MCI Inc. is suing its former CEO Bernard Ebbers, saying he must repay $408 million the company loaned him over two years.
The suit, filed Friday in U.S. Bankruptcy Court for the Southern District of New York, also seeks to void Ebbers’ resignation agreement, which promised him $1.5 million in annual pension payments, an office and computer, and use of the company jet.
Ebbers never collected anything other than some health benefits under the separation agreement, the company said.
“This action reflects MCI’s obligation to its shareholders to recover as much of the money owed the company as possible,” said MCI spokeswoman Brittany Hoff.
Reid Weingarten, Ebbers’ lawyer, did not immediately return phone and e-mail messages.
Ebbers is charged with fraud and conspiracy connected to the massive accounting fraud at MCI that is now estimated at $11 billion. He has pleaded not guilty.
MCI, then known as WorldCom Inc., made the loans to Ebbers beginning in the fall of 2000 and ending with his resignation in April 2002.
The loans were restructured when Ebbers resigned in April 2002. Under the terms, Ebbers was allowed to repay the loan over five years at a below-market interest rate. But he missed the first $25 million payment in April 2003.
The loans came about because Ebbers had used WorldCom stock as collateral for bank loans he used to buy two yachts, a ranch and interest in timber companies. When his banks called in his loans, the company loaned him the money to keep him from dumping the stock.
Ebbers has since sold some of his assets, and the company has recovered $70 million because of those sales.
His federal trial in Manhattan was set for Nov. 9, but the defense has requested a delay until at least January. Former CFO Scott Sullivan has pleaded guilty to fraud charges and agreed to testify against Ebbers.