NEW YORK – Former WorldCom Inc. finance chief Scott Sullivan (search), who has become the star witness against Bernard Ebbers (search), admitted Wednesday to a history of lies, saying he had deceived shareholders, analysts and the board while his staff undertook an $11 billion accounting fraud.
Sharply questioned by the lead attorney for Ebbers, the one-time chief executive officer, Sullivan conceded that he had lied on more than a dozen occasions about the financial health of the company, where accountants were cooking the books to hide deteriorating profits between 2000 and 2002.
At one point, the attorney, Reid Weingarten, grilled Sullivan about misleading statements he made to the company's audit committee in the summer of 2002.
"If you believe something is in your interest, you are willing and able to lie to accomplish it, isn't that right?" Weingarten asked.
"On that day, yes, I lied," Sullivan said.
Weingarten attacked Sullivan's truthfulness in hopes of undermining the credibility of the only witness to directly link Ebbers to the accounting scandal at WorldCom (search).
Sullivan — who has pleaded guilty to fraud and is cooperating with prosecutors in hopes of a lighter prison sentence — also admitted to lying during presentations to shareholders, analysts and the company's board.
He even conceded that he had lied about drug use when he filled out a government security clearance questionnaire.
Sullivan, who admitted in earlier testimony to using marijuana and cocaine, said he had felt too embarrassed to admit to his history with drugs.
"I was not truthful in answering the question," he said. "I didn't want to deal with the embarrassment of the drug usage."
But Sullivan appeared calm and confident during his first day of cross examination in U.S. District Court, much as he did during questioning by the government last week, when he testified that Ebbers had known about the accounting adjustments.
During that testimony, he repeatedly told jurors that when he had alerted Ebbers to the accounting adjustments, his boss typically replied by saying: "We have to hit our numbers."
Federal prosecutors charge that Ebbers fretted over meeting analysts' earnings estimates because he stood to lose much of his personal fortune if the company's share price collapsed.
Not only did Ebbers have most of his wealth tied up in the stock, he had also used the shares to back enormous personal loans taken out to pay for a variety of other businesses, including a rice farm and a sprawling ranch in Canada.
In order to avoid steep stock losses, prosecutors say, Ebbers orchestrated the massive accounting fraud by approving Sullivan's "adjustments" to depressed revenue and skyrocketing expenses.
Investigators eventually uncovered the accounting tricks and in 2002 WorldCom filed for bankruptcy protection, the largest in U.S. history. Last year, the company emerged from Chapter 11 under the name MCI Inc.(MCIP). On Monday, MCI agreed to a buyout by Verizon Communications Inc. (VZ) valued at $6.75 billion.
If Ebbers were convicted of fraud, conspiracy and falsifying regulatory documents, he could face a prison sentence of up to 85 years.