A potential 2001 merger of WorldCom Inc. and Verizon Communications was scuttled by internal concerns over accounting tricks at WorldCom, jurors in the fraud trial of former WorldCom Chief Executive Bernard J. Ebbers were told Thursday.
Onetime finance chief Scott D. Sullivan, who has pleaded guilty to fraud and is cooperating with prosecutors in hopes of leniency, said he became concerned that false accounting would be uncovered when Verizon began taking a closer look at the company's books, a process known as due diligence.
Sullivan talked about the failed merger discussions during his fourth day of testimony in federal court in New York. Ebbers, his former boss, is facing charges of fraud and conspiracy linked to an $11-billion accounting scandal.
Sullivan said he brought his concerns to Ebbers, recommending that he kill merger talks between the two companies.
"I said to Bernie, 'If we get to the next step with Verizon where we start to exchange nonpublic information, the details of our financial statements, I have concerns in the line cost and revenue areas,' " Sullivan testified, referring to two areas in which WorldCom had made questionable accounting entries.