NEW YORK: Bernard Ebbers, the former WorldCom Inc. chief executive, was charged with criminal fraud and the U.S. government said a key prosecution witness would be his top lieutenant, who pleaded guilty.
Ebbers, who built WorldCom from a Mississippi upstart into the nation's No. 2 long-distance phone company, is the biggest figure yet to be charged in the wave of corporate scandals that has roiled the U.S. business world.
In an indictment announced by U.S. Attorney General John Ashcroft in New York, Ebbers was accused of fraud, conspiracy and making false statements about the financial health of WorldCom, which in 2002 filed the largest bankruptcy in history amid an $11 billion accounting scandal. He is expected to be arraigned on Wednesday.
"Corporate executives who cheat investors by deceiving them about the nature of their businesses are not above the law and will be held responsible," U.S. Attorney General John Ashcroft told a news conference after the charges were filed.
Ashcroft's unusual move of personally announcing the charges comes as the Bush administration and Republicans face election-year criticisms of being overly accommodating to big-business interests.
Reid Weingarten, an attorney representing Ebbers, was not immediately available for comment.
Ebbers' indictment follows government charges brought last month against Jeffrey Skilling, the former chief executive of energy company Enron Corp., which also fell into bankruptcy in a massive bookkeeping scandal. But the top figure at Enron, former Chairman Kenneth Lay, still has not been charged.
FORMER RIGHT-HAND MAN IS KEY
The WorldCom case has become a symbol of self-enrichment that pervaded corporate boardrooms and ultimately led to the loss of billions of dollars of investor wealth.
Key to the government's case will be the cooperation of Scott Sullivan, WorldCom's former chief financial officer and Ebbers' right-hand man, who admitted conspiring to falsify the company's books by inflating revenues and improperly recording expenses to boost earnings and cash flow.
"As CFO at WorldCom I participated with other members of WorldCom to conspire to paint a false and misleading picture of WorldCom's financial results," Sullivan said in federal court in Manhattan.
The government said Ebbers demanded that WorldCom's results match Wall Street expectations, and he could potentially be convicted solely on Sullivan's testimony, legal experts said.
"The CFO is the only person who really can potentially incriminate the CEO," said Howard Schiffman, formerly with the Securities and Exchange Commission's Enforcement Division and now head of securities litigation at Dickstein Shapiro Morin & Oshinsky.
"The CEO...can say 'These numbers are unacceptable,' but you need the CFO to say that he understood the CEO's message," Schiffman said.
The charges against Sullivan, which together carry a sentence of up to 25 years and fines, were included in a new indictment hammered out by Sullivan's attorneys and federal prosecutors in the early hours of Tuesday.
(C) Reuters
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