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Ebbers guilty of Worldcom fraud

Date Class
15th Mar 2005 Fraud Investigation
 
Details
Former Worldcom chief executive Bernie Ebbers has been convicted of conspiracy and fraud in connection with the 2002 collapse of the telecoms giant.

Mr Ebbers, 63, who is to appeal against the verdict, was also found guilty of seven counts of filing false documents.

Shareholders lost about $180bn (94bn) in Worldcom's collapse - the largest bankruptcy in US history - and 20,000 workers lost their jobs.

Mr Ebbers could face up to 85 years in prison when he is sentenced on 13 June.

Worldcom emerged from bankruptcy last year and is now known as MCI.

A federal jury in Manhattan had spent eight days deliberating before returning their verdicts.

The six-week trial took place two years after an internal audit was launched into $11bn discrepancies in Worldcom's accounts.

Mr Ebbers told the court he knew too little about the company's accounts to be aware of the fraud and blamed his former finance chief, Scott Sullivan.

Mr Sullivan's evidence was only direct link between Mr Ebbers and the fraud - and he said his actions were on the instructions of his boss.

Prosecutors accused Mr Ebbers of engineering the fraud that saw senior Worldcom executives exaggerate revenues and file false expenses between 2000 and 2002.

They portrayed Mr Ebbers as "obsessed" with keeping the company's share price high at a time when the telecoms sector was under pressure in the wake of the dotcom crash.

Mr Ebbers, who had a personal fortune tied to the value of shares in Worldcom, had helped transform the company from a minor long-distance telephones company in Mississippi into a telecoms giant.

"He was Worldcom, and Worldcom was Ebbers," prosecutor William Johnson prosecutor told jurors.

"He built the company. He ran it. Of course he directed this fraud."

Five other Worldcom executives, including Mr Sullivan, have admitted their guilt and are also awaiting sentence.

Mr Ebbers, who has always protested his innocence, worked as a bouncer, basketball coach and milkman before moving into the telecoms business.

In 1983 he was an early investor in Long Distance Discount Service, the company that would later become Worldcom.

Worldcom became a Wall Street darling in the 1990s as it merged with or bought dozens of rivals including the $40bn purchase of MCI.

Mr Ebbers looked tense when the verdicts were read out and his wife Christie and other family members burst into tears.

His lawyer Reid Weingarten said after the hearing that the evidence was "riddled with reasonable doubt" and confirmed there would be an appeal.

Tuesday's verdict is the biggest success yet for US prosecutors seeking to crack down on corporate wrongdoing in the wake of the Enron collapse.

The scandal also lead to the introduction of the Sarbanes Oxley Act - a law which holds corporate bosses responsible for their companies' results.

"Bernie Ebbers was a colourful character," independent telecoms analyst Jeff Kagan told Reuters.

"He focused on the wild ride, the stock moves. Now everybody is focusing on what they should focus on: subscriber growth and mergers."

 

 

 


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