WOULDEBBERS HAVE GONE TO JAIL?

Should Ebbers have gone to jail?

Should Ebbers have gone to jail?

Bernard J. (Bernie) Ebbers from the beginning “was a man who believed in himself and his company” a statement which was best expressed by the way in which he performed duties to his company. WorldCom thus? became the second largest telecommunications company in the United States through the acquisition of over 70 companies by 2000. Experiencing explosive growth encouraged competition driving costs down from 19% to 0 in 2002 and declining $28 billion in debt. The board of directors then loaned Ebbers $366 million? to marginally pay off the debt to which investigators launched a probe into the loan which revealed 'extraordinary accounting irregularities' making profits before taxes and other charges to eventually be $11 billion higher than they actually were(Williams? Haka? ? Bettner? ? Meigs? 2003). They did this by: double counting revenue from a single customer? keep delinquent account even after they stopped paying as well as not closed dead accounts. Eventually some of the charges against former CEO Ebbers and CFO Scott Sullivan included: fraud? conspiracy? making false statements as a result of their unethical accounting practices.

A close look at the case against the onetime telecom star reveals that? despite all the superficial similarities with the Lay saga? he'll probably be much easier quarry for prosecutors than the ex-Enron chief. Not only would allegations of WorldCom's wrongdoing be far simpler for a jury to understand than those allegedly committed by the energy giant? but Ebbers also appears to have been more directly involved in the disputed transactions than Lay. He would also have a harder time deflecting liability by saying lawyers and accountants signed off on them(Robbins? Bergman? Stagg? Coulter? 2003).

The standard defense for corporate executives accused of wrongdoing has been to plead ignorance. Ebbers claimed that as CEO he wasn't knowledgable in accounting practices and was unaware of fraud at WorldCom? but the strategy failed.

To be sure? Ebbers has denied wrongdoing and is vowing to prove his innocence before a jury (Williams? Haka? Bettner? Meigs? 2003).

But the Justice's Dept.'s 31-page indictment is more than a mere sound bite. It claims that Ebbers and Sullivan artificially boosted the company's profits with a variety of accounting tricks? including understating expenses and treating operating costs as capital expenditures. Even though the government has not exposed any documents in which Ebbers orders lower-level managers to misinformed investors? the condemnation does include references to quite a few formerly undisclosed meetings with Sullivan. The former CFO's cooperation with the government means that it is going to be much harder for Ebbers to claim ignorance about WorldCom's accounting manipulations. Sullivan would be able to supplement the seemingly paltry written record with testimony about his conversations with the CEO.

Unlike Lay? who was known as Enron's ambassador to the outside world? Ebbers was a classic micromanager? according to former insiders. The indictment paints a portrait of a man directly involved in many of the events that led to WorldCom's ...