There are no documents or third-party witnesses that conclusively link Ebbers to the fraud, so prosecutors have sought to show that Ebbers must have known that the company was hiding line costs -- fees WorldCom paid to use other carriers' networks -- because he was intimately familiar with the company's finances, down to the smallest expenses.
Budget analyst G. Brady Connor, who works at WorldCom's successor, MCI, testified earlier that at a meeting in Atlanta, Ebbers boasted of his cost-cutting efforts. Not only did the chief executive say he used parking lot video cameras to monitor the length of smoking breaks and count employees' lunchtime walks around a lake at the Clinton, Miss., campus, but he boasted of a trick he was using at the company's offices in Arlington. Connor testified that Ebbers said he was working with a security guard "to manually fill up the bottled-water machines with tap water, and the employees didn't know the difference."
Ex-CEO Bernard J. Ebbers spent his second day on the stand.
(File Photo)
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Ebbers, according to Connor, also said he canceled the company's coffee service because he believed employees were stealing coffee that WorldCom provided. The company was running through bags of coffee far faster than it was using filters, Ebbers said, so employees must be taking bags home.
Prosecutors have also shown the jury that Ebbers tossed around financial terms like "incremental revenue," "cash earnings" and "EBITDA margin" (financial speak for a kind of earnings) at meetings with securities analysts.
During two days on the stand, Ebbers kept his temper, appearing grandfatherly and occasionally a bit lost when the government asked him to pick out specific information from a financial document. He talked proudly of his five daughters and eight grandchildren and modestly described his more than $100 million in anonymous charitable contributions.
He smilingly acknowledged his reputation for cost-cutting, noting that in his early career as a motel owner, he angered guests by requiring them to return the towels they had used or pay a fee. A subordinate had recommended the coffee service cancellation after he asked for imaginative ways to reduce expenses, he said. "I did not ever count coffee filters or coffee bags," he insisted. "But I can tell you I agreed with it [the cost-saving recommendation]. . . . I don't consider, when you are playing with shareholders' money, that $4 million is a small number."
But Ebbers repeatedly insisted that he never focused on accounting or on the company's line costs during the period of the fraud because he trusted Sullivan and others to handle financial matters.
"The closest thing I've ever had to an accounting course is a preliminary course on economics," Ebbers said, adding later, "I know what I don't know."
Ebbers testified that he had no idea WorldCom had a problem with too-high line costs even though he traveled to Virginia in June 2001 to attend a meeting on the subject. "I was invited there by Scott Sullivan to do my cheerleading thing and give the troops a little pep talk," he said. Asked why a pep talk was necessary, Ebbers paused and said, "Scott Sullivan told me there was some lack of harmony in the group."
As Tuesday wore on, Ebbers began to wear out under cross-examination by Assistant U.S. Attorney David B. Anders, insisting dozens of times that he did not recall documents or incidents that his subordinates had testified about earlier in the trial.
Ebbers said he had no memory of an October 2000 encounter with then-controller David F. Myers at which Myers said he thought Ebbers was apologizing for the first fraudulent accounting entry. Ebbers also said he did not recall telling his head of investor relations, C. Scott Hamilton, that he would be "wiped out" if the company told Wall Street to expect lower earnings and the stock price fell as a result.
Faced with half a dozen documents that showed line costs fluctuating by $600 million, $700 million, even $900 million in a single month, Ebbers looked tired and coughed as he insisted that he either had never read the document or had not noticed the particular line item in three budget reports he was shown.
"I did not notice that," Ebbers said.
"If I would have noticed it, we would not be here."
"I just didn't see it."
Anders pressed, "WorldCom reduced its line costs by over $2 billion and you had no idea?"
"That's correct," replied Ebbers, who resumes the stand Wednesday.
