WorldCom's Ebbers faces jail after US files fraud charges

The accounting scandal at WorldCom, the American long-distance telephone company, finally caught up with its former chief executive officer, Bernard Ebbers, yesterday. Federal officials announced they had filed criminal charges against him, including securities fraud.

In a day of unexpected drama in the two-year-old, multibillion-dollar case, the US Attorney General, John Ashcroft, travelled to New York personally to outline the charges against Mr Ebbers. They included single counts of securities fraud, conspiracy to commit securities fraud, and filing false documents with the Securities and Exchange Commission.

Simultaneously, the former chief financial officer, Scott Sullivan, appeared before a Manhattan judge and pleaded guilty to similar charges. Combined, they could bring a total penalty of 25 years in prison.

First arrested in August 2002, Mr Sullivan had been set to face trial next month. Before his court appearance yesterday, however, he struck a plea agreement with the Government, under which he will assist in the prosecution of his former boss. His co-operation could bring him a reduced sentence.

Mr Ebbers, who defeated British Telecom in a fierce bidding war for MCI in 1997, left WorldCom under a cloud in April 2002 after questions started to surface about its accounting practices. The affair quickly ballooned and became the biggest corporate scandal in US history. The fraud at WorldCom, committed as it struggled to keep its numbers in line with expectations on Wall Street, was eventually estimated to have reached about $11bn (£6bn).

Mr Ashcroft said the charges alleged that Mr Ebbers, Mr Sullivan and other co-conspirators systematically altered the books and fixed financial filings to regulators to hide WorldCom's true financial condition from Wall Street and from investors.

The Attorney General said that, according to the charges, Mr Ebbers and the co-conspirators plotted to alter the company's numbers to "deceive members of the investing public, WorldCom shareholders, professional securities analysts, the Securities and Exchange Commission and others".

According to the indictment, when the company's results fell below analysts' expectations in September 2000, Mr Sullivan advised Mr Ebbers that WorldCom should issue an earnings warning, but Mr Ebbers refused. "Ebbers nevertheless insisted that WorldCom publicly report financial results that met analysts' expectations," it said.

The saga of Mr Ebbers, who was barely known before his takeover of MCI, is one of the more colourful in the annals of American business. He began his astonishing ascent two decades ago with an investment in a Mississippi-based telephone business called Long Distance Discount Service. For 12 years, he focused on making it ever larger, snapping up one competing carrier after another. In all, he made some 60 acquisitions.

With the purchase of MCI, Mr Ebbers, who would wear cowboy boots to work and sometimes opened corporate meetings with a prayer, became the head of the second-largest long-distance carrier in the United States. He seemed unstoppable. However, he took his first stumble two years later when he attempted to vault even higher by buying the US number three, Sprint. That deal was eventually blocked by federal regulators.

A WorldCom report released in June said Mr Ebbers had fostered a poisonous corporate culture and said he was "aware, at a minimum, that WorldCom was meeting revenue expectations through financial gimmickry". The company now operates under the MCI name. It hopes to emerge from bankruptcy soon and is close to erasing most of its debts.

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