The star witness against former WorldCom Chief Executive Bernard Ebbers testified yesterday that a desire to meet Wall Street expectations...
NEW YORK — The star witness against former WorldCom Chief Executive Bernard Ebbers testified yesterday that a desire to meet Wall Street expectations eclipsed his obligation to follow the law.
Scott Sullivan, who was finance chief under Ebbers, said he knew adjusting the books was illegal but did it because “I thought we would make it through.”
During cross-examination, Ebbers defense lawyer Reid Weingarten asked Sullivan, “Was there ever an occasion when you said, ‘Numbers be damned, I’m just not booking it?’ “
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Sullivan answered, “No, because I went along with hitting the earnings-per-share number.”
Weingarten pressed, asking whether Sullivan’s desire to “hit the numbers” overtook his obligation to obey the law.
“I thought we were going to get through it in a short period of time,” Sullivan said, adding later: “I knew it was wrong and I knew it was against the law, but I thought we would make it through.”
The exchange came as Sullivan completed more than eight hours of questioning from Weingarten, who hopes to convince jurors that Sullivan, not Ebbers, was behind the $11 billion accounting fraud at WorldCom.
Weingarten also played audiotape of a 2001 conference call with analysts — well into the fraud — in which Sullivan said he believed WorldCom was in “phenomenal” position in its industry.
When Sullivan said the remark was not part of any script, Weingarten asked him whether it constituted “B.S.”
“I don’t know that I would use the word B.S., but it was misleading,” Sullivan said.
Sullivan has testified Ebbers pressured him quarter after quarter to “hit our numbers,” meaning to make revenue and earnings figures match with what Wall Street expected. The former finance chief said he interpreted the remark as a command to cook the books. On cross-examination, he said no one else was present when he repeatedly told Ebbers he thought it was wrong.
While the cross-examination touched on Sullivan’s past drug use, his $15 million Florida home and his generous compensation, it did not touch on the issue of marital infidelity.
Weingarten had pressed in pretrial hearings — and Judge Barbara Jones said she would allow him — to question Sullivan about infidelity.
Asked in a second round of questions from a prosecutor whether Ebbers had ever threatened to fire him, Sullivan said Ebbers occasionally said jokingly when they disagreed: “We’ll just get a new CFO.”
“He said it in a kidding way, but I didn’t take it as a joke,” Sullivan said.
Prosecutors said they plan to rest their case Tuesday or Wednesday after calling four more witnesses. Court will be out of session today and Monday.
The judge blocked prosecutors from calling to the stand a former WorldCom employee who lost retirement savings when the company went bankrupt.
She ruled his testimony would be repetitive because prosecutors have already questioned a securities analyst and an institutional investor about how they relied on statements from Ebbers in making investment decisions.
Ebbers, 63, faces charges of fraud, conspiracy and making seven false filings with the Securities and Exchange Commission. The charges carry up to 85 years in prison.
Sullivan, 43, has pleaded guilty to fraud in the case and hopes to win a lighter sentence by cooperating with the government. He will be sentenced after Ebbers’ trial ends.
Verizon CEO Ivan Seidenberg also testified briefly yesterday, telling jurors about talks he had with Ebbers in 2001 about a possible acquisition of WorldCom by Verizon. Seidenberg said Ebbers first insisted WorldCom was worth $40 a share, and when Verizon came back with an offer of $21, Ebbers said the company was worth at least $30.
Sullivan testified last week that he and Ebbers dropped the talks with Verizon because they were worried Verizon might look at WorldCom’s books and discover the improper accounting.
This week, Verizon agreed to purchase MCI — the post-bankruptcy incarnation of WorldCom — for $6.7 billion in cash and stock, or roughly $20.75 a share.