The hallmark of Bernard Ebbers, known almost universally as Bernie, was his brash, swaggering style — and he leveraged it at WorldCom...
NEW YORK — The hallmark of Bernard Ebbers, known almost universally as Bernie, was his brash, swaggering style — and he leveraged it at WorldCom to become one of America’s most celebrated CEOs.
Yesterday, hunched over a table in a federal courtroom, the 63-year-old Ebbers was reduced to steady tears, a sniffling that microphones picked up and broadcast to the observers packed in behind him.
His beloved business had long since been shattered, and now his life was, too — a 25-year prison sentence handed down by a federal judge for his role in the eye-popping fraud at WorldCom.
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After it was over, and Ebbers had been ordered to report to prison in Mississippi in October, there were more tears: His wife, Kristie, came to his side and embraced him tightly. They cried together as the room emptied.
The devastating sentence was handed down just days after Ebbers agreed to fork over almost all his worldly assets — as much as $40 million worth — to settle with investors.
Even his lawyer, Reid Weingarten, appeared to tear up as he pleaded with Judge Barbara Jones for leniency, citing Ebbers’ heart condition and his considerable, often anonymous, charitable works.
“If you live 60-some-odd years, if you have an unblemished record, if you have endless numbers of people who attest to your goodness, doesn’t that count? Doesn’t that count particularly on this day?” Weingarten said.
But the judge handed down the stiffest sentence imposed on a U.S. executive since the fall of Enron in 2001 touched off a record-breaking wave of business scandals.
Even with possible time off for good behavior, Ebbers would remain locked up until 2027, when he would be 85.
The sentence came four months after Ebbers was convicted of overseeing the $11 billion WorldCom fraud — much of it a pattern of chalking up expenses as long-term capital expenditures, which are classified as assets.
“I find that a sentence of anything less would not reflect the seriousness of this crime,” the judge said.
When the fraud at WorldCom began to come to light, it reduced shares of stock once worth more than $60 to mere pennies. Billions of dollars in market value vanished.
Mississippi-based WorldCom filed for bankruptcy — also the largest in U.S. history — in the summer of 2002. It has since re-emerged under the name MCI, with headquarters in Ashburn, Va.
Gino Cavallo, an MCI service consultant who worked for years at WorldCom, lost tens of thousands of dollars in retirement money in the fraud. He attended the sentencing and said he was pleased.
“The man’s 63,” Cavallo told reporters. “He’s going to die in jail. How much sterner could you get?”
The sentence completed a staggering fall for Ebbers, whose homespun manner and hard-charging business style earned him status as an admired chief executive and the nickname Telecom Cowboy.
The former basketball coach helped start a small long-distance reselling business in the early 1980s, then gradually built it into a business titan by swallowing ever-larger companies, eventually even MCI.
Jones ordered Ebbers to report to prison Oct. 12 and said she would recommend he be assigned to a low-security prison in Yazoo City, Miss., so that his family could see him easily.
But the judge said she would take written arguments during the next six weeks on whether she should allow Ebbers to remain out of prison while he appeals his conviction, a process likely to take at least a year.
She imposed the 25-year sentence after a two-hour hearing in which defense lawyers and federal prosecutors debated exactly how much money was lost because of the fraud, a key factor in determining the penalty.
The defense had argued it was impossible to find whether investors had sold WorldCom stock in 2002 directly because of the fraud, company personnel changes or the generally poor economy. The judge was unmoved.
“This was not a minor fraud,” Jones said. “Mr. Ebbers committed a fraud that caused numbers of investors to suffer losses. His statements deprived investors of the truth about WorldCom’s financial condition.”
The judge could have imposed an even stricter sentence had she found that Ebbers committed perjury when he testified in his own defense.
On the stand, Ebbers told jurors he never knew of the fraud. Asked about documents he reviewed that showed highly suspicious financial figures that tipped off the fraud, Ebbers said, “I just didn’t see it.”
Jones said it was not clear Ebbers had committed perjury, and said jurors could have believed his testimony and still convicted if they believed based on Ebbers’ “conscious avoidance” of the fraud.
The judge also heard briefly from Henry Bruen Jr., a former high-ranking sales executive at WorldCom. Bruen said he lost his job in 2003 and has been unable to find work since, putting him through “sheer hell.”
“Where do I get my life savings back from?” he demanded. “Or my career reinvigorated?”
Jones did not impose a fine or seek restitution, partly because of an agreement late last month under which Ebbers will forfeit nearly all his personal assets to settle a civil suit filed by aggrieved investors.
Under that settlement, Ebbers’ wife will be left about $50,000 of Ebbers’ assets and a modest home in Jackson, Miss. A far more lavish family home in Brookhaven, Miss., will be sold off as part of the settlement.
“Simply put, justice was served,” said New York state Comptroller Alan Hevesi, the lead plaintiff in the civil suit against WorldCom, which has racked up $6 billion in settlements.
The 25-year term is the harshest yet as corporate executives have been paraded through American courtrooms in a series of eye-popping business scandals that have cost investors untold billions.
A former finance executive of Dynegy, Jamie Olis, is serving 24 years in prison for his role in a fraudulent accounting scheme at the Enron-linked energy company.
And last month, Adelphia Communications founder John Rigas, 80, was sentenced to 15 years in prison for his role in the looting and fraud at that company. His son, former finance chief Timothy Rigas, got 20 years.
Two top executives at Tyco International convicted of stealing from company coffers are awaiting sentencing in August, and three top Enron executives go on trial in Houston early next year.
5 more await sentencing
Ebbers is the highest-ranking of six WorldCom executives and accountants who were charged by federal prosecutors in the fraud. The other five face sentencing later this month and in early August.
Among them will be Scott Sullivan, the former chief financial officer under Ebbers, who admitted carrying out the fraud but said he did so on Ebbers’ orders.