Many thought Enron Corp. execs got off relatively easy for all their fraudulence, then came Bernie Ebbers.
The public, whose sentiment can influence the courts, felt that it was time to make up for Enron so they slammed Ebbers, the Mississippi-based telecom sensation, and gave him a stiffer sentence for the failure of WorldCom.
He got 25 years and lost his half-million-acre Canadian ranch, his super-yacht-building business in Savannah and all the other trappings of mega-wealth.
His sentence was seen by many as a life term, in effect. Now at 78, Ebbers’ health is failing and a federal judge has granted him freedom after serving 13 years. That may be close to the truth.
Enron exec Jeffrey Skilling got 24 and served 12. Top Enron exec Kenneth Lay stood to get 45 years but died before he was sentenced. Reports are that he took none of his ill-got gains with him.
Big bank execs got a free pass a few years after the WorldCom bankruptcy and criminal trials because they were “too big to fail” during the financial meltdown caused by sheer greed.
“There was a hint of speculation in the media about why Ebbers received the longest sentence yet handed out to an executive convicted in a wave of high-profile white-collar crimes of the era,” Lynne Jeter wrote in the Mississippi Business Journal.
“Because Ebbers was generous with his time and money to many worthy causes almost to a fault — many people still do not realize the scope of his anonymous generosity — and because despite his rough edges, he was a charming dealmaker, it was difficult not to be sympathetic to his plight,” Jeter said in the Journal.
Jeter wrote a comprehensive version of the rags-to-riches-to-rags tale in “Disconnected: Deceit and Betrayal at WorldCom,”
Ebbers, a Canadian, had migrated south and wound up a player and then a men’s basketball coach at Mississippi College in Clinton.
Good coaches know how to get results by leading. The 6-foot-5 Ebbers made the transition from courtside to center court.
He and some buddies started by buying motels in Brookhaven. Then they got wind of the new phone telecommunications era and started reselling long-distance service.
Hence they formed Long Distance Discount Service, or LDDS.
Ebbers learned to translate X’s and O’s on a chalkboard into zeroes and ones in digital communication. Or at least he learned how to produce winners by owning companies that were successful at doing that, and could do better.
Eventually, what evolved from LDDS to WorldCom, had bought more than 60 independent telecoms.
“LDDS was very aggressive about going after business after business after the company went public,” Mississippi Public Service Commissioner Nielsen Cochran is quoted as saying in Jeter’s book.
“They were in here every month filing petitions to acquire phone companies. That struck all of us as being unusual. When they started growing . . . in a relatively short period of time, well, it’s almost unheard of. There was always conversation that at some point . . . they were going to have to start paying off debts.”
By 1992, they were no longer a long-distance reseller, “they had become the nation’s fourth-largest long-distance provider,” Jeter wrote. Then WorldCom bought MCI in 1998 in what was then the largest merger in U.S. corporate history, $42 billion.
Acquisition of Sprint would make them the second-largest behind AT&T, one of the Baby Bells that had been created by the court-ordered breakup of Ma Bell.
Regulators in the United States and Europe frowned on the proposed $117 billion merger and WorldCom and Sprint were left to fend for themselves.
There would be no cash cow to provide WorldCom with a way to keep up the act.
WorldCom did indeed have to attend to that growing debt that Cochran had mentioned. They did that by perpetrating a $11 billion fraud to disguise the debt. And Ebbers and CFO Scott Sullivan had to pay for it, in flesh and blood by serving time in prison. It turned out to be a battle between Ebbers and Sullivan as to who was the fraudmeister. Sullivan pleaded guilty in exchange for testifying against his former boss. Sullivan served four years.
» Contact Mississippi Business Journal staff writer Jack Weatherly at firstname.lastname@example.org or (601) 364-1016.
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