Ebbers Gets 25-Year Sentence For Role in WorldCom Fraud
Thursday, July 14, 2005
NEW YORK, July 13 -- A federal judge Wednesday sentenced former WorldCom Inc. chief executive Bernard J. Ebbers to 25 years behind bars for his role in the nation's largest accounting fraud, the harshest prison term yet to flow fromcorporate scandals that rocked the stock market three years ago.
The once-brash mogul, 63, wept and sniffled as U.S. District Judge Barbara S. Jones imposed the sentence in front of a packed courtroom. Ebbers, a former basketball coach who built a telecommunications empire from scratch, must serve 85 percent of the prison term -- making him eligible for release in about two decades. The judge recommended he be sent to a low-security facility in Yazoo City, Miss., so relatives and friends who live nearby could visit.
"Although I recognize . . . this is likely to be a life sentence for Mr. Ebbers, I find anything else would not reflect the seriousness of the crime," the judge said.
Ebbers, who maintains his innocence, waived his right to speak. He hunched over and clutched the back of his chair after the two-hour proceeding ended. His wife, Kristie, stepped forward and cried on his shoulder. Defense lawyers swiftly vowed to appeal and sought to delay his Oct. 12 deadline to report to prison.
"We're not giving up," lawyer Reid H. Weingarten told reporters as a light rain fell outside the courthouse. "Bernie Ebbers is not giving up. We're going to pursue an appeal as vigorously as possible."
The lengthy sentence was the latest move in a long-running government effort to hold business executives accountable for malfeasance that occurred on their watch. Earlier this year, the 80-year-old founder of Adelphia Communications Corp., John J. Rigas, received a 15-year prison sentence. Two weeks ago, an Alabama jury acquitted former HealthSouth Corp. chief executive Richard M. Scrushy on 36 fraud and conspiracy charges. Former Tyco International Ltd. chief L. Dennis Kozlowski is scheduled to be sentenced next month on larceny charges. The final chapter is set to begin when onetime Enron Corp. leaders Kenneth L. Lay and Jeffrey K. Skilling face trial in Houston in January.
Prosecutors opposed efforts that would allow Ebbers to remain free pending the results of the appeal. The judge, who expressed doubts about the likelihood of overturning the March conviction on securities fraud, conspiracy and false-statements charges, nonetheless ordered the government to file court papers within three weeks responding to the defense request.
"This case is almost the standard for large frauds," Assistant U.S. Attorney David B. Anders told the judge. "It's the case defendants for years to come will point to."
The fraud at WorldCom ultimately topped $11 billion and led to the country's biggest bankruptcy filing, in July 2002. Nearly 17,000 employees lost their jobs as a result of the scheme to bury expenses and inflate revenue, according to a probation report. The Ashburn company has since emerged from bankruptcy protection and renamed itself MCI Inc.
Last month Ebbers agreed to pay $5.5 million cash and to hand over his Clinton, Miss., mansion and other assets worth as much as $40 million to resolve claims filed by WorldCom shareholders who lost billions of dollars when the company collapsed. His wife will be allowed to keep a smaller Mississippi house, $50,000 in cash and a retirement account under the terms of the deal. Ebbers has repaid only a small portion of the $408 million in personal loans the company made before WorldCom's board forced him to resign.
Former WorldCom salesman Henry J. Bruen Jr. decried the "untold human carnage" wreaked by Ebbers and his co-conspirators, in a brief statement he read to the court before the judge handed down the sentence. Bruen, who was laid off from the company's Manhattan office in 2003, told the judge he has been unable to find a sales job in part due to the "stigma" of being an employee at a scandal-ridden firm.
Gino Cavallo, a service consultant at the company's New York office who said he lost tens of thousands of dollars in retirement savings, told reporters after the proceeding that he was satisfied with the "stern" sentence. "Well, the man's 63, he's going to die in jail," Cavallo said. "How much sterner could it get?"
Defense lawyers had pleaded with the judge for leniency, citing Ebbers's heart condition and more than $100 million he gave to charity. "If you have lived 60-something years and you have an unblemished record, doesn't that count, particularly on this day?" Weingarten asked, his voice rising with emotion.
The defense also blamed former WorldCom finance chief Scott D. Sullivan for coming up with the scheme in an effort to meet Wall Street analysts' expectations. Sullivan, the star witness against Ebbers, has pleaded guilty to fraud charges and faces sentencing Aug. 4. Four other former company officials, including its former controller and accounting director, will be sentenced later this summer.
"It seems quite clear to me that Mr. Ebbers was really a leader of criminal activity in this case," Judge Jones said. The judge said testimony from the trial showed that Ebbers repeatedly misled investors and employees and filed phony financial information with the Securities and Exchange Commission.
Disclosures about extensive fraud at WorldCom in June 2002 devastated investor confidence and prompted Congress to pass legislation increasing criminal penalties for business fraud. The company and its founder, Ebbers, since have become synonymous with that era. It is a remarkable fall for the Canada-born Ebbers, who strode down the halls in cowboy boots, graced the cover of business magazines and boasted that he would reshape the telecommunications sector.
Under the judge's calculations, Ebbers could have faced 30 years to life in prison. But she said she knocked off five years after considering nearly 170 letters from friends and neighbors describing the defendant's good works. The judge said she would recommend that prison officials treat Ebbers as if he were eligible for a low-security facility, which is available to defendants with sentences of no more than 23 years and six months.
"A medium-security facility would be absurd in this case and a waste of taxpayer dollars," defense lawyer Brian M. Heberlig told the judge. "Mr. Ebbers is a danger to no one."