Ethics Newsline®

NEW YORK
A New York jury last week found former WorldCom chief executive Bernard Ebbers guilty of securities fraud, conspiracy, and filing false documents, rejecting his “know nothing” defense in what many say should serve as a warning to other CEOs awaiting trial for leading their firms into scandal and bankruptcy.

The 12-member jury convicted Ebbers on all counts, agreeing with prosecutors that a man smart enough to turn a tiny phone company into a telecom superpower was not dumb enough to draw a blank when looking at a balance sheet, as Ebbers claimed during the trial.

“You can’t sell yourself as a genius to investors but then portray yourself as someone who flunked math to the jury,” Stephen Meagher, a former federal prosecutor in San Francisco, told the Los Angeles Times.

Ebbers’s efforts to portray himself as unschooled in finance failed to fly with the jury, especially after his evasive testimony compounded doubts raised by former WorldCom chief financial officer Scott Sullivan.

Sullivan, who has pleaded guilty to fraud and faces up to 25 years in prison, testified that Ebbers knew about WorldCom’s financial problems and pushed him to distort numbers to meet Wall Street’s expectations.

While Ebbers’s lawyer accused Sullivan of lying in a bid to lower his prison time, the Times noted that Ebbers’s alleged motives included $400 million in personal loans that hinged on his collateral of WorldCom stock, the value of which crashed after the company’s troubles were exposed.

WorldCom declared bankruptcy in July 2002 under the weight of $11 billion in fraudulent accounting, emerging last year as MCI.

Ebbers, who faces up to 85 years in prison after being convicted on all seven counts, is scheduled for sentencing on June 13. His lawyer said he will appeal.

Asked for reaction to the Ebbers verdict, MCI employee Leanne Tight, who hired on with WorldCom in 1999, said her fellow workers at MCI’s headquarters in Virginia “are pleased.”

“But this wasn’t any great surprise,” Tight told the Washington Post. “And to see somebody else suffer doesn’t bring back any of our retirement plans or help the people who have been laid off or change the impact this has had on our business. He will pay for what he has done, but this is a sad, sad episode in our history.”

Analysts noted that the jury’s rejection of Ebbers’s defense could spell trouble for other fallen chiefs, including HealthSouth’s Richard Scrushy and Enron’s Kenneth Lay and Jeffrey Skilling, all of whom face charges related to fraud already admitted to by their subordinates, reported the New York Times.