Ebbers Testifies He ‘Didn’t See’ Fraud

Former WorldCom Chief Executive Bernard J. Ebbers testified Tuesday that he “just didn’t see” glaring irregularities in internal financial papers that he reviewed while the company’s $11-billion fraud was underway.

In a daylong cross-examination by a prosecutor in federal court in New York, Ebbers gave his most detailed denial yet that he had anything to do with the improper accounting that brought down the company.

Ebbers was presented with a WorldCom budget report that showed so-called line cost expenses at $732 million in September 2000, only half the $1.4 billion budgeted by the company.

The report was doctored, reflecting adjustments made by WorldCom accountants to cover up line costs that were much higher that summer than the company expected.

Prosecutor David Anders asked Ebbers whether he noticed the gap.

“If I would have noticed that, we would not be here today,” Ebbers said. The former CEO said he paid more attention to other expenses in the document.

Ebbers took the witness stand in his defense Monday and emphatically denied knowing anything about the accounting fraud while it was taking place. The defense said it was the work of finance chief Scott D. Sullivan.

On Tuesday, under six hours of intense and sometimes contentious questioning by lead prosecutor Anders, Ebbers expanded the denial to include each quarter of the fraud, which ended in 2002.

When Anders showed him a doctored report that reflected line costs dropping from $1.6 billion in October and November 2000 to $858 million in December, Ebbers said, “I just didn’t see it.”

Presented with a report with a similar gap for the first quarter of 2001 -- although this report did not include budget figures -- Ebbers said he probably just tossed it in the trash.

“So it’s your testimony,” Anders said at the end of the day, “that WorldCom reduced its line costs through adjustments of more than $2 billion -- and you had no idea?”

“That’s correct,” Ebbers said.

Earlier Tuesday, Anders sought to show Ebbers felt intense pressure as his company’s stock fell steadily, threatening hundreds of millions of dollars of his personal loans. The prosecutor walked Ebbers through a series of margin calls issued by Bank of America Corp. in 2000, demanding more collateral for loans as the stock fell.