NEW YORK -- WorldCom Inc. former chief executive Bernard J. Ebbers was so obsessed with cutting costs that he canceled the employees' coffee service to save $4 million. But when the company's accountants made more than $2 billion in operating expenses simply disappear, Ebbers never noticed, according to his testimony at his criminal trial.
Over the past five weeks, jurors in this Manhattan courtroom have been shown two radically different faces of the entrepreneur who built WorldCom from an obscure Mississippi phone service reseller to the nation's second-largest long-distance firm.
Ex-CEO Bernard J. Ebbers spent his second day on the stand.
One is that of a hard-charging businessman so immersed in WorldCom's finances that he noticed $18,000 cost overruns in a $3 billion budget and sent angry memos when he thought subordinates' presentations were insufficiently detailed. Prosecutors say he was so driven to protect his personal fortune in WorldCom stock that he orchestrated a scheme to inflate the company's earnings from 2000 to 2002 by falsely reclassifying certain operating expenses, known as line costs, as capital expenditures.
The other view of WorldCom's chief was on full display as Ebbers, 63, took the stand in his own defense Monday.
Describing himself as a former milkman and warehouse operator, Ebbers told the jury he focused on hiring talented subordinates to handle areas in which he was weak, such as technology and accounting, and coaching them to do their best. In the crucial period of the fraud, Ebbers said, he was in the process of disengaging from WorldCom because he had developed heart trouble and was "embarrassed" by his inability to understand the technology that was a growing part of his business.
Soon jurors will have to reconcile the two pictures, or discard one, as they decide whether to convict Ebbers of conspiracy, securities fraud and seven counts of filing false documents with the Securities and Exchange Commission. WorldCom filed for bankruptcy protection in July 2002 and now operates as MCI Inc. of Ashburn.
While the government presented its case, and during parts of Ebbers's cross-examination Tuesday, jurors saw flashes of the demanding and details-oriented boss who dominated WorldCom for nearly two decades, leading it through more than 65 mergers.
WorldCom's former "whiz kid" finance chief Scott D. Sullivan, who was just 33 when Ebbers elevated him to the No. 2 job, told the jurors that his boss could be intimidating and difficult to budge. When Ebbers disagreed with one of Sullivan's financial decisions, Sullivan said, "He would make comments to me in the presence of other people, 'We'll just get a new CFO, that's what we'll do.' . . . He said it in a kidding way, but I didn't take it as a joke." Another witness quoted Ebbers as referring to the diminutive Sullivan dismissively as "short man" when he was displeased.
That history is why, Sullivan said, he "took it as a command to commit accounting fraud" when Ebbers ordered him in private one-on-one meetings to "hit the numbers" for revenue and earnings that Wall Street analysts were expecting. "I knew it was wrong. I knew it was against the law," said Sullivan, now 43. "I capitulated."
Ebbers said on the stand that he rarely had one-on-one conversations with Sullivan and that the finance chief never told him about the illegal accounting entries. "If he had, we wouldn't be here today," Ebbers added.