If WorldCom chief executive Bernie Ebbers is convicted of fraud for his role
in the company's $11 billion accounting scandal, he can blame his shoddy
memory: "I don't know ... I don't recall ... I don't remember."
Jurors ended their second day of deliberations in Ebbers' trial Monday.
Ebbers took the stand last week, leaving them with a staggering absurdity:
Can an obscenely paid CEO lord over the single largest accounting fraud in
history and claim that he simply didn't know what was happening?
Ebbers made $11 million in 2000. He also borrowed more than $400 million
from WorldCom over the years to buy cattle ranches and timberlands, and a
yacht-building business in Georgia. Yet Ebbers claims to be a simpleton.
"I know what I don't know," Ebbers testified, "and I, to this day, don't
know technology, don't know finance and accounting, but ... actually, I
always thought I was a pretty good coach. ..."
Ebbers coached WorldCom through one merger after the next - including its
takeover of MCI - until the Justice Department blocked WorldCom from
acquiring Sprint in 2000.
Without another merger partner, WorldCom could no longer roll its dubious
accounting into a new set of books - or pay its debts. The result was
bankruptcy. And what's left of WorldCom, a revived MCI, is merger fodder for
Verizon or Qwest.
"What was your reaction, Mr. Ebbers, to the news ... that there may be a
serious accounting problem at WorldCom?" Ebbers' attorney asked last week.
Ebbers: "I was shocked."
Ebbers: "I couldn't believe it."
Attorney: "Why not?"
Ebbers: "Never thought anything like that had gone on, never. I mean, I put
those people in place. I trusted them. And I just had no earthly idea that
anything like that would have occurred."
Chief financial officer Scott Sullivan admits he cooked the books, but he
testified that Ebbers was in the kitchen, too. Former WorldCom controller
David Myers said Ebbers once apologized for forcing company accountants to
make questionable accounting entries. Both Sullivan and Myers have already
pleaded guilty to criminal charges.
Ebbers denied their allegations and implied he didn't know them very well.
Ebbers' attorney: "Is it fair to say you supervised (Sullivan) as a CEO
supervises a CFO?"
Ebbers: "I had never been a CEO before ... so I supervised him as best I
could, as I knew a CEO should."
A prosecutor later asked: "You talked to Scott Sullivan multiple times a
Ebbers: "Oh, no."
Prosecutor: "You didn't talk to Mr. Sullivan regularly?"
Ebbers: "It depends on what you mean by regularly."
Prosecutor: "But you did do some social things with him on occasion, right?"
Prosecutor: "You invited him to your wedding in 1999, didn't you?"
Ebbers: "Yes, him and many others."
Perhaps Ebbers' most ironic testimony came when questioned about WorldCom's
employee coffee expenses. Ebbers ended the free coffee when he learned it
was costing $4 million a year.
"I don't consider, when you're playing with shareholders' money, $4 million
to be a small number," Ebbers said. "If you look after the pennies, the
dimes will take care of themselves."
Ebbers hadn't a clue about the dollars, though. Perhaps that was Sullivan's
Ebbers isn't the only fallen executive claiming ignorance. Enron chairman
Ken Lay probably will offer a similar defense when he is tried in January.
HealthSouth Corp. founder Richard Scrushy, now on trial, has already pleaded
"You have been fed the 'Aw shucks, I'm not sophisticated' defense," a
prosecutor told Ebbers' jury.
It's frightening to consider that Ebbers and these other captains of
industry may be telling the truth. They really didn't know. They were too
busy chasing deals on Wall Street to bother building profitable businesses.
They were only glorified salesman.
Considering what shareholders lost to these self-proclaimed ignoramuses, "aw
shucks" sounds like a crime, too.