WorldCom Inc. CEO Bernard Ebbers apologized in 2000 after company accountants were forced to cover up more than $800 million in expenses, a former controller at the company says.
David Myers also testified Ebbers pushed for the company to project 15 percent revenue growth for 2001 — when his chief financial officer was comfortable only with 9 percent to 12 percent.
“Bernie indicated that the company really needed to have 15 percent in the range,” Myers testified Thursday. Days later, WorldCom issued a press release predicting 12 to 15 percent growth for 2001.
The testimony was part of an effort by the government to portray Ebbers as aware that WorldCom was suffering financially and that number-crunchers had been asked to use accounting tricks to improve the bottom line.
Ebbers, 63, is charged with fraud and conspiracy, accused of orchestrating the massive accounting fraud at WorldCom, eventually estimated by investigators at $11 billion.
Prosecutors have portrayed him as obsessed with keeping the company’s stock price high by keeping its financial numbers in the good graces of Wall Street.
Myers said he encountered Ebbers in a hallway in October 2000 at the company’s Mississippi headquarters, days after he and other accountants had devised a plan to paper over soaring costs.
He paraphrased Ebbers as saying: “I’m sorry you were asked to do what you were asked to do. It’s something that you should not have been put in that position to do.”
He said Ebbers promised him “that we would never have to do that again.”
But Myers also made clear in his testimony that it was former Chief Financial Officer Scott Sullivan, not Ebbers, who explicitly ordered him to find a way to hide expenses when they came in far higher than expected in the third quarter of 2000.
“He refused to accept the fact that the numbers were what they were,” Myers testified, referring to Sullivan. “He told me that obviously we had made a drastic mistake ... (and) take them back and fix them.”
At the time, so-called line costs — the fees WorldCom paid other telephone companies to lease their lines — had soared out of control, putting WorldCom in danger of missing Wall Street earnings estimates.
Myers said Ebbers apologized after two lower WorldCom accounting employees had threatened to quit for being ordered to cover up the $800 million in expenses.
But he said in the very next financial period, the fourth quarter of 2000, Sullivan ordered him to find a way to make expenses appear lower.
The former controller pleaded guilty to fraud and conspiracy in 2002, agreeing to cooperate with the government in hopes of winning a lighter penalty when he is eventually sentenced.
The nine counts against Ebbers — fraud, conspiracy and seven false filings with the Securities and Exchange Commission — carry a top penalty of 85 years in prison.