Advertisement
YOU ARE HERE: LAT HomeCollectionsManagement

WorldCom Execs' Conduct Detailed

Two reports say ex-CEO Bernard Ebbers and others fostered a poisonous corporate culture that led to the telecom firm's downfall.

June 10, 2003|Matthew Barakat | Associated Press

The former top executives at WorldCom Inc. ruled with unquestioned authority, steering the telecommunications company into multibillion-dollar acquisitions on a whim and intimidating underlings who questioned their conduct, according to two reports released Monday.

A report by former Atty. Gen. Richard L. Thornburgh outlined a corporate culture thoroughly dominated by former Chief Executive Bernard J. Ebbers and ex-Chief Financial Officer Scott D. Sullivan, fostering an environment that led to the largest U.S. bankruptcy filing and an $11-billion accounting scandal.

A second investigative document, produced by lawyer William McLucas at the request of the company's new board, offered searing details about how Sullivan and other key finance executives allegedly cooked WorldCom's books to hide that the real numbers were falling short of Wall Street's expectations.

In one incident cited by the investigators, accounting executive Buford Yates reportedly told an underling who questioned the company's books that he'd throw the employee out the window if he showed the numbers to the auditors.

The report faulted Ebbers for fostering a poisonous corporate culture and said he was aware that, at a minimum, WorldCom was meeting revenue expectations through "financial gimmickry."

A voice mail Sullivan left for Ebbers on June 19, 2001, more than a year before WorldCom acknowledged its accounting irregularities, described monthly revenue reports as "getting worse and worse....[T]he latest copy that you and I have already has accounting fluff in it ... all one-time stuff or junk."

The report stung Ebbers for resisting efforts to establish a code of conduct at WorldCom. Ebbers was said to have described it as a "colossal waste of time."

"We have heard numerous accounts of Ebbers' demand for results -- on occasion emotional, insulting, and with express reference to the personal financial harm he faced if the stock price declined -- we have heard none in which he demanded or rewarded ethical business practices," the report said.

Thornburgh's report, prepared at the request of a bankruptcy judge in New York, said Ebbers and Sullivan dominated WorldCom "with virtually no checks or restraints placed on their actions by the board of directors or other management."

The authors of both reports indicated that they were hampered by their inability to question Ebbers and Sullivan.

Sullivan has been charged with fraud in federal court and Ebbers may face charges. Sullivan, who has denied wrongdoing, is free on $10-million bail while he awaits trial next year. Yates and three other former WorldCom executives, including former Controller David Myers, have pleaded guilty and are helping federal prosecutors.

Ebbers' lawyer has said prosecutors are being overzealous in their efforts to find something against Ebbers.

WorldCom hopes to emerge from Chapter 11 protection this fall, renamed MCI and headquartered in Ashburn, Va.

Advertisement
Los Angeles Times Articles
|
|
|