Risk Management

Ebbers Loses Appeal: Faces 25 Years

Ruling comes on the heels of SEC decision to waive disgorgement payments for former WorldCom CFO Scott Sullivan.
Stephen TaubJuly 28, 2006

It looks like Bernie Ebbers is headed to prison.

A federal appeals court upheld the former WorldCom chief executive’s conviction on charges stemming from the telecom company’s massive accounting fraud, according to the Associated Press.

The decision sets the stage for Ebbers to begin serving a 25-year prison sentence, noted the wire service. His former CFO, Scott Sullivan, who testified against him, is already serving a 5-year sentence.

“The methods (Ebbers) used were specifically intended to create a false picture of profitability even for professional analysts that, in Ebbers’ case, was motivated by his personal financial circumstances,” wrote Judge Ralph Winter of the U.S. Second Circuit Court of Appeals, reported Reuters. “Given Congress’ policy decisions on sentences for fraud, the sentence is harsh but not unreasonable.”

Ebbers had argued that there were mistakes in the original trial — including the introduction of some testimony and the trial judge’s instructions to the jury — and that the sentence was unreasonably long, the appeals panel said, according to Reuters.

CFO.com reported Thursday that the Securities and Exchange Commission has announced final civil settlements with Sullivan, four former WorldCom accountants, and another former finance executive. The commission noted that, pending court approval, it would waive payment of disgorgement and prejudgment interest and would not impose a civil penalty against Sullivan and two of the accountants — David Myers and Buford Yates — based on their demonstrated inability to pay.

The other two accountants — Betty Vinson and Troy Normand — are not liable for disgorgement, according to the SEC, because neither received ill-gotten gains from their participation in the fraud. The SEC is not seeking civil penalties against Vinson or Normand, who also do not have the funds to pay them, added the commission.

SEC officials also settled civil fraud charges against Mark Abide, WorldCom’s former director of property accounting, for his role in the fraud and for illegally selling WorldCom stock based on inside information.