Bernard Ebbers

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Bernard John Ebbers

Bernard John Ebbers, also known as Bernie Ebbers (born August 27, 1941 in Edmonton, Alberta), is a Canadian-born businessman. He co-founded telecom company WorldCom and is a former CEO of that company.

In 2005 he was convicted of fraud and conspiracy in the largest (to date) accounting scandal in U.S. history, as a result of WorldCom's false financial reporting, and subsequent 11 billion dollar loss to investors. On July 13, 2005, federal judge Barbara Jones, of the U.S. District Court, Southern District of New York in Manhattan, sentenced Ebbers to 25 years in a federal prison in Mississippi, the toughest sentence yet among other recent corporate accounting scandals. Ebbers, who is 63 years old, will begin his sentence in October, and is not expected to be released until he is 85.

1 Early life
- 1.1 Education and degrees
2 Business achievements
- 2.1 Other activities
3 Personality
4 Post-WorldCom
- 4.1 Congressional hearing
- 4.2 Criminal charges
5 Aw Shucks defence
- 5.1 Civil suits
6 References
7 See also
8 External links

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Early life

Born to the family of a traveling salesman, Bernard Ebbers was the second of five children. He was born in Edmonton, Alberta and his family also lived in California and New Mexico, while he was growing up, before returning to Edmonton.

After high school, Ebbers briefly attended the University of Alberta and Calvin College before enrolling at Mississippi College. During the time between schools he worked as a milkman and bouncer. While attending Mississippi College Ebbers earned a basketball scholarship. An injury before his senior season prevented him from playing his final year. Instead of playing, he was assigned to coach the Junior Varsity team.

In 1968 Ebbers married Linda Pigott, and the two of them raised three daughters. Ebbers filed for divorce in July 1997 and married his second wife, Kristie Webb, in the spring of 1999.

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Education and degrees

Bachelor in physical education, minor in secondary education. Mississippi College (1967)
Honorary Doctor of Laws. Mississippi College (1992)
Honorary doctorate. Tougaloo College (1998)

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Business achievements

Ebbers began his business career operating a chain of motels in Mississippi. He joined with several other people in 1983 as investors in the newly formed Long Distance Discount Services, Inc (LDDS). Two years later he was named chief executive of the corporation. The company acquired over 60 other independent telecommunications firms, changing its name to WorldCom in 1995. In 1996, WorldCom acquired MFS Communications, Inc., which itself had recently acquired UUNet and its Internet backbone. At the time, this $12 billion transaction was one of the largest corporate acquisitions in U.S. history, although it would soon be eclipsed by much larger deals, including WorldCom's $40 billion acquisition of MCI.

Ebbers gained public notice on October 1, 1997 when he announced that WorldCom was making an unsolicited bid for MCI Communications. The successful acquisition of MCI was completed in September 1998. The fame from this accomplishment caused Ebbers to receive a number of accolades from the press, including:

Mississippi Business Hall of Fame (May 1995)
Member of Wired 25 (November 1998)
Being named to The 25 most powerful people in networking by Network World (January 4, 1999)
Listing in the TIME Digital 50 (September 27, 1999)

At his peak in 1999, Ebbers was worth an estimated $1.4 billion and listed at number 174 on the Forbes 400. His personal holdings included Canada's biggest ranch, a minor league hockey team, a lumberyard, a trucking company, and a yacht company.

In 1999, Ebbers announced that MCI WorldCom would acquire its rival Sprint Communications for over $115 billion. This transaction, however, was abandoned after U.S. and European antitrust regulators raised objections. This combined with a general downturn in the telecom market resulted in a downturn in WorldCom stock price.

Much of Ebbers' personal holdings were purchased with loans that had been backed by his WorldCom stock holdings. As the stock price declined he received a number of margin calls to provide additional collateral for these loans. In an effort to prevent Ebbers from having to sell his shares, the WorldCom board of directors authorized a series of loans and loan guarantees between September 2000 and April 2002.

WorldCom announced the resignation of Bernie Ebbers on April 30, 2002. As part of his departure, Ebbers' loans were consolidated into a single $408.2 million promissory note.

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Other activities

Bernard Ebbers served as Chairman of the Board of Directors of the Competitive Telecommunications Association from 1993 through 1995. In 1997 he became the chair for Mississippi College's New Dawn Campaign, a fund raising effort initially intended to provide $80 million that raised its goal to $100 million. In July 2001, Ebbers was proposed as the chair for the President’s National Security Telecommunications Advisory Committee.

