Ebbers Is Sentenced to 25 Years
By SHAWN YOUNG, DIONNE SEARCEY and KARA SCANNELL
Staff Reporters of THE WALL STREET JOURNAL
July 13, 2005 12:10 p.m.
Bernard J. Ebbers, the former chief executive of WorldCom Inc., was sentenced to 25 years in federal prison today for spearheading the largest accounting fraud in U.S. history.
Mr. Ebbers, 63 years old, was convicted in March of nine counts of fraud, conspiracy and making false filings with regulators in connection with the $11 billion fraud that drove the telecommunications empire he founded into bankruptcy protection in 2002. The bankruptcy filing wiped out the shares of a company that was once worth more than $180 billion at its peak in 1999.
Judge Barbara Jones handed down the sentence in U.S. District Court in Manhattan. Mr. Ebbers, who continues to maintain that the fraud was committed by underlings without his knowledge, is planning to appeal.
Judge Jones said she believed federal sentencing guidelines called for a sentence of between 30 years to life, but cited Mr. Ebbers's health condition and charitable work in sentencing him to a term of 25 years.
``I find that a sentence of anything less would not reflect the seriousness of this crime,'' Judge Jones said. She ordered Mr. Ebbers to report to prison on Oct. 12. She said she would recommend Mr. Ebbers be designated to the federal prison in Yazoo City, Miss., close to his home.
Mr. Ebbers did not address the judge and showed no discernible reaction. His wife, Kristie Ebbers, cried quietly.
Defense lawyer Reid Weingarten had asked for leniency, mentioning Mr. Ebbers's heart condition and his charitable works, cited repeatedly in 169 letters sent to the judge. He described Ebbers as ``a modest man'' and an angel to many desperate charitable causes.
The judge said she did not believe his heart condition was serious enough to warrant a lesser sentence. She called the charity question a close call and said she would consider it but not formally reduce sentence because of it.
The sentencing came a day after Judge Jones denied a bid by Mr. Ebbers for a new trial -- a ruling in which she cited ``strong'' evidence supporting the conviction, including government witnesses who ``outlined the fraud in painstaking detail.''
Last month, Mr. Ebbers agreed to pay $5 million and forfeit nearly everything he owns, including his Mississippi mansion, to settle a civil lawsuit brought by investors who lost billions of dollars in WorldCom's collapse. Earlier this week, another judge approved the settlement, which calls for Mr. Ebbers to turn over his assets to a trust that eventually will sell them off for an expected $25 million to $40 million.
Mr. Ebbers's conviction was a landmark victory for prosecutors seeking to hold top executives responsible for the string of corporate scandals that helped end the stock market boom of the late 1990's.
Mr. Ebbers is the second aging former corporate chieftain to be handed an effective life sentence in recent weeks. Last month a federal judge sentenced Adelphia Communications Corp.'s 80-year-old founder John Rigas to 15 years for fraud and conspiracy. (Mr. Rigas's son, former chief financial officer Timothy Rigas, 49, was sentenced to 20 years.)
And on Aug. 2, Tyco International Ltd.'s former CEO, L. Dennis Kozlowski, and its former chief financial officer, Mark Swartz, could be sentenced to as many as 30 years, though legal experts say they probably won't get near that much. Last month, a jury found them guilty of grand larceny, conspiracy and fraud.
Mr. Ebbers was convicted after a dramatic nine-week trial featuring his former right-hand man and chief financial officer Scott Sullivan as the star witness. Despite nearly two years of investigation, prosecutors hadn't been able to charge Mr. Ebbers, who didn't use email and left virtually no paper trail, until Mr. Sullivan agreed on the eve of his own trial to plead guilty and testify against his former boss. Mr. Sullivan is scheduled for sentencing next month for his role in the fraud and faces up to 25 years.
In his testimony, Mr. Sullivan described a company caught flatfooted as the telecommunications bubble began to deflate and antitrust officials thwarted the acquisition binge that had fueled much of WorldCom's spectacular growth. The fraud included improperly classifying key operating expenses as capital expenditures so they wouldn't cut as deeply into earnings as well as booking revenue the company knew it was unlikely to ever collect.
Prosecutors had recommended an effective life sentence of 85 years for Mr. Ebbers based in part on the many thousands of investors and employees who were harmed by the company's collapse. Mr. Ebbers, represented by Reid Weingarten of Steptoe & Johnson LLP, based in Washington, D.C., had asked for leniency based on Mr. Ebbers' lack of criminal record, age, heart condition, history of civic activity and charitable donations--and the improbability of a repeat offense.
The company, renamed MCI Inc., has since emerged from bankruptcy protection under new management and agreed to be acquired by Verizon Communications Inc. in May.
--The Associated Press contributed to this article.
Write to Shawn Young at shawn.young@wsj.com8, Dionne Searcey at dionne.searcey@wsj.com9 and Kara Scannell at kara.scannell@wsj.com10
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