WorldCom Report Says Ebbers Had Role In Inflating Revenue

Dow Jones News Service | June 6, 2003

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A long-awaited report on the accounting fraud at WorldCom Inc. -- the largest in U.S. history -- will conclude for the first time that former Chief Executive Bernard J. Ebbers played a role in the company's effort to improperly boost revenue to meet Wall Street expectations, people familiar with the matter told The Wall Street Journal.

The expansive report, due to be released Monday, is the product of an independent investigation commissioned by the company and led by William McLucas of the law firm of Wilmer Cutler & Pickering. It details how, starting in 1999, the company used accounting fraud to cover up more than $10 billion in losses. WorldCom was one of the biggest stars of Wall Street, and its bankruptcy has cost shareholders $180 billion as the result of the drop in the stock's value.

The report highlights questions about the role of WorldCom's auditors, both internal and external, as well as the board of directors and scores of employees who knew about the fraud or helped carry it out. The company, now called MCI, plans to emerge from bankruptcy-court protection this fall and is hoping that the report will answer many of the questions that continue to create a cloud of distrust.

There hasn't been any decision thus far whether to bring a civil or criminal case against Mr. Ebbers.

Reid Weingarten, Mr. Ebbers's lawyer, said prosecutors determined to pin something on the former chief executive are only looking at revenue issues after making no progress in tying him to anything else. "It sounds to me that they are looking at every business decision that was ever made at WorldCom to find something wrong," said Mr. Weingarten. "I am hopeful and confident that the prosecutors will not proceed with some razor-thin case based on an allegation that does not directly implicate Mr. Ebbers." Mr. Weingarten said Mr. Ebbers wouldn't comment.