NEW YORK, Feb. 7 -- Former WorldCom Inc. chief financial officer Scott D. Sullivan took the stand at the trial of his ex-boss Bernard J. Ebbers on Monday and described the former chief executive as a "micromanager" with a "good grasp of accounting concepts" who was directly involved with the alleged conspiracy to falsify the telecommunications giant's books.
Sullivan, 43, began what is expected to be several days on the stand as the government's chief witness by including Ebbers in a list of the alleged conspirators who falsely boosted WorldCom's publicly reported revenue and hid its expenses. Sullivan also depicted Ebbers as a hands-on boss who kept mounds of WorldCom financial statements in his office and regularly pored over them with Sullivan. Obsessed with cutting costs, Ebbers asked detailed questions about coffee filter consumption, customer service response time, employee attrition and outsourcing contracts, Sullivan said.
Attorney Reid H. Weingarten, left, leads the defense team for former WorldCom chief executive Bernard J. Ebbers.
(Chip East -- Reuters)
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"Bernie had a grasp of financial information that surpassed the chief financial officers at some of the companies we were acquiring," Sullivan said. "He saw all the revenue coming together. He saw all the expenses coming together. He understood the total company picture."
Sullivan's testimony so far contrasts with e-mails and audiotapes that suggested Ebbers was less than adept at financial matters. But if the jury finds Sullivan's depiction compelling, it could seriously undermine the defense claim that Ebbers was misled by his underlings about the company's accounting and did not know that Sullivan and other were hiding billions of dollars in operating expenses known as line costs by pretending they were capital expenditures. WorldCom filed for bankruptcy protection in July 2002 and ultimately said it had uncovered $11 billion in accounting fraud. The company now does business as MCI Inc. of Ashburn.
Prosecutors have charged Ebbers with conspiracy, securities fraud and making false filings to the Securities and Exchange Commission. Ebbers, 63, was impassive as Sullivan took the stand and explained to the jury that he has pleaded guilty to three felony counts and is facing up to 25 years in prison. Ebbers appeared to stroke his beard as his former protege outlined their multimillion-dollar retention bonuses and stock option grants. Sullivan looked at Ebbers only once during his hour and a half on the stand, when Assistant U.S. Attorney William Johnson asked him to point his former boss out to the jury.
The former finance chief spoke evenly and seemed almost diffident as he described, in response to prosecutors' questions, his 1984 conviction for drunken driving and his past drug use -- he said he used marijuana three or four times a year from college into the late 1990s and cocaine about as frequently from 1989 to 2000.
Then Sullivan described life as Ebbers's sidekick. They had neighboring offices in the company's Clinton, Miss., headquarters, and Sullivan said Ebbers was in his office "three, four, five, sometimes 10 times a day." They ate lunch together daily and went to sporting events such as the Super Bowl and the NCAA Final Four basketball tournament, Sullivan said.
When the company was growing explosively in the 1990s and was a darling of Wall Street securities analysts, Sullivan said, his relationship with Ebbers was "very good," but things deteriorated in 2000 as WorldCom had trouble meeting its ambitious financial goals. "It was very tough. There was a lot of stress," said Sullivan, adding that "at times" he was frightened of Ebbers. "He can be very intimidating, very imposing," Sullivan said.
Sullivan and the WorldCom budget analyst who testified right before him, G. Brady Connor, also described Ebbers's focus on cutting costs. Sullivan said Ebbers would demand that WorldCom's Atlanta-based marketing director drive six or seven hours to Mississippi to save airplane costs and that Ebbers alleged that company employees were stealing coffee because the number of filters outnumbered the supply of beans.
Connor testified that Ebbers said at a company meeting in Atlanta that he wanted the information technology staff to track employee start times through the company's e-mail programs and that he planned to reprimand a senior manager for spending too much time on smoking breaks.
Ebbers also described a cost-cutting measure he had secretly implemented in the Pentagon City offices, Connor said. Ebbers said he had ordered a security guard to use tap water to refill the company's water dispensers rather than order more bottled water. "The employees didn't know the difference," Connor described Ebbers as saying.
Sullivan has not yet begun to describe the detailed accounting actions that prosecutors contend were fraudulent, nor has he faced cross-examination. The former finance chief is expected to spend the rest of the week on the stand.
