| Bernard John Ebbers | |
|---|---|
Bernard Ebbers |
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| Born | August 27, 1941 Edmonton, Alberta, Canada |
| Charge(s) | Securities fraud, conspiracy |
| Penalty | 25-year imprisonment |
| Status | Incarcerated at Oakdale Federal Correctional Institution, Louisiana |
| Spouse | Linda Pigott (divorced), Kristie Webb (divorced) |
Bernard John "Bernie" Ebbers (born August 27, 1941) is a Canadian-born businessman. He co-founded the telecommunications company WorldCom and is a former chief executive officer of that company.
In 2005, he was convicted of fraud and conspiracy as a result of WorldCom's false financial reporting, and subsequent loss of US$100-billion to investors. The WorldCom scandal was, until the Madoff schemes came to light in 2008, the largest accounting scandal in United States history. He is currently serving a 25-year prison term at Oakdale Federal Correctional Complex in Louisiana. Portfolio.com and CNBC named Ebbers as the fifth-worst CEO in American history;[1] Time magazine named him the tenth most corrupt CEO of all time.[2]
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Born to the family of a traveling salesman, Bernard Ebbers was the second of five children. He was born in Edmonton and his family also lived in California and New Mexico, while he was growing up, before returning to Edmonton. After high school, Ebbers briefly attended the University of Alberta and Calvin College before enrolling at Mississippi College. During the time between schools he worked as a milkman and bouncer. While attending Mississippi College, Ebbers earned a basketball scholarship. An injury before his senior season prevented him from playing his final year. Instead of playing, he was assigned to coach the junior varsity team.
In 1968 Ebbers married Linda Pigott, and the two of them raised three daughters. Ebbers filed for divorce in July 1997 and married his second wife, Kristie Webb, in the spring of 1999. His second wife filed for divorce from him on April 16, 2008, less than two years after he entered prison.
Ebbers began his business career operating a chain of motels in Mississippi. He joined with several other people in 1983 as investors in the newly formed Long Distance Discount Services, Inc. (LDDS). Two years later he was named chief executive of the corporation. The company acquired over 60 other independent telecommunications firms, changing its name to WorldCom in 1995. In 1996, WorldCom acquired MFS Communications, Inc., which itself had recently acquired UUNet and its Internet backbone. At the time, this $12 billion transaction was one of the largest corporate acquisitions in U.S. history, although it would soon be eclipsed by much larger deals, including WorldCom's proposed $40 billion acquisition of MCI.
Ebbers gained public notice on October 1, 1997 when he announced that WorldCom was making an unsolicited bid for MCI Communications. The successful acquisition of MCI was completed in September 1998. The fame from this accomplishment caused Ebbers to receive a number of accolades from the press, including:
In 1999, Ebbers announced that MCI WorldCom would acquire its rival Sprint Communications for over $115 billion. This transaction, however, was abandoned after U.S. and European antitrust regulators raised objections. This combined with a general downturn in the telecom market resulted in a downturn in WorldCom stock price. Much of Ebbers' personal holdings were purchased with loans that had been backed by his WorldCom stock holdings. As the stock price declined he received a number of margin calls to provide additional collateral for these loans. In an effort to prevent Ebbers from having to sell his shares, the WorldCom board of directors authorized a series of loans and loan guarantees between September 2000 and April 2002.
WorldCom announced the resignation of Bernie Ebbers on April 30, 2002. As part of his departure, Ebbers' loans were consolidated into a single $408.2 million promissory note.
At his peak in early 1999, Ebbers was worth an estimated $1.4 billion and listed at number 174 on the Forbes 400. His personal holdings included:[7]
Bernard Ebbers served as Chairman of the Board of Directors of the Competitive Telecommunications Association from 1993 through 1995. In 1997 he then became the chair for Mississippi College's New Dawn Campaign, a fund raising effort initially intended to provide $80 million that raised its goal to $100 million. In July 2001, Ebbers was proposed as the chair for the President's National Security Telecommunications Advisory Committee.[9]
Dubbed the "Telecom Cowboy",[10] Ebbers was known for his unorthodox style. Instead of the typical corporate uniform he often wore boots and blue jeans.
