updated 2/3/2005 8:25:59 AM ET 2005-02-03T13:25:59

Two former accounting employees at WorldCom Inc. testified at ex-CEO Bernard Ebbers’ fraud trial that they threatened to resign after being directed to make improper accounting entries.

Betty Vinson and Troy Normand told jurors separately Wednesday they drew up resignation letters — one day apart in October 2000 — but decided to stay with the company for personal reasons.

The pair said they had been asked to cover up soaring WorldCom expenses for the third quarter of 2000 by drawing down reserve accounts, some of which had nothing to do with the expenses in question.

Normand’s draft resignation letter said: “I do not want to be held responsible in any way should any consequence arise.”

But Vinson and Normand testified they continued making improper entries, ultimately hiding billions of dollars in expenses from 2000 to 2002. Both were fired later in 2002, and both later pleaded guilty to fraud.

Both also said they attended an October 2000 meeting with Scott Sullivan, at the time the chief financial officer of WorldCom, who asked them to stick with the company and promised things would improve.

According to Vinson, Sullivan said at the meeting that improper accounting entries were required because Ebbers did not want to cut Wall Street forecasts.

“Scott said Bernie didn’t want to lower third-quarter expectations, so that we needed to make the entry,” Vinson testified. “He told us not to jump out of the plane, hang in there, help him get through the quarter.”

Normand also testified about the meeting — but did not mention Sullivan saying Ebbers knew about the improper adjustments accountants were making. Normand said only that Sullivan claimed to have talked with Ebbers about the company’s financial projections.

Sullivan “indicated he had a discussion with Bernie Ebbers, asking Bernie to reduce projections going forward, and that Bernie had refused,” Normand recalled.

Normand also recalled telling Sullivan he was scared, and did not want to go to jail for the company.

He said Sullivan told him that “if it was later found to be wrong, he would be the person going to jail and not me.”

Vinson, Normand and Sullivan have all pleaded guilty in the $11 billion accounting scandal and agreed to help the government in its case against Ebbers, who is charged with ordering the fraud.

Under about three hours of questioning from a federal prosecutor, Vinson did not cite any direct interaction with Ebbers or direct orders from him to falsify the books.

Prosecutors contend Ebbers, who took out $400 million in personal loans secured by WorldCom stock, was obsessed with keeping earnings and revenue figures high and in line with what Wall Street wanted.

Lawyers for Ebbers maintain it was Sullivan, not Ebbers, who ordered the fraud, and that Ebbers preferred to stay out of complex accounting matters.

Vinson and Normand both testified to altering WorldCom accounts from 2000 to 2002, moving expenses off income statements and listing them as assets on the balance sheet.

In deciding which accounts to alter, “I just really pulled some out of the air,” Vinson said. “I used some spreadsheets.”

Sullivan, the star government witness, is expected to testify against Ebbers later in the trial.

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