NEW YORK, Jan. 26 -- Jurors at the securities fraud trial of Bernard J. Ebbers heard two tapes Wednesday in which the former WorldCom Inc. chief executive ducked financial questions from analysts, saying on one occasion, "Remember, I'm a P.E. graduate, not an economist, so I don't know that I can speak to that with any credibility."
The government argues that the taped calls capture Ebbers in the act of misleading analysts and investors about the finances of his telecommunications company, which has acknowledged uncovering $11 billion in accounting fraud. WorldCom filed for bankruptcy protection in July 2002. Prosecutors are seeking to convict Ebbers, 63, of securities fraud, filing false documents with the Securities and Exchange Commission and conspiring with then-chief financial officer Scott D. Sullivan to inflate WorldCom's financial results.
Bernard J. Ebbers generally gave the main part of WorldCom's financial presentation to analysts, one analyst testified.
(David Karp -- Bloomberg News)
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But Ebbers's attorney Reid H. Weingarten used excerpts of the tapes during cross-examination to bolster his contention that Ebbers was the company's public face and left the accounting to Sullivan, who misled and betrayed him. Sullivan, who has pleaded guilty, is expected to testify against Ebbers.
Prosecutors plan to play much longer portions of the tapes later in the trial, including sections in which Ebbers talked specifically about WorldCom's financial results. A Merrill Lynch & Co. analyst who participated in many of the calls, Adam Quinton, testified Wednesday that Ebbers generally gave the company's main presentation, in which "he would typically mention a number of financial metrics," including the performance of revenue and profitability.
The tapes came at the end of a day in which prosecutors slowly laid the groundwork for their case against Ebbers by calling witnesses to explain WorldCom's business and the importance of the financial statements that the company allegedly falsified. The government alleges that Ebbers and Sullivan falsely pumped up their company's profit by illegally categorizing some operating expenses -- called line costs -- as capital costs and that they used unannounced one-time changes to increase reported revenue.
Douglas Webster, who worked for WorldCom and is now a vice president at its successor company, MCI Inc. of Ashburn, explained that line costs -- the fees WorldCom had to pay other carriers to use their networks to complete specific calls -- were the company's single largest operating expense. He also showed the 16-member jury pool samples of fiber-optic and copper cable and diagrams of the way the phone network worked.
Quinton followed him to the stand to talk about how he relied on WorldCom's news releases and financial statements to make recommendations on the stock. Those recommendations were available to Merrill's 6 million retail customers and a host of institutional clients, such as mutual funds.
The defense, meanwhile, began eliciting evidence to support its contention that Sullivan was the mastermind of the fraud and that Ebbers was largely ignorant of the company's financial statements.
Under questioning from defense attorney Brian M. Heberlig, Webster agreed that Sullivan was professional, intelligent and appeared trustworthy. Webster then said that when he learned of the fraud, he was "shocked about the accounting decisions" Sullivan had made.
But the day's highlights clearly came from the tapes. Weingarten played two excerpts in which Quinton asked Ebbers direct questions about WorldCom's revenue and forecasts, and the chief executive begged off, saying, "Those all sound like Scott questions to me" and "I'll let [then-chief of operations] Ron Beaumont answer that one."
