Former WorldCom chief Ebbers charged with securities fraud

WASHINGTON -- Former WorldCom CEO Bernard Ebbers has been indicted on federal charges stemming from the multibillion-dollar accounting scandal at the telecommunications giant.

The indictment was handed up late Monday in U.S. District Court in Manhattan. A copy was obtained Tuesday by The Associated Press.

The indictment, a rewritten version of the one earlier used to charge former WorldCom chief financial officer Scott Sullivan, includes single counts of securities fraud, conspiracy to commit securities fraud and filing false documents with the Securities and Exchange Commission.

Ebbers resigned from WorldCom in April 2002, well after its stock price had begun a steady decline and soon after questions began to swirl about the company's finances. Two months later, WorldCom announced it had uncovered nearly $4 billion in hidden expenses -- the beginning of a spiral that would become the largest corporate scandal in U.S. history. The fraud now is estimated at $11 billion.

Bankruptcy, name change

WorldCom filed for bankruptcy July 21, 2002. In a bid to heal its reputation, WorldCom changed its name to MCI last April and moved its headquarters to Ashburn, Va.

Four former company executives, including controller David Myers, have pleaded guilty to criminal charges in the Justice Department's fraud investigation and are helping federal prosecutors.

Sullivan was arrested in August 2002 on charges of securities fraud, conspiracy and filing false statements with the SEC.

A source familiar with the case, who spoke on condition of anonymity, said Sullivan has been involved in plea negotiations with federal prosecutors. Sullivan was scheduled to appear Tuesday in federal court in New York and an agreement involving a guilty plea could be announced then, the source said.

Sullivan's attorney, Irv Nathan, could not immediately be reached to comment.

Ebbers and Sullivan were also charged with 15 violations of state securities laws in Oklahoma. They are among six ex-WorldCom employees charged there in an accounting fraud that prosecutors say cost state pension funds $64 million.

Oklahoma's attorney general dropped criminal charges against Ebbers in November but has said he plans to refile them this year.

A WorldCom report released in June said Ebbers fostered a poisonous corporate culture and said he was "aware, at a minimum, that WorldCom was meeting revenue expectations through financial gimmickry."

The report, produced by lawyer William McLucas at the request of the company's new board, said Ebbers had been in meetings in which company officials discussed ways to artificially inflate revenue.

A second report, by former Attorney General Richard Thornburgh for a bankruptcy judge in New York, described a corporate culture dominated by Ebbers and Sullivan "with virtually no checks or restraints placed on their actions by the board of directors or other management."

Last year a federal judge in New York approved a $750 million settlement between WorldCom and the Securities and Exchange Commission, designed to repay investors who lost money in the fraud.

WorldCom also has agreed to corporate reforms, including a court-appointed monitor and regular audits.

Ebbers and business associates started Long Distance Discount Service two decades ago in Hattiesburg, Miss. For the next 12 years, they snapped up communications companies, including IDB WorldCom, and in 1995 adopted the name WorldCom Inc., with Ebbers as chief executive.

WorldCom merged with MCI in 1997 and planned to merge with Sprint in 1999 until the deal was called off.