NEW YORK – Jury selection begins this week in the trial of former WorldCom Inc. (search) Chief Executive Bernard Ebbers (search), who prosecutors blame for an accounting scandal that cost investors billions and wrecked the telephone company he built.
Lawyers for Ebbers, 63, made clear at a pretrial hearing Tuesday that one of their chief strategies will be attacking the credibility of Scott Sullivan (search), once WorldCom's top finance executive and now the government's star witness.
Together, Ebbers and Sullivan are credited for building WorldCom from a Mississippi upstart into the No. 2 U.S. long-distance phone company. But they have also been blamed for orchestrating a fraud that drove the company to seek bankruptcy protection in the largest Chapter 11 filing in U.S. history.
Sullivan pleaded guilty last year and has agreed to testify against his former boss in hopes of leniency — an arrangement that will be assailed by lawyers for Ebbers.
"The jury may disbelieve Scott Sullivan, they may well doubt his credibility," lead defense attorney Reid Weingarten told the judge presiding over the case on Tuesday.
Among other areas, Weingarten wants to ask Sullivan about possible marital infidelity — a line of questioning the judge said she would allow.
U.S. District Judge Barbara Jones' pretrial rulings came a day before jury selection is due to begin with the distribution of questionnaires
Unlike most securities fraud cases, which prominently feature e-mails and notes, the case against Ebbers offers little by way of a paper trail, meaning it can largely be boiled down to Sullivan's testimony.
"Without tape recordings or e-mails or faxes the government is put in a very difficult situation in proving the case," said Joel Androphy, a white-collar litigator in Houston with Berg & Androphy.
In an indictment charging Ebbers with conspiracy, fraud and making false statements, only one Ebbers e-mail is cited. Written to a senior WorldCom executive, it requested information on "those one time events that had to happen in order for us to have a chance to make our numbers."
Otherwise, much of the case appears to center on public statements, securities filings and the testimony of Sullivan.
"The government is hanging a carrot out there for Sullivan," said Androphy. "But he could get destroyed."
Sullivan's role as chief witness against Ebbers is a far cry from the heady days when they were one of the most effective one-two punches in the telecommunications industry.
Aided by the buttoned-down Sullivan, Ebbers — a former high school basketball coach who often dressed in cowboy boots and jeans — built WorldCom from a a local Mississippi company into one of the nation's most powerful telecommunication concerns.
In the process, he amassed a huge personal fortune, investing money in everything from a yacht company to a cattle ranch in Canada billed as the world's largest.
But much of his wealth was tied up in WorldCom stock, which was also used to secure personal bank loans, according to prosecutors, who will likely argue that this gave Ebbers a personal motive to falsely inflate the company's share price.
The case argues that by September 2000 both Ebbers and Sullivan knew the company's results were sliding. Sullivan told Ebbers that WorldCom should issue an earnings warning, letting investors know that results were flagging.
Ebbers brushed aside the advice. Instead, he and Sullivan "agreed to take steps to conceal WorldCom's true financial condition," according to the indictment.
Two years later, in 2002, WorldCom filed for bankruptcy protection, creating public outrage and giving rise to calls for the criminal prosecution of Ebbers.
But the government did not — or could not — bring charges against Ebbers until Sullivan agreed to cooperate. And it is Sullivan's testimony that will likely dictate whether the jury hears from Ebbers himself.
"If the defense destroys the government witness, then there is no reason to put Ebbers on the stand," said Androphy. "If you put Ebbers on the stand and the jury doesn't believe him, then you've made the government's case."
WorldCom emerged from bankruptcy last year under the name MCI (search) .