Ex-WorldCom CEO Pleads Not Guilty on Fraud Charges
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Bernard Ebbers, the former CEO of WorldCom, has pleaded not guilty to 15 securities fraud charges brought against him by the Oklahoma Attorney General.
During a court appearance in the Oklahoma County Court in Oklahoma City Wednesday, Ebbers' attorney entered the pleas.
The charges, 15 in all, carry a penalty of 10 years in prison and a fine of $10,000 each.
Ebbers is one of six former officials of the bankrupt telecom giant, which is currently in bankruptcy reorganization, facing 15 securities each by the state of Oklahoma.
In addition to the former executives, MCI -- WorldCom is changing its name as part of its bankruptcy reorganization -- also faces charges by Oklahoma that it "executed a scheme to artificially inflate the value of WorldCom stock and bonds by intentionally falsifying information filed with the Securities and Exchange Commission."
MCI is already facing a litany of litigation and investigations since it collapsed into bankruptcy in July of 2002 as the result of an accounting scandal that has now been revealed to involve about $11 billion. The US Attorney for New York's Southern District, James Comey, has recently said he was disappointed that the Oklahoma case wasn't coordinated with his office, which is also investigating Ebbers and former WorldCom officials for their alleged part in the telecom's accounting downfall.
By the time WorldCom declared bankruptcy in July of last year -- the largest in U.S. corporate history -- it had already admitted it overstated cash flow by $3.8 billion. By then, the Securities and Exchange Commission was investigating the company, which later said it would restate $9 billion in revenue as a result of improper accounting.
Edmondson has said the state's pension had lost $64 million as a result of actions and statements of then-WorldCom officials, not to mention what individual investors in Oklahoma lost in their WorldCom investments.
MCI's General Counsel, Stasia Kelly, has said that MCI intends to fully cooperate with the Oklahoma Attorney General and does not believe the action will impact the bankruptcy process. MCI's reorganization plan is slated for a hearing before a Bankruptcy Court in New York next Monday, September 8th.
Indeed, MCI's plans to emerge from bankruptcy protection nearly debt-free has raised the ire of rivals and state prosecutors, who have filed objections to some of the details in MCI's reorganization plan.
Just this week MCI was hit with a new fraud lawsuit by its long-distance rival, AT&T.
In a civil complaint announced Tuesday, AT&T claimed it suffered damages as a result of an alleged "fraudulent call-routing scheme that is fundamentally different from, and bears no relation to, legitimate routing practices widely employed in the telecommunications industry." AT&T said it filed its charges as the result of a grand jury investigation.
AT&T, Verizon and SBC have complained to federal regulators that MCI allegedly re-routed some of its long-distance calls through Canada, with the help of telco company Onvoy, they added, in order to avoid paying them inter-connect charges. Federal prosecutors have been looking into the charges.