorldCom into the nation's second-largest long distance provider.
WorldCom changed its name to MCI last April and moved its headquarters from Mississippi to Ashburn, Va.
