Witness Tells of Ebbers’ Request
Former WorldCom Inc. Chief Executive Bernard J. Ebbers, facing financial ruin as the company’s stock plummeted, pleaded with other top executives in 2001 to do “everything they could possibly do” to turn the troubled telephone giant around, a witness testified at Ebbers’ fraud trial Friday.
Ebbers told executives at a 2001 meeting that “everything that I worked for since I joined WorldCom will basically be wiped out” if the stock price continued to sink, former company controller David Myers recalled during his testimony in federal court in New York.
Myers, who is cooperating with the government after pleading guilty in a related case, said the meeting occurred even as the company’s finance department was covering up billions of dollars in expenses in its financial statements.
Prosecutors charge the coverups amounted to fraud, and were orchestrated by Ebbers out of fear the company’s stock would suffer if financial results fell below forecasts.
Not only did Ebbers have most of his wealth tied up in the company’s stock, but he had used the stock to secure about $400 million in personal bank loans, the government has charged in bringing its fraud and conspiracy case.
Ebbers had built WorldCom from a Mississippi upstart into a telecom powerhouse, but the company had fallen on hard times by 2000. Expenses had skyrocketed, and revenue was well below expectations.
Over two days of testimony, Myers has recounted a series of coverups that he ordered under the direction of the company’s chief financial officer, Scott D. Sullivan, to hide WorldCom’s financial troubles from the public.
By the third quarter of 2001, for instance, Myers testified, $744 million in expenses were removed from the company’s books, changing its quarterly results from a loss of 1.8 cents a share to a profit of 16.6 cents.
At a meeting of executives in the summer of 2001, Myers said that Ebbers spoke for about 30 minutes, addressing the problem of soaring costs.
“He made a plea to everybody to do everything they could possibly do to work to reduce costs,” Myers said. He then recalled Ebbers told them that “while this company was in extraordinary times, extraordinary things had to be done.”
According to the testimony, Ebbers then said: “I’m sure all of you guys are aware of my personal situation,” and explained that he was facing margin calls on his loans if WorldCom’s stock price continued to fall.
A margin call is essentially a demand by a broker for a cash deposit to back loans secured with stock if the price of the stock has dropped.
WorldCom, which went through bankruptcy proceedings, now operates under the name MCI Inc.
