Corp-Ethics.com - Report: Ebbers pleads Worldcom ignorance

Company	WorldCom [Company Info]
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Date	Issue	Title
27th Jan 2005	Fraud Investigation	Ebbers pleads Worldcom ignorance

Report

The former head of Worldcom has told a court that he knew too little about the phone firm's accounts to be aware of the fraud that drove it to bankruptcy.

Bernie Ebbers' lawyers argued that their client was a sharp entrepreneur but no accountant.

For that reason, they said, he was not responsible for the $11bn (£6bn) fraud which led to the firm's 2002 collapse.

Mr Ebbers is accused of overseeing the fraud for which Worldcom's ex-finance chief has already pleaded guilty.

The former chief financial officer, Scott Sullivan, is expected to testify for the prosecution.

If found guilty, Mr Ebbers could face a substantial jail sentence. He has firmly declared his innocence.

Worldcom has now emerged from bankruptcy and is known as MCI.

Mr Sullivan was used as an example of Mr Ebbers' weak grasp of the numbers in recordings of conference calls with analysts produced in court by defence lawyers.

In one, from October 2001, Mr Ebbers deflected requests for details about Worldcom's guidance about its earnings.

"Those sound like Scott questions to me," Mr Ebbers was heard to say.

On a later tape, Mr Ebbers told a questioner asking about the state of the economy that he was "a PE graduate, not an economist".

"So I don't know that I can speak to that with any credibility or anything," he went on.

But the analyst who had asked the questions, Adam Quinton of Merrill Lynch, told the court he had received answers on Worldcom's accounting procedures from Mr Ebbers which showed command of "a reasonable level of detail".

Under Mr Ebbers' leadership, Worldcom emerged from Mississippi obscurity to become a $160bn telecoms giant and a darling of late-1990s investors.

Yet as competition intensified and the telecoms boom petered out, Worldcom found itself under growing financial stress.

When Worldcom finally collapsed, shareholders lost about $180bn and 20,000 workers lost their jobs.

Mr Ebbers' trial, which is expected to last two months, is the latest in a series of attempts by US prosecutors to pursue senior executives for fraud.

It will coincide with the retrial of former Tyco International chief Dennis Kozlowski and his top lieutenant, accused of looting the industrial conglomerate to the tune of $600m.

Trial preparations are also preparing for former executives of shamed US energy firm Enron.

Other Reports on WorldCom
Date	Issue	Company	Report
28th Jul 2006	Other Issue	WorldCom	Worldcom's ex-boss loses appeal
11th Aug 2005	Fraud Investigation	WorldCom	Ex-Worldcom finance chief jailed
13th Jul 2005	Fraud Investigation	WorldCom	Worldcom's ex-boss gets 25 years
15th Mar 2005	Fraud Investigation	WorldCom	Ebbers guilty of Worldcom fraud
19th Jan 2005	Fraud Investigation	WorldCom	WorldCom trial starts in New York
6th Jan 2005	Other Issue	WorldCom	WorldCom agrees $54m payout

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