[A-List] US legitimation crisis: WorldCom

["Michael Keaney" <michael.keaney@xxxxxx>]

Ebbers 'dominated' failed WorldCom

David Teather in New York
Tuesday November 5, 2002
The Guardian

A court-appointed investigator last night presented a withering portrayal of
former WorldCom chief executive Bernard Ebbers, who was said to have
single-handedly "dominated" the failed company.

In a 122-page report filed with the bankruptcy court, Richard Thornburgh
also raised the prospect of further financial restatements beyond the $7bn
already announced after it was discovered that costs had been misreported.

The stiffest criticism is reserved for Mr Ebbers, the churchgoing company
founder, who it was disclosed used WorldCom shares to guarantee more than
$1bn in personal or business loans. "One person, Bernard Ebbers, appears to
have dominated the course of the company's growth, as well as the agenda,
discussions and decisions of the directors," the report said.

Meetings of the compensation committee were brief, with members deferring to
Mr Ebbers' recommendations. "While Mr Ebbers received more than $77m in cash
and benefits from the company, shareholders lost in excess of $140bn in
value," it said. Mr Ebbers left the company owing it more than $400m in
loans he received between September 2000 and April 2002.

Mr Thornburgh said he has "significant information" alleging that WorldCom
personnel created fake internal reports to conceal their financial
manipulations but the details were excluded for fear of prejudicing criminal
inquiries.

Chief financial officer Scott Sullivan has so far been the highest-ranking
executive at WorldCom to be indicted on fraud - no charges have been brought
against Mr Ebbers.

The report also highlighted the relationship between WorldCom and Salomon
Smith Barney. It pointed to occasions where former telecoms analyst Jack
Grubman would agree to ask questions during conference calls that would
elicit positive answers.

"WorldCom put extraordinary pressure on itself to meet the expectations of
securities analysts," the report said.