Fraud Trial Begins for Ex-WorldCom Chief

Jan. 19, 2004 — -- A federal court in New York was the stage today as former WorldCom Inc. chief executive officer Bernard Ebbers went on trial on charges he committed an $11 billion fraud that caused the company's collapse.

Ebbers is accused of criminal fraud and conspiracy that resulted in WorldCom, one of the world's largest telecommunications companies, filing the largest U.S. bankruptcy ever in 2002. If convicted on all charges, including seven counts of false filings with the Securities and Exchange Commission, Ebbers could face up to 85 years in prison.

Ebbers built a small long-distance company into a telecom giant that merged with MCI in 1997 and at its peak, was worth more than $160 billion. But was it all a shell game?

Federal prosecutors have accused Ebbers of lying and actively hiding the company's true financial standing from employees, investors, Wall Street and regulators. WorldCom filed for bankruptcy with an estimated accounting fraud totaling $11 billion.

Ebbers has insisted he is innocent of the charges, and the defense maintains there is no concrete evidence implicating him.

The prosecution's star witness will be WorldCom's former chief financial officer, Scott Sullivan, who pleaded guilty in 2004 before his own trial was to start.

Prosecutors are expected to play a voicemail message Sullivan left for Ebbers in June 2001 in which Sullivan told his boss he was worried about "accounting fluff" and that the company was "disguising what is going on."

It is expected that Ebbers' attorneys will argue that the former CEO left accounting decisions to Sullivan and was too high up the corporate ladder to concern himself with day-to-day accounting issues.

And the testimony promises to get personal. On Tuesday U.S. District Judge Barbara Jones ruled that defense attorneys could quiz Sullivan about alleged marital infidelity so jurors can weigh his honesty as a witness.

Defense attorneys had also hoped to show that Ebbers discussed the collapse of Enron Corp. with Sullivan to show that Ebbers was aware that WorldCom's accounting practices were also illegal, but Jones ruled any Enron testimony irrelevant.