Trial of WorldCom's Ebbers begins in New York

Ex-CEO accused of falsifying books, faces counts that could carry prison sentences

Opening arguments in the securities fraud trial of former WorldCom Inc. chief executive Bernard Ebbers are scheduled to begin at about 2 p.m. EST Tuesday in the U.S. District Court for the Southern District of New York.

Ebbers, who resigned in April 2002 amid a federal probe into WorldCom's accounting practices, faces nine charges: one count of conspiracy to commit securities fraud, one count of securities fraud and seven counts of false filing with the U.S. Securities and Exchange Commission (SEC). The conspiracy charge carries a maximum prison sentence of five years, and the other counts have a maximum prison sentence of 10 years.

The securities fraud charge has a maximum fine of $1 million, or twice the gain or loss resulting from the offense, while the conspiracy charge carries a maximum fine of $250,000, or twice the gain or loss.

The U.S. Attorney's Office for the Southern District of New York accuses Ebbers of falsifying WorldCom's books between 2000 and 2002 in order to give investors a false impression of the company's financial health. WorldCom, now operating as MCI Inc., filed for bankruptcy in July 2002, about a month after the company disclosed that a group of former employees had altered accounting records.

MCI emerged from bankruptcy in April 2004, after agreeing to an SEC settlement worth $750 million for accounting irregularities.

Scott Sullivan, former chief financial officer at WorldCom, pleaded guilty in March 2004 to securities fraud, conspiracy and false filing charges.

U.S. Attorney David Kelley's indictment accuses Ebbers of knowingly inflating the financial results of WorldCom in an attempt to deceive investors and analysts. "Rather than reveal WorldCom's true condition, which would have likely resulted in a decline in the price of WorldCom's stock, Ebbers insisted that WorldCom publicly report financial reports that met analysts' expectations," Kelley's office said in a press release in March 2004.

Ebbers' lawyer, Reid Weingarten of Steptoe & Johnson LLP, was unavailable for comment Tuesday. In court filings, Weingarten has indicated he intends to ask Sullivan, the prosecution's star witness, about marital infidelity, possibly leading to questions about Sullivan's credibility.

The Ebbers trial is expected to take four to eight weeks.

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