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Personality

Dubbed the Telecom Cowboy, Ebbers was known for his unorthodox style. Instead of the typical corporate uniform he often wore boots and blue jeans. His direct style of speech is typified by comments following the announcement of Worldcom's unsolicited bid for MCI when he joked that then MCI CEO Bert C. Roberts Jr. should be in the office "a little bit earlier."

Ebbers' personal faith was another important factor in his personality. While CEO of WorldCom, he was a member of the Easthaven Baptist Church in Brookhaven, Mississippi. As a high-profile member of the congregation, Ebbers regularly taught Sunday School and attended the morning Worship service with his family. His Christian faith was overt, and he often started corporate meetings with prayer. [1]

When the allegations of conspiracy and fraud were first brought to light in 2002, Ebbers addressed the congregation and protested his innocence. "I just want you to know you aren't going to church with a crook," he said [2], "No one will find me to have knowingly committed fraud." [3]

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Post-WorldCom

The June 25, 2002 announcement by WorldCom of $3.85 billion, a figure that would grow to $11 billion, in accounting misstatements caused a series of investigations and legal proceedings to commence. Ebbers, being the CEO of WorldCom during the time the inflated earnings occurred, was a major figure in these investigations and legal proceedings.

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Congressional hearing

In response to a subpoena, Ebbers appeared before the U.S. House Committee on Financial Services on July 8, 2002. At these hearings Ebbers stated "I do not believe I have anything to hide, I believe that no one will conclude that I engaged in any criminal or fraudulent conduct." [4] After making this statement Ebbers asserted his Fifth Amendment right against self-incrimination.

Following his actions, Ebbers was threatened with Contempt of Congress charges. [5] The basis of the allegation was that Ebbers' statement constituted testimony that could not be cross-examined. No charge of contempt was ever filed.

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Criminal charges

On August 27, 2003, Oklahoma Attorney General Drew Edmondson filed a 15-count indictment against Ebbers. [6] The indictment charged that he violated the state's securities laws by defrauding investors on multiple occasions between January 2001 and March 2002. [7] These charges were dropped, with the right to refile retained, on November 20, 2003. [8] An agreement to extend the statute of limitations on these charges, allowing Oklahoma prosecutors time to see the results of federal sentencing, was signed on March 30, 2005. [9]

Federal authorities indicted Ebbers with security fraud and conspiracy charges on March 2, 2004. [10] [11] An amendment to the indictment on May 25, 2004 increased the list of charges to nine felonies: one count each of conspiracy and securities fraud, and seven counts of filing false statements with securities regulators. [12] Ebbers was found guilty of all charges on March 15, 2005. As a result of this conviction, Ebbers was sentenced to serve 25 years in prison on July 13, 2005. [13]

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Aw Shucks defence

The Aw Shucks Defence is a term coined by the prosecutor Assistant US Attorney William F Johnson, as he concluded the argument against Bernie Ebbers, former CEO of WorldCom in a court case. Bernie Ebbers had relied upon a defence of ignorance of the financial crimes committed at WorldCom, the telecommunications company he had built up. WorldCom collapsed in 2002 amid accusations of fraudulent accounting to the tune of $11 billion US. Shareholders lost $180 billion US in the collapse and 20,000 people lost their jobs. It was, at the time, the biggest bankruptcy in the history of the USA. The "Aw Shucks Defence" was not accepted and Ebbers was found guilty of conspiracy and fraud in March 2005 and sentenced to 25 years in July 2005 after his bid for a retrial was lost. There may have been a precedent with the rejection of this defence as it could have been employed in the forthcoming trials of former Enron officers.

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Civil suits

On 11 October 2002, WorldCom investors brought a class action civil lawsuit against Ebbers and other defendants, alleging injuries as a result of Ebbers' securities fraud violations.[14] Judge Denise Cote of the U.S. District Court for the Southern District of New York ordered the parties in the lawsuit to participate in settlement negotiations. On 12 September 2005, Judge Cote approved the settlement reached by the parties, and dismissed the lawsuit aganist Ebbers. [15] The parties agreed that Ebbers and his codefendants would distribute over $6.13 billion, plus interest, to over 830,000 individuals and institutions that had held stocks and bonds in WorldCom at the time of its collapse. Under the terms of the settlement, Ebbers agreed to relinquish a significant portion of his assets, including a lavish home in Mississippi, and his interests in a lumber company, a marina, a golf course, a hotel, and thousands of acres of forested real estate.

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