Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Scott Sullivan, the former chief financial officer of WorldCom and the star prosecution witness in the trial of WorldCom’s former CEO, Bernard Ebbers, began testifying Monday. The fireworks — the heart of the government’s case — are still to come. Rarely has one witness meant so much to the prosecution in a complex white-collar trial. Ebbers, 63, is charged with multiple counts of securities fraud and related crimes for his alleged part in WorldCom’s $11 billion accounting scandal, which pushed the former telecom giant into bankruptcy in 2002. WorldCom emerged from bankruptcy last April under its former name, MCI, after shedding billions in debt. Halfway through the trial before Southern District of New York Judge Barbara Jones, there seems to be little doubt that WorldCom was the scene of massive understating of operating expenses and inflating of revenues to match growing investor expectations as the telecommunications market was in a precipitous decline. The question before jurors is: Who was behind the misdeeds? David Anders and the other prosecutors at the Southern District U.S. Attorney’s Office have told the jury that Ebbers ordered his lieutenants to orchestrate the fraud. Witness after witness from WorldCom’s accounting and other departments have said they presumed they were acting under the direct orders of Ebbers himself. Yet Ebbers’ lead attorney, Reid Weingarten of Washington, D.C.’s Steptoe & Johnson, has extracted testimony through cross-examination that none of the witnesses received direct orders from or consulted with Ebbers about the accounting machinations. A shortage of documents pointing to Ebbers’ alleged involvement is an additional problem for the prosecution. That is why Sullivan is crucial. He was the person who actually told most of the others to cook the books, acting — so the witnesses believed — in accordance with Ebbers’ instructions. “He’s unquestionably the central witness,” for the government, said Seth Farber, a former prosecutor now at Dewey Ballantine. From the outset, the defense has exploited the disconnect between Ebbers and those once removed from him, blaming the accounting fraud on Sullivan, whom Weingarten calls a “brilliant” CFO. Ebbers is portrayed as a folkloric “coach” who left oversight of the accounting department to his trusted No. 2. LAYING THE FOUNDATION Sullivan, 43, Monday spent two hours of soft-spoken testimony laying the foundation for what is to come. He described his rapid rise from accountant to CFO at WorldCom and his close working relationship with Ebbers, whom he called “Bernie.” Ebbers, he said, paid close attention to the details of every aspect of the company, including accounting measures and financial results. The key for prosecutors in the coming days is whether the jury will believe Sullivan when he testifies that he followed Ebbers’ illegal commands. Like other witnesses who have struck agreements with government lawyers in return for their testimony, Sullivan will face an attack on his credibility. “The stock defense argument is that the witness is cooperating and trying to implicate someone else to get himself a lesser sentence,” said Farber. Sullivan faces a maximum sentence of 25 years plus fines and penalties for the three counts of conspiracy, securities fraud and related charges to which he pleaded guilty. In his opening statement, Weingarten told jurors that Sullivan could have faced the rest of his life in prison if he had not cooperated with prosecutors. The defense position is that Sullivan masterminded the fraud and later turned against the innocent CEO to protect himself. “If all you’ve got is some guy facing a lengthy jail sentence,” without much else, said Farber, then prosecutors will be in trouble. “However, if that witness ties things together,” Farber said of Sullivan, he will be effective. The government can help matters, Farber said, by providing corroborating evidence to back Sullivan’s testimony, making the jurors less reliant on one witness. MAKING THE LINK Earlier witnesses from the company’s accounting department tried to do just that. Ultimately, the burden will fall largely on Sullivan to link the fraud to Ebbers. “I falsified the financial statements of the company,” testified Sullivan, “for the purpose of meeting the expectations of security analysts.” On the first day of his testimony, he did not accuse Ebbers. In their own opening statement, prosecutors promised that before the trial is over, he will.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.