NEW YORK, Feb. 22 -- As WorldCom Inc.'s finances deteriorated, relations between chief executive Bernard J. Ebbers and finance chief Scott D. Sullivan became so strained that Ebbers began referring to the diminutive Sullivan as "short man" and did independent research to justify more aggressive revenue targets, a former WorldCom official testified at Ebbers's criminal trial Tuesday.
Former head of investor relations C. Scott Hamilton also provided jurors with another glimpse of Ebbers's demanding manner of running the telecommunications company, describing him as "abrupt and curt" with "good attention to detail."
Prosecutors have called on Hamilton, who reported to Sullivan and worked closely with Ebbers on investor presentations, to bolster Sullivan's contention that Ebbers was both intimidating and intimately involved in key financial decisions, including WorldCom's efforts to boost its bottom line with accounting tricks from 2000 to 2002.
Hamilton, who took the stand late in the day, has not yet testified about his or Ebbers's possible connection to the scheme, but he has already made it clear to the jury that Ebbers, 63, had quite a temper.
As the person listed on the company Web site as the contact for investors, Hamilton said, he sometimes got dubious e-mails, including one from an individual who offered to buy the company outright. Hamilton told the jury that he could tell from the e-mail that "this was one of those crazy people," so he passed the offer on to the company's general counsel rather than bother Ebbers directly.
Shortly thereafter Ebbers came storming in. "He cursed at me, told me not to effing ever do anything like that again. He told me that if there was an effing offer to buy the company, I'd better take it directly to him," Hamilton said.
Ebbers is charged with securities fraud, filing false documents with Securities and Exchange Commission and conspiring to boost WorldCom's bottom line. But Ebbers's defense team contends that Sullivan orchestrated the fraud and is falsely implicating Ebbers to reduce his own prison time. Sullivan, so far, is the only witness to directly link Ebbers to the scheme to make unannounced changes to the way the company recorded revenue and to hide operating costs as capital expenditures.
But Hamilton described Ebbers as deeply involved in the process of setting guidance for Wall Street analysts on what kind of revenue and earnings growth to expect from WorldCom. The investor relations chief said Ebbers and Sullivan often disagreed, with Ebbers wanting higher targets and having final say over all announcements. During one particularly bitter 2002 battle, Ebbers showed Hamilton charts he had prepared personally. "He said he had done additional research and this had showed that Scott Sullivan was being too conservative," Hamilton said.
WorldCom filed for bankruptcy protection in July 2002 and now does business as MCI Inc. of Ashburn.
Much of the day was spent on testimony about unannounced changes that WorldCom officials made to the way the company reported revenue and Ebbers's possible knowledge of them. Former accounting manager Lisa Taranto testified that she and her staff personally delivered copies of the company's monthly revenue reports to Ebbers's assistant in 2000 and 2001, including versions that included the one-time changes intended to boost the company's publicly reported revenue.
Taranto, who was given immunity from prosecution for her testimony, said she routinely prepared two versions of the monthly internal revenue reports -- a "normalized" version and the higher, publicly reported numbers that included the adjustments. Taranto said she was also asked to prepare "adjusted" versions of two revenue reports specifically for the company's auditors at Arthur Andersen LLP. The versions for the auditors shifted more than $220 million from the accounting changes out of the "corporate unallocated" line item, where it was clearly visible, and divided the money up among WorldCom's many sales divisions, Taranto said.