Weeping in court as he learned his fate, former WorldCom boss Bernard Ebbers was sentenced to 25 years in prison Wednesday for leading the largest corporate fraud in U.S. history.
It was the toughest sentence imposed on an executive since the fall of Enron in 2001 touched off a record-breaking wave of business scandals.
Even with possible time off for good behavior, Ebbers, 63 and with what his lawyers describe as serious heart problems, would remain locked up until 2027, when he would be 85.
The sentence came four months after Ebbers was convicted of overseeing the $11 billion WorldCom fraud — much of it a pattern of chalking up expenses as long-term capital expenditures, which are classified as assets.
CNBC and other news organizations originally reported the sentence as between 30 years and life in prison. However, Ebbers’ attorneys were allowed to speak before the final sentence was handed down and the judge ultimately decided to render a final, 25-year verdict.
Ebbers, an imposingly tall man with buzzed white hair, leaned forward in his chair and cried, sniffling audibly, after Judge Barbara Jones of U.S. District Court in Manhattan read his penalty.
“I find that a sentence of anything less would not reflect the seriousness of this crime,” the judge said.
As a packed courtroom emptied after the hearing, Ebbers’ wife, Kristie, who had cried quietly during the hearing, walked up to the defense table and embraced her husband tightly. Ebbers did not speak to reporters.
It was just more than three years ago that the fraud at WorldCom began to come to light, reducing shares of stock once worth more than $60 to mere pennies. Billions of dollars in market value vanished.
Mississippi-based WorldCom filed for bankruptcy — also the largest in U.S. history — in the summer of 2002. It has since re-emerged under the name MCI Inc., with headquarters in Ashburn, Va.
Gino Cavallo, an MCI service consultant who also worked for years at WorldCom, lost tens of thousands of dollars in retirement money in the fraud. He attended the sentencing and said he was pleased.
“The man’s 63,” Cavallo told reporters. “He’s going to die in jail. How much sterner could you get?”
The sentence completed a staggering fall for Ebbers, whose homespun Mississippi manner and hard-charging business style earned him status as an admired chief executive — and the nickname Telecom Cowboy.
The former basketball coach helped start a small long distance reselling business in the early 1980s, then gradually built it into a business titan by swallowing ever-larger companies, eventually even MCI.
Jones ordered Ebbers to report to prison Oct. 12, and said she would recommend that federal prisons officials assign him to Yazoo City, Miss., so his family could see him easily.
But the judge said she would take written arguments over the next six weeks on whether she should allow Ebbers to remain out of prison while he appeals his conviction, a process likely to take at least a year.
She imposed the 25-year sentence after a two-hour hearing in which defense lawyers and federal prosecutors debated exactly how much money was lost because of the fraud, a key factor in determining the penalty.
The defense had argued it was impossible to find whether investors had sold WorldCom stock in 2002 directly because of the fraud, company personnel changes or the generally poor economy. The judge was unmoved.
“This was not a minor fraud,” she said. “Mr. Ebbers committed a fraud that caused numbers of investors to suffer losses. His statements deprived investors of the truth about WorldCom’s financial condition.”
Defense lawyer Reid Weingarten had asked for leniency, mentioning Ebbers’ heart condition and his considerable, often anonymous, charitable works, cited repeatedly in 169 letters sent to the judge.
“If you live 60-some-odd years, if you have an unblemished record, if you have endless numbers of people who attest to your goodness, doesn’t that count? Doesn’t that count particularly on this day?” Weingarten said.
The judge could have imposed an even stricter sentence had she found that Ebbers committed perjury when he testified in his own defense.
On the stand, Ebbers told jurors he never knew of the fraud. Asked about documents he reviewed that showed highly suspicious financial figures that tipped off the fraud, Ebbers said, “I just didn’t see it.”
Jones said it was not clear Ebbers had committed perjury, and said jurors could have believed his testimony and still convicted if they believed he intentionally looked the other way as the fraud took place.
The judge also heard briefly from Henry J. Bruen Jr., a former high-ranking sales executive at WorldCom who lost his job in 2003 and said he has been unable to find work since, putting him through “sheer hell.”
“Where do I get my life savings back from?” he demanded. “Or my career reinvigorated?”
Jones did not impose a fine or seek restitution, partly because of an agreement late last month under which Ebbers will forfeit nearly all his personal assets to settle a civil suit filed by aggrieved investors.
Under that settlement, Ebbers’ wife will be left about $50,000 of Ebbers’ assets and a modest home in Jackson, Miss. A far more lavish family home in Brookhaven, Miss., will be sold off as part of the settlement.
“Simply put, justice was served,” said New York state Comptroller Alan Hevesi, the lead plaintiff in the civil suit against WorldCom, which has racked up $6 billion in settlements.
The 25-year term is the harshest yet as corporate executives have been paraded through American courtrooms in a series of eye-popping business scandals that have cost investors untold billions.
A former finance executive of Dynegy Inc., Jamie Olis, is serving 24 years in prison for his role in a fraudulent accounting scheme at the Enron-linked energy company.
And last month, Adelphia Communications Corp. founder John Rigas was sentenced to 15 years in prison for his role in the looting and fraud at that company. His son, former finance chief Timothy Rigas, got 20 years.
Two top executives at Tyco International Ltd. convicted of stealing from company coffers are awaiting sentencing in August, and three top Enron executives go on trial in Houston early next year.
Ebbers is the highest-ranking of six WorldCom executives and accountants who were charged by federal prosecutors in the fraud. The other five face sentencing in late July and early August.
Among them will be Scott Sullivan, the former chief financial officer under Ebbers, who testified at Ebbers trial that he carried out the fraud but said he did so on Ebbers’ orders.