Federal Appeals Court Affirms Conviction of Former WorldCom CEO Bernard Ebbers

NEW YORK – A federal appeals court in New York Friday affirmed the conviction of former WorldCom Inc. Chief Executive Bernard Ebbers for orchestrating an $11 billion accounting fraud that led to the largest U.S. bankruptcy.

The ruling by a three-judge panel of the U.S. Second Circuit Court of Appeals may clear the way for Ebbers to begin serving his 25-year prison sentence.

Ebbers, 64, had been convicted by a jury in March 2005 of nine counts of conspiracy, securities fraud and other crimes. He had remained free on bail while pursuing his appeal. His sentence means he could spend the rest of his life in prison.

"I never thought his appeal was particularly strong," said Jonathan Turley, a law professor and white-collar crime expert at George Washington University in Washington, D.C. "There was a mountain of evidence against Ebbers, a pattern of corruption, so it would have been surprising if his appeal succeeded."

Attempts to reach Reid Weingarten, a partner with Steptoe & Johnson LLP who represents Ebbers, by telephone and e-mail were not immediately successful. A spokeswoman for U.S. Attorney Michael Garcia in New York declined immediate comment.

The appeals panel rejected Ebbers' contention the trial was "fundamentally flawed."

"The methods (Ebbers) used were specifically intended to create a false picture of profitability even for professional analysts that, in Ebbers' case, was motivated by his personal financial circumstances," Judge Ralph Winter wrote.

"Given Congress' policy decisions on sentences for fraud, the sentence is harsh but not unreasonable," the judge added.

Judges Jose Cabranes and Barrington Parker joined Winter's opinion.

EBBERS DEEMED PRIMARILY AT FAULT

Ebbers had argued that trial judge Barbara Jones should have forced the government to grant immunity to several prospective defense witnesses and wrongly instructed the jury that it could convict Ebbers on the basis that he engaged in "conscious avoidance" of the fraud at WorldCom.

He also maintained that his sentence was unreasonably long compared with those of other defendants.

Former WorldCom chief financial officer Scott Sullivan, who pleaded guilty to fraud and was the star witness at Ebbers' trial, was sentenced to five years in prison.

The appeals panel concluded that Ebbers failed to show that the absence of some testimony "affected the total mix of evidence before the jury."

It also concluded that based on Ebbers' own testimony, "a rational juror could find he was consciously trying to avoid knowledge that the financial reports were inaccurate."

As to the sentence, the panel said that "Ebbers, as CEO, had primary responsibility for the fraud." It also noted that, under federal sentencing guidelines, Ebbers could have faced even more time in prison.

Professor Turley said Ebbers differed from Kenneth Lay, the former chief executive of Enron Corp., who was convicted in May of fraud and conspiracy in that company's downfall. Lay died earlier this month.

"Lay had more of a reason to claim ignorance, because he had very powerful subordinates who were running the operation," Turley said. "Ebbers was not of that mode. These allegations fit Ebbers' personality as a wheeling-and-dealing salesman.

A one-time milkman who became known as an exacting, cost- obsessed boss, Ebbers transformed WorldCom into a telecommunications powerhouse through a string of takeovers.

WorldCom filed for bankruptcy in July 2002. It emerged as MCI Inc., which was later acquired by Verizon Communications Inc.. Ebbers agreed last year to forfeit almost all of his personal wealth in a settlement with WorldCom investors.