Ebbers $30 million fine and 25 years in prison.|
former CEO Bernie Ebbers of Worldcom (now known as MCI, Inc.) offered all his
assets in a bid for leniency. Ebbers was convicted on March 15 by a federal jury
for his role in the WorldCom fraud. Ebbers would have lost all his assets in the
numerous civil lawsuits against him anyway so does anyone really think this is
going to help him get a reduced prison sentence? I'm sure all the shareholders
are looking for the maximum sentence. In this highly publicized case, I believe
the judge will make an example of Bernie Ebbers and sentence him to at least 25
years in prison.
WorldCom shareholders who filed a class-action lawsuit
against Ebbers would get 75% of the money. MCI Inc., would be entitled to the
handing over his entire fortune to settle civil claims, Ebbers hopes to get a
lighter term when he appears in federal court for sentencing July 13. Prosecutors
are reportedly seeking an 85-year term, essentially a life sentence. Ebbers was
convicted for orchestrating an $11-billion accounting fraud at WorldCom.
the settlement negotiated by the U.S. attorney's office Ebbers would pay out $5
million immediately. He would then transfer all his other assets, estimated at
$25 million to $40 million, into a trust. The trust would distribute the proceeds
to shareholders and the company.
high profile senior executives being charged with accounting fraud to inflate
earnings and drive up the value of stock options, have all been using the "I
didn't know defense". What's interesting about this case, unlike the other
executives from other firms, Ebbers never sold off any of his company stock. He
simply continued to borrow money off the value of the stock. Ebbers apparently
still owes $338 million that he borrowed from Worldcom.
At the peak of
Worldcom's stock price, Ebbers was worth over $1 billion. If Ebbers was continuously
inflating revenues, he had to know the stock would drop as soon as sales and earnings
missed expectations. Most savvy executives would have sold off a portion of their
stock to cash out. Even as he borrowed against his Worldcom stock, Ebbers failed
to hedge against a falling stock price. Although, I did arrive at the same conclusion
as the jury that convicted him, Ebbers may have in fact, really been a "clueless"
Updates after July 11, 2005:
the proposed settlement of civil lawsuits against Bernie Ebbers. Part of the settlement
allows Bernie Ebbers' wife Kristie ebbers to retain a house in Mississippi, $50,000,
her retirement account and some other undisclosed assets considered minor by the
courts. Kristie Ebbers was never charged with any wrong doing. The Ebbers would
have lost everything in the civil lawsuits anyway so Kristie may actually have
walked away with more assets through this "settlement".
after July 13, 2005:
As expected, Bernie Ebbers received a 25 year
sentence at his hearing today.
MCI: Director's Payoff Establishes New Legal Precedent.
2005 Nelson Chin.
inquire about consulting or speaking engagements, e-mail: Nelson