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Update: Ebbers found guilty of WorldCom fraud

By , IDG News Service
March 15, 2005 01:59 PM ET

IDG News Service - Former WorldCom CEO Bernard Ebbers Tuesday was found guilty on all charges of conspiracy and fraud leveled against him in connection with $11 billion of accounting misstatements that led to the telecommunications giant's bankruptcy, according to the U.S. Attorney's Office for the Southern District of New York.

The indictment against Ebbers charged that in 2000 he took part in a scheme to falsely inflate revenue and the price of WorldCom's stock. If sentenced sequentially, and to the maximum time, on all charges, Ebbers could receive 85 years in jail, according to the U.S. Attorney's office. The sentencing date is set for June 13, and until then Ebbers remains free, according to the U.S. Attorney's Office.

Ebbers took the stand to say that he left accounting to subordinates and had no knowledge of financial irregularities at WorldCom while he was CEO. However, the jury apparently gave credence to the testimony of former WorldCom chief financial officer, Scott Sullivan, who pleaded guilty in the case and was the key witness against Ebbers.

Sullivan stands to receive a more lenient sentence for aiding federal authorities in the case. He was the only witness in the six-week trial who said he had spoken to Ebbers directly about the fraud.

In is testimony, Ebbers said that after he resigned as CEO in 2002, he was "shocked" to have learned that Sullivan was involved in financial irregularities.

The prosecution, however, produced e-mail that showed Ebbers grilled his subordinates about financial presentations, and questioned him about WorldCom decision-making to show that he was a hands-on manager who would have know about accounting issues.

"I'm not surprised. I would have been surprised if it had gone the other way," said Ernest Buehler, a former accountant for the City of New York, who attended part of the trial. "The idea that he didn't know anything about the financial shenanigans that were going on just doesn't go over. Surely he had to investigate the profit-and-loss figures of the companies that WorldCom acquired. WorldCom grew by acquiring dozens of companies. It doesn't make sense that when it came to running his own house, he wouldn't have known what was going on."

WorldCom now operates under the name MCI . It filed for bankruptcy in July 2002 after disclosing that employees falsified records to inflate revenue. MCI agreed to a $750 million settlement for accounting irregularities with the U.S. Securities and Exchange Commission (SEC) and came out of bankruptcy last April.

MCI announced a $6.7 billion merger deal with Verizon last month, and is now considering a counterbid by Qwest.

Ebbers faced, and was found guilty of, one count of conspiracy to commit securities fraud, one count of securities fraud and seven counts of false filing with the SEC. The conspiracy charge carries a maximum prison sentence of five years and a fine of either $250,000 or twice the gross gain or loss resulting from the offense, whichever amount is larger. The fraud count carries a maximum of 10 years in prison and a fine of $1 million or twice the gross gain or loss, whichever is bigger. The other counts have a maximum prison sentence of 10 years.

The decision to let Ebbers take the stand to offer his own story was controversial since, legal observers say, business executives often display prickly personalities and can become evasive under the stress of cross-examination.

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