Five years in prison for WorldCom ex-CFO
NEW YORK – Depending on whom you believe, Scott Sullivan was either the mastermind of the $11 billion accounting fraud that capsized WorldCom, or a troubled employee who caved to pressure from his boss.Five months ago, a jury sided with Sullivan, convicting ex-CEO Bernard Ebbers of orchestrating the largest accounting scandal in U.S. history – a verdict that led to a 25-year prison sentence.And on Thursday, Sullivan learned his own, much more lenient penalty:Five years in prison.”I am sorry for the hurt that has been caused by my cowardly actions. I truly am, Your Honor,” he said before the sentence was issued. “I stand before you today ashamed and embarrassed.”Sullivan, 43, admitted in early 2004 – and testified for 30 hours at Ebbers’ trial this year – that he carried out the epic accounting fraud, which falsely boosted WorldCom’s performance in a bid to please Wall Street.But he insisted, and repeated in court Thursday, that he did so under intense pressure from Ebbers, 63, who instructed him over and over to “hit the numbers” and meet analyst expectations. Ebbers always maintained he was kept in the dark, and that the fraud was a Sullivan operation.U.S. District Judge Barbara Jones told Sullivan he was getting a break on his sentence because he had helped the government build its case against Ebbers. Prosecutors called him a model cooperator.She also said she was granting him a lighter sentence because his wife is seriously diabetic, and unable to care for the couple’s 4-year-old daughter during her frequent hospitalizations.But while Jones said she believed Ebbers was the “instigator” of the scandal, she made clear Sullivan bore significant responsibility, telling him his offenses were “of the highest magnitude.””Mr. Sullivan, I believe, was the architect of the fraud,” the judge said moments before imposing the sentence. “Mr. Sullivan was the day-to-day manager, if you will, of the scheme.”Five former WorldCom executives have now been sentenced to prison, their terms totaling more than 32 years.Sullivan, has already agreed to sell his $11 million mansion in Boca Raton, Fla. – a lavish Mediterranean-style estate with 10 bedrooms and seven fireplaces – and turn the money over to former WorldCom investors.Under the settlement he also forfeited his decimated WorldCom retirement account, and his lawyer said Thursday that Sullivan had been left without any assets. Sullivan’s wife will set up a trust fund to care for their daughter.Sullivan, pleading for leniency before the judge issued her sentence, said he accepted responsibility for his crimes and would “carry the burden of my failing always.”As WorldCom grew from a small Mississippi long-distance reseller into a global communications titan, Sullivan came to be seen by Wall Street as an exceptional chief financial officer who nimbly handled analysts’ questions.Ebbers, by contrast, had a more laid-back public persona. In one analyst conference call played by the defense at his trial, he said: “Remember, I’m a P.E. graduate, not an economist.”Sullivan was indicted in 2002 shortly after the company went bankrupt, and initially denied wrongdoing. But he pleaded guilty to fraud and conspiracy in 2004 just before he was to go to trial, turning on his former boss.At Ebbers’ trial, Sullivan was the star witness, telling jurors Ebbers repeatedly urged him to “hit the numbers” – a kind of mantra that Sullivan said he interpreted as a command to commit fraud.Sullivan admitted he examined WorldCom’s financial performance each quarter, compared it to what analysts were expecting, then ordered subordinates to make up the difference.Three of those subordinates – controller David Myers, accounting director Buford Yates and accounting manager Betty Vinson – all face prison terms, although significantly less than Sullivan’s and Ebbers’.At the sentencing Thursday, lead WorldCom prosecutor David Anders praised the time and effort Sullivan put into the Ebbers case.”Mr. Sullivan was not the cause of the fraud,” the prosecutor said in court. “Mr. Ebbers was. Yet without Mr. Sullivan’s cooperation, it’s likely that Mr. Ebbers never would have been brought to justice.”The bulk of the fraud scheme, which prosecutors said took place from 2000 to 2002, was an illegal decision by WorldCom executives to record regular operating expenses as long-term capital expenditures.When the fraud came to light in the summer of 2002, the company went bankrupt, costing investors billions of dollars and tens of thousands of employees their jobs. The company emerged from bankruptcy last year under the name MCI.A class-action lawsuit has recovered more than $6 billion from WorldCom executives and board members, an auditing firm and major investment banks that underwrote WorldCom securities.Ebbers is scheduled to report to a federal prison Oct. 12. The same judge is considering whether he should be allowed to remain free while he appeals his conviction on nine criminal counts.Sullivan made one final reference to his old boss before the sentence came down.”In the face of intense pressure inside the company, I turned away from the truth,” Sullivan said. “I knew it was wrong. My intentions were not to hurt people.”
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