Former WorldCom Chief Awaits Sentence
Bernard Ebbers, the former chief executive of WorldCom, symbolized an era of corporate malfeasance that drove some of the world’s largest and most venerated companies into ruin.
Convicted by a jury last month of spearheading an $11 billion accounting fraud that led to the biggest bankruptcy in U.S. history, the 63-year-old Ebbers could spend the rest of his life behind bars. He faces up to 85 years in prison.
Attorney General Alberto R. Gonzales called the Ebbers verdict “a triumph of our legal system and the application of our nation’s laws against those who breach them.”
Gilbert Geis, a professor emeritus in the department of criminology, law and society at the University of California, Irvine, says he does not believe Ebbers will spend the rest of his life behind bars. A wild guess: five years.
“Typically speaking, they [wild-collar criminals] get very short sentences, but I think the mood has changed,” Geis says.
Ebbers was credited with transforming Mississippi-based WorldCom into one of the world’s largest telecommunications companies through acquisitions, but maintaining the growth Wall Street expected became harder in the face of falling long-distance prices, stiff competition and other pressures. So WorldCom, under Ebbers, manipulated its financials in an $11 billion fraud, according to the government.
Ebbers, who claimed in testimony he did not have any knowledge about the fraud, had a reputation for being controlling.
He and other former top executives bullied underlings who questioned their tactics and approved multibillion-dollar acquisitions in a matter of hours or minutes without a shred of paper presented to the board of directors, according to two investigative reports released in 2003. The board, according to the reports, functioned as puppets, rather than as watchdogs, not even questioning Ebbers when he secured a $50 million loan through WorldCom to cover personal bank loans that he risked defaulting on as a result of the company’s declining stock price.
One report detailed how former top brass concealed questionable accounting practices from employees, while scolding and intimidating others. After one employee approached former general accounting director Buford Yates Jr. “for an explanation of a large [accounting] discrepancy,” Yates reportedly berated him and said, “‘Show the numbers to the damn auditors and I’ll throw you out the [expletive] window.'”
The late John Sidgemore took over WorldCom in 2002 after the accounting scandal surfaced and Ebbers quit. Under Sidgemore, WorldCom filed the largest bankruptcy in U.S. history and vowed to restore the public’s trust - but an extraordinary amount of damage could not be undone. Shareholders reportedly saw $180 billion in market value disappear, thousands of people lost their jobs and retirement funds shriveled.
“Twenty thousand people lost their livelihoods because of Ebbers’ greed. Ordinary people lost $600 million from their pension plans because Ebbers did not have enough houses, boats or automobiles,” says Ken Boehm, chairman of the National Legal and Policy Center, in a statement commenting on the Ebbers verdict. “The largest financial fraud in American history didn’t just happen, it resulted from the specific actions of specific individuals, who are now being made accountable.”
Geis says the Ebbers conviction is an encouraging sign for the U.S. government as it prosecutes former executives of another prominent company that fell victim to a record bankruptcy: Enron. The professor says the government has a greater pool of witnesses in the Enron case.
In the Ebbers trial, prosecutors rested their case largely on one witness: former WorldCom CFO Scott Sullivan.
“It became almost like a rape case: “he says, she says” sort of thing,” Geis says. “The government got the jury to believe the witness.”
Now, Ebbers could be going to prison for a long time.
