Ebbers and the WorldCom Scandal

Bernie Ebbers graduated from Mississippi College in 1967 with a bachelor’s degree in physical education. He then went on to manage a chain of motels in Mississippi. In 1983, he and several others invested in Long Distance Discount Services, Inc. He was later named Chief Executive of this company and grew it through acquisitions over the years. It ultimately became WorldCom – a telecommunications firm. Through this growth, the company became well known as an industry leader, until its demise in 2002.

In 2002, WorldCom admitted to several billion dollars in accounting misstatements. The final amount reached $11 billion. This was the largest instance of accounting fraud to date. In 2006, he was sentenced to 25 years in a low security prison for one count each of conspiracy, fraud, and filing false statements. Bernie Ebbers will be in jail until he is 87 years old.

There were several others indicted in the WorldCom scandal, including the CFO and the Controller. However, each of these people were sentenced to five or fewer years in prison. Several were granted leniency because they cooperated with the legal system and helped convict Ebbers. While I believe that all of these people deserve some punishment, I think this distribution of sentencing is grossly unfair. As CEO, Ebbers is seen as the “ringleader”, however, the CFO and others who worked directly with the accounting deserve a great deal of blame as well. Certainly Ebbers was not the only person who knew about this and had a hand in executing the fraud.


3 thoughts on “Ebbers and the WorldCom Scandal

  1. It is interesting to look at the distribution of sentencing. I’m guessing that the courts saw him as a bigger part of the fraud, but the CFOs definitely played a big role in it. It is interesting to contrast this situation with John’s post about Richard Scrushy from HealthSouth, who was given no jail time while his various CFOs were. It seems like a similar case (accounting fraud being used to make the books look better), but the treatment of the CEOs were drastically different.

  2. I also find jail sentencing distribution a worthwhile topic. Once convicted of white-collar crime, a corporate executive has various options, but it basically boils down into either pleading either innocent or guilty, and using the opportunity to divulge more information on other parties involved in the crime for less punishment time. If an executive is truly guilty, it is more honorable to own up the his or her mistakes, but
    “rat” others out? It is a difficult proposition to be placed. I suppose it comes down to whether one chooses self-freeing at the expense of others, or cherishes the relationships with their colleagues more dearly than their own potential wider freedoms.

  3. This is another very interesting example of how the legal system works in the United States. While Ebbers was the one who was convicted of the major charges instead of his CFOs, CEO Richard Scrushy of HealthSouth was acquitted of all his charges and his CFOs were given the punishment. It is fascinating at how various courts in the U.S. view the person giving the orders (mostly CEOs), and the people carrying out the orders (CFOs and other high-level execs). In Scrushy’s case, the law deemed that he did not carry out the fraudulent activities, therefore, he could not be guilty. While this is true, it seemed like Ebber’s case was COMPLETELY different. Interesting stuff.

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