washingtonpost.com  > Technology > Special Reports > MCI

Prosecution Says Ebbers Had Motive, Led Fraud

By Brooke A. Masters
Washington Post Staff Writer
Thursday, March 3, 2005; Page E01

NEW YORK, March 2 -- Bernard J. Ebbers masterminded a multibillion-dollar scheme to falsify WorldCom Inc.'s bottom line because he cared more about protecting his personal fortune than being honest with shareholders, Assistant U.S. Attorney William F. Johnson told the jury at Ebbers's fraud trial.

"Money, power and pressure corrupted Bernard J. Ebbers to commit fraud on a billion-dollar scale," Johnson said in closing arguments Wednesday. "WorldCom had truly become WorldCon."

Former WorldCom chief executive Bernard J. Ebbers said on the stand that he didn't know about billions of dollars in accounting fraud. (Louis Lanzano -- AP)

Photo Gallery: Ebbers Through the Years
_____Post 200 Profile_____
MCI Inc.
_____MCI Coverage_____
MCI to Evaluate Qwest Bid (The Washington Post, Mar 3, 2005)
A Clear Path to Consolidation (The Washington Post, Mar 3, 2005)
Qwest Tells MCI Stockholders That Its Offer Beats Verizon's (The Washington Post, Mar 2, 2005)
Story Archive and Company Background

Prosecutors charged Ebbers, the former chief executive, with securities fraud, making false filings to the Securities and Exchange Commission and conspiring with Scott D. Sullivan, who was chief financial officer, to boost the telecommunication giant's earnings by hiding operating expenses and make unannounced changes to the way it recorded revenue. Investors lost billions of dollars when WorldCom filed for bankruptcy in July 2002. The company now does business as MCI Inc. of Ashburn, Va..

Ebbers said on the stand he knew nothing of the fraud. His attorney Reid H. Weingarten contends that Sullivan concocted the scheme with his underlings and is falsely accusing Ebbers to reduce his own prison sentence. Weingarten will address his closing arguments to the 12 jurors and two alternates Thursday.

In his 3 1/2-hour summation, Johnson focused on Ebbers's financial motive for falsifying WorldCom's results and on his reputation as a demanding boss who kept a close eye on the company's expenses.

It was no coincidence, Johnson said, that the conspiracy began in October 2000, shortly after Ebbers's bank started calling in his personal loans because of the company's falling stock price. "Ebbers faced a choice of admitting WorldCom's financial position or lying to cover it up, but the truth would have wiped him out," Johnson said. "He chose to commit a crime."

Johnson ridiculed Ebbers's testimony that he did not notice entries in monthly budget reports that showed key operating expenses -- called line costs -- fluctuating by $600 million in a single month, calling it the " 'Aw shucks, I'm just not that sophisticated' defense."

"He treated you no better than he treated the ordinary investors and shareholders in WorldCom," Johnson told the jury. "He lied right to your face. It insults your intelligence that Ebbers could have built this company up from nothing in 10 years and still be clueless about its financial performance.

"There is a paper trail in this case that stretches nearly all the way back to Mississippi," but the government did not introduce a single document that clearly linked Ebbers to the line-cost fraud at the heart of the case, Johnson said.

Johnson gave jurors a "top 10 list" of reasons Ebbers is guilty. No. 1 on the list was Sullivan, who testified that there were no witnesses to the conversations in which he told Ebbers he was committing fraud. Four other events Johnson cited incriminated Ebbers primarily based on Sullivan's testimony. Among those items: Sullivan's assertions that Ebbers called off merger talks with Verizon Communications Inc. because he feared Verizon officials would uncover the fraud and that Ebbers wanted the company's main monthly budget report altered to omit line costs. Other witnesses testified that the merger talks stalled and that the reports were changed but did not link the developments to Ebbers's knowledge of fraud.

Still, Johnson's list had five non-Sullivan items: Ebbers's financial motive, a voice mail that recorded Sullivan telling Ebbers about "accounting fluff" in the company's revenue, a hallway encounter between Ebbers and the controller, David F. Myers, in which Ebbers appeared to apologize for the fraud, a speech to investors in which Ebbers ad-libbed that the company had "let you down" and a memo from Ebbers to another executive that refers to "one-time items" in the company's revenue.

"Ebbers ordered his troops into battle, knowing full well that the battle plan was fraud," Johnson said.

© 2005 The Washington Post Company