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.

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