WorldCom’s Sullivan Gets 5-Year Term

It pays to spill the beans.

That was the consensus opinion of legal experts Thursday as former WorldCom Inc. finance chief Scott D. Sullivan was sentenced to five years in prison for his central role in the company’s $11-billion accounting fraud -- the same fraud that led to a 25-year sentence for his boss, Bernard J. Ebbers.

U.S. District Judge Barbara Jones called Sullivan the “architect” of the scam, but said the light sentence was warranted because his court testimony proved pivotal in convicting Ebbers.

“His cooperation was the key factor in the case against Mr. Ebbers,” Jones said. She added that although Sullivan was the “day-to-day” manager, “there is no doubt that Mr. Ebbers was the instigator of the scheme.”

Defendants often receive reduced sentences for cooperating with prosecutors, but outside experts said Jones was particularly lenient with Sullivan, who faced a term of as many as 25 years.

“There is no question he caught himself a huge break,” said Robert Ray, a white-collar defense lawyer at Pitney Hardin in Morristown, N.J.

“For him to come away with 20 years less than Ebbers is real good,” added Julian Solotorovsky, a white-collar crime partner at Kelley Drye & Warren in Chicago.

Jones said another factor she considered was the ill health of Sullivan’s wife, who suffers from severe diabetes. Sullivan must help care for their 4-year-old daughter, and a longer sentence would have had a “punishing effect on Mr. Sullivan’s innocent family,” the judge said.

If he earns time off for good behavior, Sullivan, 43, would serve about four years and three months. The final six months could be spent in a halfway house, Solotorovsky said. Sullivan is scheduled to report to prison Nov. 11.

In a prepared statement before he was sentenced, Sullivan apologized for his “cowardly decisions” and said he was “ashamed and embarrassed.”

“Every day, I regret what happened at WorldCom,” Sullivan said. “I will carry the burden of my failings always.”

Sullivan refused to comment after the sentencing.

To settle an investor class-action lawsuit, Sullivan has agreed to forfeit his $11-million Florida estate, which includes a 30,000-square-foot mansion, as well as $200,000 in his 401(k) retirement account. An attorney for Sullivan said he would effectively be left without assets, although some money would go into a trust fund to care for his daughter.

One former WorldCom employee, Henry J. Bruen Jr., said after court Thursday that he was satisfied with Sullivan’s sentence because his testimony secured Ebbers’ conviction.

“I’m not thrilled, but it was a means to an end, and it was a just conclusion to this whole saga,” Bruen said.

WorldCom was a telecommunications juggernaut during the late 1990s, but its revenue and earnings began to shrivel as the Internet boom faded.

Ebbers wanted to conceal the problems from investors, Sullivan testified at Ebbers’ trial. In testimony, Sullivan described how he systematically overstated WorldCom’s revenue and understated costs by improperly listing expenses as capital expenditures.

Sullivan said he warned Ebbers in several one-on-one discussions that their actions were wrong, but said his boss simply told him to “hit the numbers” that Wall Street analysts expected.

By mid-2002, an internal auditor discovered extensive bookkeeping errors, and the company collapsed into bankruptcy protection after the fudged accounting was revealed. The company, since rechristened MCI Inc., is now being acquired by Verizon Communications Inc.

Ebbers, 63, is scheduled to begin serving a 25-year-sentence Oct. 12. He maintains his innocence and is seeking to remain out of prison while he appeals his conviction.

Sullivan’s attorney argued for leniency on the grounds that the former finance chief quickly acknowledged his culpability and worked with prosecutors. But Jones contradicted him, saying Sullivan initially disclaimed any responsibility, particularly when confronted by WorldCom directors, and was slow to accept a plea bargain.

Sullivan reiterated Thursday that he was trying to nurse WorldCom through what he thought was a temporary soft patch in demand for telecom services, and that he never sought to plunge the company into scandal.

“I knew it was wrong but my intentions were not to hurt people,” Sullivan said.

Associated Press was used in compiling this report.