Bernard Ebbers, the maverick former boss of WorldCom, was on Tuesday found guilty of taking a lead role in the largest fraud in corporate history and could now face the rest of his life in prison.
The conviction is a landmark result for US prosecutors seeking to restore confidence in corporate America after a slew of financial scandals stemming from the dotcom boom.
WorldCom, the world’s largest carrier of internet traffic, came to symbolise the aggressive and often reckless hubris of the late 1990s and the crash that followed.
Ebbers (63) was found guilty on all nine counts that he faced, one each of conspiracy and securities fraud and seven of false regulatory filings. The crimes carry a sentence of up to 85 years in prison.
Ebbers stood hands clasped and looking straight ahead, unmoved as the guilty verdict was read. His wife, who has been present throughout the trial, wept behind him. He was released on bail and left court without saying a word to the media. He will be sentenced on June 13.
The verdict came after eight days’ deliberation by the jury.
Ebbers claimed throughout the trial that he had no knowledge of the $11-billion fraud at WorldCom, and little understanding of financial matters. This was disparaged by prosecutors as the ”aw shucks” defence.
As the boom faded during 2000, WorldCom began fudging its books, wrongly classifying expenses and inflating revenues, to ensure it met Wall Street targets. The company, like many others, was trapped by a refusal to believe that the good times were over.
The government’s star witness in the six-week trial was WorldCom’s former chief financial officer, Scott Sullivan, who, along with four others, had already pleaded guilty to fraud. He implicated his erstwhile boss and the case was about who the jury believed. Ebbers, who rarely used e-mail, had not left a paper trail.
His lawyer, Reid Weingarten, said he was ”extremely disappointed” by the verdict but added the fight would continue. ”I don’t believe that Mr Ebbers ever acted with criminal intent and I still don’t.”
At its peak in 1999, WorldCom was valued at $160-billionn. The collapse three years later cost thousands their jobs and thousands more their investments and retirement nest eggs as shares in the company became worthless.
That year became a watershed on Wall Street. Five of the top 10 bankruptcies of all time occurred in 2002 as companies unravelled, some by fraud, and the markets were plunged into crisis. The scandals that were revealed led to a tightening oflaws and the pursuit of high-profile executives, in which the government has secured a series of notable victories.
Former Enron chief Andrew Fastow pleaded guilty to fraud early last year and has been sentenced to 10 years in prison. Frank Quattrone, the former star banker at Credit Suisse First Boston, was given an 18-month sentence last September after being found guilty of obstruction of justice. In July, Adelphia chiefs John Rigas and Timothy Rigas were convicted of looting their company. Martha Stewart has just been released from five months in prison for lying to prosecutors. Dozens of lower level executives have also been convicted.
The biggest cases will be the forthcoming trials of former Enron chiefs Ken Lay and Jeffrey Skilling.
Ebbers hatched the idea for his firm, the Long Distance Discount Service, in a coffee shop in Mississippi in 1983. The company built itself into one of the biggest telecom firms in the world through a series of acquisitions. It changed its name to WorldCom in 1995 and completed a transforming $37bn merger with MCI in 1997.
Ebbers’s penchant for cowboy boots and hats earned him the nickname, Telecom Cowboy.
During the trial Ebbers, who teaches in Sunday school at his local Baptist church, portrayed himself as an unsophisticated man with little formal education and no head for figures. ”I don’t know about technology and I don’t know about finance and accounting.”
He said his ”marks weren’t too good” at college and that he had a string of jobs including milkman, basketball coach and warehouse manager before setting up WorldCom.
The prosecution portrayed him as a man obsessed with keeping WorldCom’s share price high. He was said to have panicked about $400-million he received in loans from WorldCom that were backed by his company stock.
Sullivan testified that Ebbers had told him to do whatever was necessary to ”hit our numbers”, something he took as an order to make fraudulent entries in the books.
WorldCom’s former financial advisor Citigroup has paid $2,65-billion to settle related shareholder lawsuits. The firm’s auditor, Arthur Andersen, is now a shell company dealing with ongoing legal issues. – Guardian Unlimited Â