In a closing chapter in what has become the nation's largest accounting fraud, former WorldCom chief executive Bernard Ebbers was found guilty today on all counts, the Wall Street Journal reported.
The verdicts were a major victory for Justice Department prosecutors who spent nearly three years investigating the $11 billion fraud that pushed the company into bankruptcy and decimated a stock that was once worth $100 billion. The company, now known as MCI, emerged from bankruptcy in 2004 and is courting acquisition offers from Verizon Communications Inc. and Qwest Communications International Inc., the Journal reported.
Ebbers, 63, faces a life sentence after being convicted on one count of securities fraud, one count of conspiracy and seven counts of filing false statements with the Securities and Exchange Commission. The jury deliberated for eight days at the end of the six-week trial.
"We are obviously extremely disappointed by the verdict," said Ebbers's lawyer, Reid Weingarten. "We continue to believe there's not a chance in the world [Ebbers] participated in any effort to cook the books at WorldCom ... The fight will continue."
Once among the highest-profile chief executive officers during the roaring 1990s, Ebbers showed no emotion as the verdicts were read in court on Tuesday. His wife, Kristie, who was sitting in the front of the gallery and attended every day of the trial, cried silently. Afterward, Ebbers and his wife hailed a taxi outside the courthouse and left without speaking to reporters, the Journal reported.
Much of Ebbers' personal fortune was tied up in WorldCom stock, which prosecutors used as the foundation for their case that he had good reason to hide the company's true financial condition. The prosecution's star witness was former chief financial officer Scott Sullivan, who pleaded guilty and hopes for a lesser sentence for his role in the fraud in exchange for his testimony against Ebbers.
The ex-CFO testified that he repeatedly discussed details of the fraud with his boss, and that Ebbers pressured him to do whatever it took to keep WorldCom in Wall Street's good graces, the Journal reported, adding that Ebbers denied the assertions of his former key lieutenant, saying he was unaware of the accounting transgressions.
"He has never told me he made an entry that wasn't right. If he had, we wouldn't be here today," said Ebbers during his two-day testimony.
Attempts to use the “aw shucks” defense apparently failed as the government added there was no way a detail-oriented executive like Ebbers (he kept track of the cost of office coffee filters, for instance) would ever be unaware of billions of dollars in improper accounting adjustments, the Journal reported.
The guilty verdict is a "huge victory" for the government, Gabriel J. Chin, a professor of law at the University of Arizona, told the Journal. "What this says is that when the Department of Justice thinks a case is particularly important they can go up against some of the top lawyers in the country and beat them."
CEOs face trials in numerous corporate fraud cases. Former Tyco CEO L. Dennis Kozlowski is undergoing a second trial in New York on charges of grand larceny and securities fraud after his first ended in a mistrial, while Richard M. Scrushy, the founder and CEO of HealthSouth Corp., currently is on trial for fraud in Birmingham, Ala. The fraud and conspiracy trial of Enron Corp. founder Kenneth Lay and former CEO Jeffrey Skilling has been set for January 2006, the Journal reported.