Posted on: Thursday, February 17, 2005

WorldCom trial witness says he lied

By Greg Farrell
USA Today

NEW YORK — The government's star witness in the trial of former WorldCom CEO Bernie Ebbers admitted yesterday to using cocaine and conceded that he lied repeatedly to board members, shareholders and stock analysts when he claimed the company's earnings were healthy from 2000 to 2002.

In his first chance to cross-examine former WorldCom chief financial officer Scott Sullivan, Ebbers' lead attorney, Reid Weingarten, tried to paint the government cooperator as a serial liar who would do anything to avoid a long prison term.

In five days of questioning by prosecutors, Sullivan had told the jury that the only reason he engineered the $11 billion fraud at WorldCom was that Ebbers insisted the company had to "hit the numbers." But Weingarten forced Sullivan to admit inconsistencies between what he told the jury and what he told the company and the public three years ago.

Noting that WorldCom fired Sullivan in June 2002 after an internal inquiry discovered the fraud, Weingarten asked Sullivan if he'd been truthful in explaining his actions to the board of directors.

"I wasn't being forthcoming with the committee," Sullivan, 43, replied in a subdued voice.

"You attempted to mislead them with falsehoods?" Weingarten asked. Sullivan said, "Yes."

Ebbers' attorney also asked about a security clearance form Sullivan filled out in 2000 as part of a WorldCom contract with the government, in which Sullivan lied about his history of drug use. "I was not truthful," he admitted to the jury, saying he had used marijuana and cocaine in the 1990s and briefly thereafter.

Weingarten's efforts to cast Sullivan as a liar whose testimony against Ebbers can't be trusted are vital to the defense. Sullivan is the only witness to directly link Ebbers to the WorldCom accounting fraud, which led to the biggest bankruptcy filing in U.S. corporate history.

For investors who think WorldCom's board should have done a better job monitoring the company's finances, Sullivan's testimony was illuminating. Weingarten asked him if the board's audit committee ever challenged him on the bogus financial statements.

"Those people were not even awake," Sullivan said to some laughter.