WorldCom was in trouble. The stock price was wobbly and Wall Street was asking tough questions. But CEO Bernard Ebbers repeatedly put a positive face on his company, promising...
NEW YORK — WorldCom was in trouble. The stock price was wobbly and Wall Street was asking tough questions. But CEO Bernard Ebbers repeatedly put a positive face on his company, promising sound finances, strong revenue growth and conservative accounting — famously reassuring concerned analysts in 2001 that “we do not see any storms on the horizon.”
Federal prosecutors say Ebbers was lying, orchestrating a shell game to cover up his company’s financial trouble and stay in Wall Street’s good graces. In the summer of 2002, WorldCom collapsed under the weight of an $11 billion accounting fraud and filed for the largest bankruptcy in the history of American business.
Two-and-a-half years later, Ebbers, 63, faces a criminal fraud and conspiracy trial in New York, with jury selection getting under way this week.
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The trial completes a remarkable arc for Ebbers, from visionary who launched a long-distance company with colleagues at a Mississippi coffee shop in 1983, to leader of one of the world’s leading telecommunications firms, to felony suspect facing possibly years in prison.
While Ebbers has kept a low profile since he was indicted in March 2004, he has always maintained his innocence.
“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,” his lawyer Reid Weingarten said at the time.
Potential jurors are set to fill out questionnaires tomorrow, with in-court juror interviews set for next Monday. Opening statements could begin as early as the middle of next week.
The star witness for the government is expected to be Scott Sullivan, the former chief financial officer of WorldCom, who faced his own trial until pleading guilty in March 2004 and agreeing to testify against his former boss.
Prosecutors are expected to play a June 2001 voice-mail message in which Sullivan told Ebbers that a WorldCom internal revenue report “just keeps getting worse and worse” and “already has accounting fluff in it.”
The defense is expected to argue that Ebbers left the accounting decisions to Sullivan, and that Sullivan was willing to tell the government what it wanted to hear when he made his deal last year.
Unlike other recent white-collar trials, prosecutors do not appear to have much of a paper trail from Ebbers, who was said not to use e-mail often.
In the 2004 trial of star technology banker Frank Quattrone, for example, prosecutors won a conviction partly by relying on a series of e-mails they said showed Quattrone deliberately obstructed a federal stock investigation.
The federal indictment of Ebbers does refer to a memo he sent in July 2001 to a senior WorldCom officer, asking for information about “those one time events that had to happen in order for us to make our numbers.”
Among prosecutors’ allegations is that Ebbers had an almost frenzied desire from 2000 to 2002 to see WorldCom meet Wall Street’s expectations for quarterly revenue and earnings, ignoring Sullivan’s pleas to issue earnings warnings.
WorldCom has since emerged from bankruptcy and now operates under the name MCI, with headquarters in Ashburn, Va.
Manhattan prosecutors will be gunning for their latest high-profile white-collar conviction, hoping to follow wins against Martha Stewart and two executives from Adelphia Communications.
The prosecution is led by David Anders, part of the government team that won a conviction in Quattrone’s obstruction trial.