On September 26, Bernie Ebbers began serving a 25-year sentence at the Oakdale Correctional Complex in Central Louisiana for his role in the $11-billion accounting fraud.
In a ruling earlier this month, U.S. District Judge Barbara Jones ordered Ebbers, who turned 65 August 27, an age when most people are retiring, to report to an institution designated by the U.S. Bureau of Prisons.
Former WorldCom controller David Myers completed his one-year sentence at the minimum-security federal prison in Yazoo City in late August. Former WorldCom CFO Scott Sullivan, the chief prosecution witness against Ebbers, is serving time at a federal prison in Georgia near Savannah, with a projected release date of 2010.
“When Bernie was doing well, and WorldCom was on top of the world, we were awfully proud to ride up and down I-20 and say, ‘We’re a player,’” said Marty Wiseman, director of the John C. Stennis Institute of Government at Mississippi State University. “This (prison sentence) certainly adds a punctuation mark to the end of a Mississippi company being a major player in the telecommunications world, at least at the level we were. Maybe this will help some people feel better, knowing that Bernie has to spend a few years feeling bad about the whole thing, like they are. Folks who were up in years and had their retirement tied up in the ‘WorldCom miracle,’ they’ll never recover.”
Wiseman pointed to Ebbers’ stranglehold on WorldCom associates wanting to execute their stock options.
“You don’t have to go far to hear the stories about this mess,” said Wiseman. “These folks were getting called on the carpet by Bernie, and if for some reason they had to sell some of their stock, they were in trouble. First off, they were forced to buy something that was headed toward being worthless. Luckily, most of them were young enough to get out and consider it a lesson learned. You hate to be sitting around salivating for revenge, but the fact that he is now going to have to sit in jail somewhere will at least make a few more folks believe in the justice system, that the big guys can get theirs just like the little fellow, too.”
Ebbers, one of five children born into a working-class, deeply religious family in Edmonton, Canada, was an unlikely choice to run a company that many people say never should have happened. (Ebbers and other investors established LDDS, the predecessor to WorldCom, January 14, 1984.) But oddities defined the sinewy CEO who had been a milkman, bartender, bar bouncer, car salesman, truck driver, motel manager, garment factory foreman and high school basketball coach before heading what would become the most feared telecom company in the world.
“When I knew him back in high school, he was always a nice guy, always very attentive as a coach,” recalled Sells Newman, a basketball player from Crystal Springs, now a businessman living in Madison County. “As I saw him grow through his success, I personally never saw a change in him.
A few years back, I saw him one night at Schimmel’s and challenged him to a couple of hoops for five bucks, and his wife said, ‘Don’t do that or he’ll take you up on it.’ He was always so cordial. I hate to see anybody have to go to jail, especially when you’ve known them and known their family and see what it’s done to them.”
On April 29, 2002, as stock prices were falling, Ebbers resigned as WorldCom CEO after 17 years at the helm. John Sidgmore, who was named his replacement, had not even started his turnaround plan when internal audit team leader Cynthia Cooper discovered a $3.8-billion accounting fraud, which escalated to $11 billion within months and led to the company filing bankruptcy and indictments brought against Ebbers, Sullivan, Myers and others. (Sidgmore died the following year from complications related to a stomach disease.)
The Enron and WorldCom scandals prompted Congress to pass the Sarbanes-Oxley Act of 2002, a sweeping corporate reform bill.
“Bernie’s jail sentence sends a strong message about the need for CEOs to maintain high ethical standards,” said Neel-Schaffer president Hibbett Neel. “I believe Bernie would agree that his greed was hardly worth the price he will pay for the rest of his life.”
The debacle also spurred corporate governance classes as mainstays of business degree programs at colleges and universities around the world.
“The Worldcom and Enron cases set the stage for what I think will be a new era in corporate governance,” said Mississippi author and economic developer Phil Hardwick. “I think we’re seeing some of those ramifications in the Hewlitt-Packard case. Public companies will have boards that have more outsiders instead of being made up of people handpicked by the CEOs. We may even see some corporations go private because of the increased scrutiny by their own shareholders.
The business textbooks of the future will probably have photos of Bernie Ebbers as a symbol in matters regarding corporate ethics.”
Contact MBJ contributing writer Lynne W. Jeter at Lynne.Jeter@gmail.com.