NEW YORK, Feb. 28 -- Former WorldCom Inc. chief executive Bernard J. Ebbers took the stand in his own defense Monday and adamantly denied he knew anything about the $11 billion accounting fraud scandal that helped drive the company into collapse in 2002.
Flatly contradicting earlier testimony by WorldCom's former finance chief Scott D. Sullivan, Ebbers said neither Sullivan nor anyone else told him that WorldCom was making improper changes to its revenue accounting and hiding operating expenses called line costs.
Former WorldCom chief executive Bernard J. Ebbers took the stand yesterday.
(Michael Nagle -- Bloomberg News)
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"I wasn't advised by Scott Sullivan of anything ever being wrong," Ebbers said. "He has never told me he made any [accounting] entry that wasn't right. If he had, we wouldn't be here today."
Ebbers, 63, looked grandfatherly and sounded folksy as he described his meteoric rise from a college dropout working as a milkman to the largest shareholder and driving force behind what was once the nation's second-largest long-distance company.
The 12 jurors and two alternates learned about Ebbers's early days as a motel owner who charged guests for failing to return all their towels and his sense of embarrassment in 2000 that he no longer understood the company's network products well enough to pitch a $650 million deal to the head of BP Amoco. Along the way, Ebbers named all five of his daughters, mentioned his eight grandchildren and explained how he suffered his first heart trouble while bush-hogging, or clearing brush, on his tractor.
Through it all, Ebbers and his attorney Reid H. Weingarten emphasized Ebbers's lack of knowledge about accounting and his long-standing practice of leaving financial reporting and accounting decisions to others. "The closest thing I've ever had to an accounting course is a preliminary course on economics," Ebbers said. Later he testified that he always tried to hire good finance people and never overruled their decisions. "I know what I don't know. To this day I don't know technology, and I don't know finance and accounting."
Prosecutors have charged Ebbers with committing securities fraud, filing false documents with the Securities and Exchange Commission and conspiring with Sullivan and others to falsely hide line costs -- fees paid to other carriers -- by classifying them as capital expenses. Their case rests almost entirely on testimony from Sullivan, who has pleaded guilty, that he told Ebbers the accounting tricks "weren't right" and were done solely to "hit the numbers" -- slang for meeting Wall Street's expectations for revenue and earnings growth.
But Ebbers contends that Sullivan masterminded the scheme without his knowledge or consent. Weingarten has accused Sullivan, 43, of lying in hopes of persuading prosecutors to recommend a reduced prison sentence.
In fact, Ebbers testified, he was so far in the dark that he continued to invest in the company even after the board forced him out as chief executive in April 2002. In May of that year, Ebbers said, he bought $5.3 million in WorldCom stock. "I invested in the best company I knew," Ebbers said.
When the company's general counsel called Ebbers to alert him to the fraud discovery in June, Ebbers said, he was "shocked."