While CEO of WorldCom, he was a member of the Easthaven Baptist Church in Brookhaven, Mississippi. As a high-profile member of the congregation, Ebbers regularly taught Sunday School and attended the morning Worship service with his family. His faith was overt, and he often started corporate meetings with prayer.[11] When the allegations of conspiracy and fraud were first brought to light in 2002, Ebbers addressed the congregation and insisted on his innocence. "I just want you to know you aren't going to church with a crook", he said. "No one will find me to have knowingly committed fraud."[12][13]
On June 25, 2002, WorldCom admitted to $3.85 billion in accounting misstatements (the figure eventually grew to $11 billion). This initiated a series of investigations and legal proceedings, which naturally focused on Ebbers, WorldCom's then-CEO.
In response to a subpoena, Ebbers appeared before the U.S. House Committee on Financial Services on July 8, 2002. At these hearings Ebbers stated "I do not believe I have anything to hide, I believe that no one will conclude that I engaged in any criminal or fraudulent conduct."[14] After making this statement Ebbers asserted his Fifth Amendment right against self-incrimination.
Following his actions, Ebbers was threatened with Contempt of Congress charges.[15] The basis of the allegation was that Ebbers' statement constituted testimony that could not be cross-examined. No charge of contempt was ever filed.
On August 27, 2003, Oklahoma's Attorney General, Drew Edmondson, filed a 15-count indictment against Ebbers.[16] The indictment charged that he violated the state's securities laws by defrauding investors on multiple occasions between January 2001 and March 2002.[17] These charges were dropped, with the right to refile retained, on November 20, 2003.[18] An agreement to extend the statute of limitations on these charges, allowing Oklahoma prosecutors time to see the results of federal sentencing, was signed on March 30, 2005.[19]
Federal authorities indicted Ebbers with security fraud and conspiracy charges on March 2, 2004.[11][20] An amendment to the indictment on May 25, 2004 increased the list of charges to nine felonies: one count each of conspiracy and securities fraud, and seven counts of filing false statements with securities regulators. Ebbers was found guilty of all charges on March 15, 2005.
On July 13, 2005, federal judge Barbara S. Jones, of the U.S. District Court, Southern District of New York in Manhattan, sentenced Ebbers to twenty-five years in a federal prison in Louisiana. Ebbers was allowed to remain free for another year while his appeal was being considered. His conviction, however, was upheld in a federal circuit court on July 28, 2006.[21] On September 6, 2006, the presiding judge ordered him to report to jail[22] on September 26 to start serving his 25-year sentence. Ebbers self-reported to Oakdale Federal Correctional Institution in Oakdale, Louisiana on September 26, 2006, driving himself to the prison in his Mercedes.[23] He is serving his sentence as inmate #56022-054 [24] in the low-security portion of the complex, which typically houses non-violent offenders and is built more like a school dormitory. The earliest date he can be released is in July 2028, at which time he will be 87 years old.[25]
On October 11, 2002, WorldCom investors brought a class action civil lawsuit against Ebbers and other defendants, alleging injuries as a result of Ebbers' securities fraud violations.[26] Judge Denise Cote of the U.S. District Court for the Southern District of New York ordered the parties in the lawsuit to participate in settlement negotiations. On September 12, 2005, Judge Cote approved the settlement reached by the parties, and dismissed the lawsuit against Ebbers.[26] The parties agreed that Ebbers and his codefendants would distribute over $6.13 billion, plus interest, to over 830,000 individuals and institutions that had held stocks and bonds in WorldCom at the time of its collapse. Under the terms of the settlement, Ebbers agreed to relinquish a significant portion of his assets, including a lavish home in Mississippi, and his interests in a lumber company, a marina, a golf course, a hotel, and thousands of acres of forested real estate. It is believed that Ebbers was left with around $50,000 in assets after settlement.