Ebbers Pleaded Ignorance on Tapes
A defense lawyer played two audiotapes of WorldCom Inc.’s former chief executive in court Wednesday in hopes of convincing jurors that Bernard J. Ebbers knew too little about the company’s accounting to have overseen the $11-billion fraud that forced the company to file for bankruptcy protection.
On the first day of testimony in Ebbers’ fraud trial in federal court in New York, the defense aimed to show that he left the financial details to his finance chief, Scott D. Sullivan, who has pleaded guilty and is expected to testify against his former boss.
“Those sound like all Scott questions to me,” Ebbers said in an October 2001 tape in response to a detailed question from stock analyst Adam Quinton.
On that tape and one taken of a conference call with stock analysts in February 2002, Ebbers deflected complex questions about revenue, earnings and economic trends.
In the 2002 conference call, Quinton, an analyst at Merrill Lynch & Co., asked Ebbers whether he could give any estimate of when the U.S. economy would emerge from recession.
“Adam, as far as indicators of ... when we’re going to come out of the recession, you know, remember, I’m a PE graduate, not an economist,” said Ebbers, who has a degree in physical education. “So I don’t know that I can speak to that with any credibility or anything.”
Ebbers is charged with fraud, conspiracy and making false filings with the Securities and Exchange Commission in connection with WorldCom’s 2002 collapse. Those crimes carry a maximum penalty of 85 years in prison.
Quinton, testifying for the prosecution Wednesday, was asked about an e-mail he sent in 2002 to Sullivan that raised eight complex questions about the company’s finances and accounting practices.
He said that his concerns were mostly addressed in a conference call shortly afterward and that Ebbers “ran through a list of items in a reasonable amount of detail.”
Quinton also testified, however, that Sullivan was typically the one “focused on answering the more specific questions about the financial statements.”
Most of Wednesday’s testimony amounted to a primer for jurors, with Quinton covering the basics of accounting. Another witness, Douglas Webster, a vice president of MCI Inc. -- WorldCom’s new name -- described the company’s rise from a small long-distance provider into a global telecommunications giant.
A defense lawyer asked Webster whether he was shocked, given Sullivan’s sterling reputation as an accountant, to learn about WorldCom’s shady accounting in 2002.
“I was shocked about the fact that the accounting situation had taken place,” he said. “I certainly was shocked about what was going on.”
MCI is now based in Ashburn, Va. As WorldCom, the company lost $184.6 billion in value between its high on June 18, 1999, and July 21, 2002, when it filed for bankruptcy protection.
