Crashes Depressions Manipulations Scams Swindles Thefts in Markets Currencies Commodities Stocks Etc

[bartermania]

WorldCom's Sullivan gets 5-year term for fraud role

CHICAGO TRIBUNE

August 12, 2005

NEW YORK – Scott Sullivan, credited with helping the government to convict former WorldCom chief executive Bernard Ebbers, was sentenced yesterday to five years in prison for his role in the largest case of corporate fraud in U.S. history.

Sullivan, who had been the telecom company's financial director, received far less than the 25 years given last month to Ebbers, his one-time boss. The lighter sentence was seen as a powerful signal to would-be white-collar criminals to cooperate with government prosecutors rather than take their cases to trial.

At a morning hearing in a packed Manhattan courtroom, Sullivan, 43, repeatedly apologized for his actions, pleading with U.S. District Court Judge Barbara Jones to recognize the importance of his cooperation in convicting Ebbers.

Sullivan also said his wife suffers from a severe case of diabetes and has been hospitalized for emergencies nine times this year, suggesting a prison sentence would be an "extreme burden" on her and their 4-year-old daughter.

"I am sorry for the hurt that has been caused by my cowardly actions. I truly am," Sullivan said. "I ask the court for leniency so that I can get back to my family as soon as possible."

In reducing his sentence, Jones said Sullivan was a "model of cooperation" and added that she recognized Sullivan's "extraordinary family circumstances."

For Sullivan, who pleaded guilty to fraud and other charges in March 2004, the opportunity to testify against Ebbers gave him an avenue for redemption and will allow him to leave prison before he turns 50.

"It was extremely fortunate there was an opportunity for you to cooperate," Jones told Sullivan. "Mr. Sullivan, you would have faced a substantial sentence had you not cooperated with the government."

After the hearing, Sullivan hugged his mother and shook hands with his father, who suffers from Parkinson's disease. Sullivan must surrender to federal officials Nov. 11.

Sullivan's effort to win a light sentence was helped considerably by Assistant U.S. Attorney David Anders, who told Jones that the government would not have been able to convict Ebbers without the help of WorldCom's former No. 2 man.

"Mr. Sullivan was not the cause of the fraud at WorldCom. Mr. Ebbers was," Anders said. "Without his cooperation, Mr. Ebbers would never have been convicted." Under nonbinding federal sentencing guidelines, Sullivan could have received as much as 25 years in prison.

Kirby D. Behre, a former prosecutor and a partner with Paul Hastings LLC in Washington, said, "The interesting thing is the huge disparity between what Ebbers gets for going to trial – 25 years – and what Sullivan gets for cooperating.

"It's a great advertisement for the benefits of cooperating with the government," he said.

Ebbers, 63, was sentenced in July, four months after a jury ruled that he had committed fraud and conspiracy in conjunction with the $11 billion accounting scam that sent WorldCom into bankruptcy, the largest in U.S. history. Ebbers, who suffers from a weak heart, has appealed the conviction.

While praising Sullivan for his cooperation, Jones was quick to add that his "offenses were of the highest magnitude." Thousands of shareholders lost billions of dollars when the extent of WorldCom's fraud became public.

Jones labeled Sullivan the "day-to-day manager of the scheme at WorldCom" – someone who she said was "significantly more culpable" than the other managers who cooperated. "In keeping WorldCom going," she said, "he was also preserving his $700,000 salary, $10 million bonus and stock options."

In addition, she pointed out that in June 2002 when WorldCom first acknowledged fraud at the company, Sullivan initially denied any involvement.

That denial, she said, "remains in sharp contrast" to David Myers, the former WorldCom controller who quickly admitted guilt and agreed to work with the government. Myers received a sentence of one year and one day in prison.

Nonetheless, Jones said she recognized that Sullivan was under intense pressure from Ebbers.

During Ebbers' six-week trial, Sullivan testified for seven days, detailing conversations between the two men that led the company to manipulate its sales and profit numbers to buoy WorldCom's stock price. At its 1999 peak, WorldCom's stock was worth $180 billion, the company served about 15 million customers and employed about 40,000 people.

Sullivan told jurors Ebbers repeatedly urged him to "hit the numbers" – a kind of mantra that Sullivan said he interpreted as a command to commit fraud in order to meet Wall Street expectations.

"I told Bernie, 'This isn't right,' " Sullivan said from the witness stand, describing an October 2000 meeting in which he said he showed Ebbers a plan to improperly create $133 million in revenue. "He just stared at it, and he looked up at me and he said, 'We have to hit our numbers.' "

Sullivan's testimony was the pivotal point in the Ebbers trial. The standoff was an extraordinary confrontation between two men who had once been so closely linked in the minds of investors and the financial media that covered them.

Though Ebbers was unmistakably the public face of WorldCom, Sullivan was widely recognized as the engineer of the company's stunning string of acquisitions. WorldCom, after all, was the most successful stock of the 1990s.

Throughout Ebbers' trial, his defense attorney, Reid Weingarten, charged that it was Sullivan, not his client, who had concocted and engineered the accounting scam meant to cover-up the company's declining revenues. Ultimately, a jury determined that Ebbers was responsible for WorldCom's fraud.

Sullivan made one final reference to his old boss before the sentence came down.

"In the face of intense pressure inside the company, I turned away from the truth," Sullivan said. "I knew it was wrong. My intentions were not to hurt people."

As part of his guilty plea, Sullivan sold his $11 million beachside home in Boca Raton, Fla., handing the proceeds to a fund for WorldCom shareholders.

Sullivan will not be fined and will not have to pay any restitution beyond the assets that he agreed to turn over last month. Sullivan must also serve three years of probation.

Jones also agreed to recommend that Sullivan be sent to a minimum-security prison in Pensacola, Fla., near his home, and that he receive treatment for alcohol abuse.

Sullivan's lawyer also asked for 90 days before his surrender, so that his client could arrange for child care at his home.

But Sullivan's payments and reduced sentence are probably cold comfort to WorldCom's investors and to its former employees, who lost their livelihoods as WorldCom entered bankruptcy protection in 2002.

"It was a mixed blessing, but a well-measured sentence," said Henry J. Bruen Jr., a former WorldCom salesman who submitted a victim-impact statement to the judge. Bruen said he had lost all of his savings, investments, medical benefits and some of his property since being laid off in early 2003.

Sullivan's sentence is roughly in proportion to those given to four of his subordinates, who had also pleaded guilty.

Ebbers, meanwhile, is scheduled to report to a federal prison in Mississippi Oct. 12. Jones must decide whether to allow Ebbers to remain free during his appeal.



--------------------------------------------------------------------------------
The Associated Press and the New York Times News Service contributed to this report.

Link: http://www.signonsandiego.com/uniontrib/20050812/news_1n12worldcom.html