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Ebbers' Fraud Trial Under Way

NEW YORK -- A defense attorney for Bernard Ebbers claimed the former head of WorldCom was hoodwinked by a practiced and sophisticated liar -- its chief financial officer -- on the way to the failed telecom's $11 billion accounting scandal.

During opening arguments Tuesday in the federal fraud charges against Ebbers in U.S. District Court, attorney Reid Weingarten sought to paint Ebbers as an almost tragic figure who was misled by slippery accounting deeds by then-CFO Scott Sullivan.

Sullivan has pleaded guilty to charges that include conspiracy to commit securities fraud. He is the government's star witness in its case against Ebbers who faces similar charges of conspiring to cook the books at WorldCom -- the telecom whose massive collapse would become an emblem for the excesses during the dot-com bubble.

"Scott Sullivan is a poseur, an accomplished liar," said Weingarten. "Scott Sullivan is such a practiced and accomplished liar, he should be deemed not worthy of belief," he told the jury.

Indeed, it was only when Sullivan faced federal sentencing guidelines of at least 25 years or more in jail for his part in the accounting scandal at WorldCom that he decided to cooperate with federal prosecutors in the case against Ebbers, Weingarten said.

Ebbers helped build WorldCom from a tiny regional telecom into a major provider of backbone networking services across the globe. He faces multiple fraud and conspiracy charges "in connection with his participation from September 2000 through June 2002 in a scheme to inflate artificially the price of WorldCom common stock by hiding from investors the truth about WorldCom's declining operating performance and financial results," according to the charges by the U.S. Attorney.

The telecom's $107 billion bankruptcy filing in 2002 ranks as the largest in U.S. corporate history after it knocked Enron's notorious $63 billion petition for bankruptcy the year before into second place. Since emerging from bankruptcy reorganization, WorldCom is now known as MCI.

During opening arguments Tuesday, Ebbers' attorney wasted no time laying out its strategy of shifting blame to Sullivan, calling him the mastermind behind alleged fraudulent maneuvers that led to the telecom's crash and investors' massive losses. Weingarten suggested Sullivan was a slick, sophisticated financial operator who looked down on Ebbers at the same time he was allegedly deceiving him.

"He thought of Bernie as a social and intellectual inferior," Weingarten told the jury, claiming that Sullivan had also called Ebbers "that red-necked hillbilly" and "the milkman" in a reference to work Ebbers had done in the years prior to his founding of WorldCom.

"Every official word out of his mouth is a lie," Weingarten said of Sullivan, while hinting that Sullivan and other former company officials charged in the case would not be truthful in order to "do the government's bidding" and save themselves from more years in prison.

As the judge in the case reminded the jury not to be exposed to news media during the trial, U.S. attorney David Anders took issue with the defense's use of sentencing guidelines in opening arguments, but no formal objections were raised or addressed in the court session.

The trial is expected to last between three and six weeks. In addition to Sullivan, another figure expected to come up at trial is Jack Grubman, the former Salomon Smith Barney telecom analyst who maintained positive buy ratings on WorldCom, despite its then-falling stock amid questionable accounting already unveiled.

He later resigned from the firm and became a figurehead for the clubby, insider-relationship atmosphere on Wall Street that helped feed overtly positive stock ratings on technology companies with questionable revenue pictures.