Sitting on top of the...
WorldCom
Sightings from The Catbird Seat
~ o ~
July 31, 2006
Ebbers Conviction Upheld; SEC Settles
with Other Execs
A federal appeals court upheld the conviction and 25-year prison sentence handed to former WorldCom Inc. chief executive Bernard Ebbers a year ago.
Ebbers was found guilty of securities fraud in March 2005, and sentenced later that summer for his role in overseeing an $11 billion accounting fraud at the telecommunications company. He had appealed on a number of arguments, saying that the court should have forced the government to grant immunity to several prospective defense witnesses, that WorldCom's accounting entries complied with accepted standards and that the court wrongly instructed the jury that it could convict Ebbers on the basis of what was termed "conscious avoidance" of the massive fraud.
Writing for the 2nd U.S. Circuit Court of Appeals , Judge Ralph Winters said that while the sentence was long for a white-collar crime, it was not unreasonable. Ebbers has remained free during his appeal.
Last week, the Securities and Exchange Commission also announced that it had settled civil actions against two more former WorldCom financial executives, including the company's former chief financial officer Scott Sullivan.
The SEC will waive nearly $15 million in payments from Sullivan, saying that he has demonstrated an inability to pay. Sullivan is serving a five-year prison term for fraud and has already agreed to surrender an under-construction Florida mansion and $200,000 in a retirement fund.
The SEC also brought and settled a fraud case against former director of property accounting Mark Abide, who agreed to pay a total of nearly $130,000 for his role making misleading bookkeeping entries.
January 22, 2004
Goldman Sachs to Give
WorldCom $9.5M Refund
New York Society of CPA’s
NEW YORK -- Goldman, Sachs & Co., the world's biggest adviser on mergers and acquisitions, will refund $9.5 million that WorldCom Inc. paid for advice in the weeks before the long-distance company's record bankruptcy filing, Bloomberg News reported Thursday.
The two companies last month settled a dispute over whether $13.2 million that WorldCom paid for financial advice in mid-2002 was reasonable. U.S. Bankruptcy Judge Arthur J. Gonzalez approved the accord today at a hearing in New York.
WorldCom hired Goldman in May 2002 to help find new investors, advise on “strategic merger discussions with several leading telecommunications companies,'' arrange bankruptcy financing and explore the possible sale of assets and businesses, according to papers filed last month in U.S. Bankruptcy Court in New York.
Goldman's unsuccessful effort to find a rescuer for WorldCom left it open to arguments it didn't deserve payments of $10.2 million on June 14, 2002, and $3 million on July 19, 2002. The New York-based investment bank will refund about three-quarters of the money to WorldCom, the second-largest U.S. long-distance carrier after AT&T Corp.
May 25, 2003
Critics Decry SEC's Corporate Settlements
by Marilyn Geewax, Atlanta Journal-Constitution
WASHINGTON -- This past week, the Securities and Exchange Commission reached settlements with both WorldCom Inc. and PricewaterhouseCoopers LLP, forcing the companies to pay penalties for wrongdoing.
But some victims of corporate misdeeds ask: Why isn't the SEC hauling the scofflaws into court to let jurors decide the punishments?
"The SEC should be enforcing the law to its fullest extent," not negotiating compromises, said Mitch Marcus, a former WorldCom manager who founded BoycottMCI.com to lobby for stiff punishment. Compared with the suffering of investors, WorldCom ended up with "a very, very insignificant fine."
But the SEC says a settlement offers several advantages. By negotiating an agreement, the government can impose swift punishment that forces changes in corporate behavior to prevent future crimes, said Thomas Newkirk, associate director of the SEC's enforcement division.
"You get things much more quickly than would otherwise be the case," Newkirk said.
"The typical litigation case probably takes between two and three years," he said. "One needs to balance the benefit of getting remedial provisions into place now, as opposed to getting them three years from now." http://www.americas.org/item_6912
WorldCom agreed last week to settle fraud charges by paying $500 million, the largest penalty ever proposed for accounting fraud. In New York, U.S. District Court Judge Jed Rakoff is expected to decide in June whether to approve it.
Also last week, the SEC announced that PricewaterhouseCoopers LLP agreed to pay $1 million to settle allegations of improper conduct related to its audits of SmarTalk TeleServices, a now-bankrupt provider of prepaid telephone cards and wireless services.
With the lure of a settlement, the SEC can force almost immediate changes to protect shareholders and others from further victimization, Newkirk said.
For example, after the WorldCom accounting fraud was revealed last June, "we got a monitor put into place to make sure we didn't have another Enron-type situation where the managers were giving themselves big bonuses on the way out of the door," Newkirk said. "We also got controls put into place to fix what was wrong with their record keeping and the accounting."
In the PricewaterhouseCoopers case, the firm agreed to establish new document-retention policies.
J. Boyd Page, a securities attorney in Atlanta, agreed that settlements typically offer more benefits than long court battles.
"Settlements can make sense because white-collar crime is ofttimes very, very complicated," Page said. "It can take weeks on end simply to present a case" to the jury after years of investigative work.
As the case drags on, costs mount, he said. "There is a huge cost of going to trial, just in terms of absolute dollars, to retain lawyers, pay experts and pay employees to sit in a courtroom instead of doing their own jobs," he said. "Furthermore, trials, whether you win or lose, can be quite devastating simply because of adverse publicity."
But Page said the reluctance to go to trial can harm shareholders who want to sue.
"From a plaintiff's perspective, I prefer to go to trial because during the course of that, there is a lot of testimony developed, a lot of documentary evidence made public," he said. "That type of evidence often bolsters the claims of individual investors who have lost their life savings."
The settlements also fail to help victims of corporate wrongdoing by allowing the perpetrators to avoid admissions of guilt. The WorldCom settlement allowed the company to declare that it does not admit guilt.
Page said companies insist on that provision because typically, "they remain subject to a number of class-action civil lawsuits. An admission of guilt would pretty much stop them from fighting those lawsuits."
Reformers alarmed
Charlie Cray, a corporate reform expert for Citizen Works, a Ralph Nader group, said quick settlements allow companies to get off too easily.
At WorldCom, where company officials overstated earnings by about $11 billion since 1999, a punishment of $500 million won't amount "to a penny on the dollar," Cray said. "The number sounds impressive at first because it's the largest ever levied in history, but you take into count all the factors, and it looks pretty weak."
Moreover, because the company didn't have to admit a crime, "it doesn't help people in lawsuits," he said.
If the court accepts the SEC proposal, the settlement could help WorldCom Chief Executive Michael Capellas lead WorldCom out of the largest bankruptcy case in history.
WorldCom's revelations last June of massive overstatements of earnings came on the heels of similar announcements by Enron Corp., Tyco International Ltd. and others.
The SEC accused WorldCom with committing fraud "in connection with several securities offerings" and violating record and bookkeeping laws. Former Chief Financial Officer Scott Sullivan, who was fired after the earnings misstatements were discovered, has pleaded not guilty to criminal fraud charges. Ex-CEO Bernard Ebbers has said he was unaware of the disguised expenses and has not been charged.
Four other executives have pleaded guilty to criminal charges filed in New York and are cooperating with investigators.
© 2003 The Atlanta Journal-Constitution
# # #
To see more VULTURE NESTS in
our Public Communications Systems,
GO TO
\/
Birds that Drink from Cesspools
Pointing the Finger at WorldPoint
The Rise and Fall of Summit Communications
Vultures of the Sandwich Isles
~ o ~
MORE OF THE CATBIRD’S FAVORITE LINKS
~ o ~
###
FAIR USE NOTICE. This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.
For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.
###
Last update June 3, 2007, by The Catbird