• United States
Senior U.S. Correspondent

Criminal charges filed against WorldCom’s Ebbers

Mar 02, 20043 mins
Financial Services IndustryFraudRegulation

Bernard Ebbers, the former CEO of WorldCom, Tuesday was charged with conspiracy and securities fraud in connection with his former company’s $11 billion of accounting misstatements.

Bernard Ebbers, the former CEO of WorldCom, Tuesday was charged with conspiracy and securities fraud in connection with his former company’s $11 billion of accounting misstatements.

Scott Sullivan, WorldCom’s former chief financial officer, pleaded guilty and agreed to cooperate with prosecutors, the U.S. Department of Justice said in a statement.

WorldCom, which now operates under the name MCI, filed for bankruptcy in July 2002, about a month after the company disclosed that a group of former employees had altered accounting records to conceal losses and inflate earnings. The company, now based in Ashburn, Va., plans to emerge from bankruptcy later this year. Ebbers has denied any wrongdoing.

The unsealing of the high-profile indictment was announced in a news conference at the U.S. Attorney’s Office for the Southern District of New York, in Manhattan, by U.S. Attorney General John Ashcroft, the statement said. Also participating were David Kelley, the U.S. attorney for the Southern District, and Pasquale D’Amuro, assistant director in charge of the FBI’s New York Field Office.

Sullivan originally was charged in the case in July 2002 but faced additional charges in Tuesday’s indictment. Following the unsealing of the indictment Tuesday, he pleaded guilty, the statement said.

The indictment charges that Ebbers participated from September 2000 through June 2002 in a scheme to artificially inflate the price of WorldCom’s stock by hiding the truth about the company’s financial results. It charges Ebbers and Sullivan each with one count of conspiracy to commit securities fraud, to make false filings with the Securities and Exchange Commission and to falsify books and records. It also charges each with two counts of securities fraud.

The maximum penalty for the conspiracy charge is five years in prsion and a fine of either $250,000 or twice the gross gain or loss resulting from the offense, whichever amount is the larger. Each fraud count could carry a sentence of 10 years in prison and a fine of $1 million or twice the gross gain or loss, whichever is the bigger.

Ebbers, who lives in Jackson, Miss., is expected to be arraigned Wednesday before Judge Barbara Jones of the U.S. District Court for the Southern Districk of New York, according to the statement.

In a statement, Ebbers’ attorney said a “fair-minded jury” would exonerate the former executive.

“Bernie Ebbers never sought to mislead investors, never sought to improperly manipulate WorldCom’s numbers, never improperly took any money and never sought to hurt the company he built,” wrote Reid Weingarten of Steptoe & Johnson LLP in Washington, D.C.