Sullivan: WorldCom Stock Slide Upset Ebbers

WorldCom Inc. CEO Bernard Ebbers (search) was angry about the company's falling stock price in late 2000 and demanded to know why it was going down, his former chief financial officer testified Wednesday.

Scott Sullivan (search) told jurors at Ebbers' fraud trial that the CEO checked the stock price repeatedly throughout the day. Previously, Sullivan said, he would look only at day's end.

"He was angry more often," Sullivan said. "He was frustrated. He was in a bad mood. He was distracted by the stock price."

Click here to read the indictment against Bernard Ebbers

Sullivan said Ebbers demanded explanations from him, "and a lot of times, I don't know why it's down."

Sullivan also described showing Ebbers disappointing financial statements for the fourth quarter of 2000, and asking him whether the company should lower its projections for Wall Street.

"We can't lower our guidance," he quoted Ebbers as saying. "We're sticking with our revenue and expense guidance, and we have to hit our numbers. Get to work on it."

Sullivan said he ordered David Myers, a WorldCom (search) accounting official, to find accounting adjustments. Hundreds of millions of dollars in expenses for the quarter were eventually hidden by drawing down unrelated tax reserves.

On Tuesday, Sullivan testified that he repeatedly warned Ebbers in 2000 that the only way to meet Wall Street expectations would be to book improper accounting entries.

He said Ebbers came back several times with the same response: "We have to hit our numbers."

Sullivan, who has pleaded guilty to fraud and is testifying as the star government witness at Ebbers' fraud trial, walked jurors Tuesday through the deteriorating financial environment in late 2000.

At the time, the dot-com bubble had burst, and WorldCom was faced with sharply slowing revenue growth and expenses that soared so high Sullivan said he thought there was something wrong with the numbers.

Sullivan testified he informed Ebbers that WorldCom could only meet Wall Street expectations by booking improper figures to boost revenue and hide expenses.

"I told Bernie, `This isn't right,'" Sullivan said, describing an October 2000 meeting in which he showed Ebbers a plan to create $133 million in revenue by improperly drawing down reserve accounts.

"He just stared at it, and he looked up at me and he said, `We have to hit our numbers,'" Sullivan testified.

The government contends the remark was a command from Ebbers for Sullivan and WorldCom accountants to commit fraud — a fraud that eventually grew to $11 billion and drove the telecommunications firm into bankruptcy in 2002.

Two accountants have testified they threatened to quit in October 2000, and Sullivan testified he sent a handwritten note to Ebbers complaining that there was no support for the adjustments.

Sullivan said Ebbers later told him: "We shouldn't be making these people make these adjustments."

Ebbers is accused of fraud, conspiracy and submitting false filings to the Securities and Exchange Commission — in effect overseeing the enormous fraud that sank WorldCom into bankruptcy in 2002.

The defense has portrayed Ebbers as uncomfortable with accounting details, preferring to remain a visionary leader.

But Sullivan's testimony has suggested he was a hands-on manager who deftly analyzed financial figures — and who was fanatical about controlling even the most minor of expenses, such as coffee filters.