WorldCom witness' credibility attacked

Ex-finance chief admits lying after CEO quit

February 17, 2005|By BLOOMBERG NEWS

NEW YORK - Former WorldCom Inc. finance chief Scott D. Sullivan told jurors yesterday that he lied to company officers, directors and accountants about fraudulent practices in his department even after chief executive Bernard J. Ebbers resigned.

Defense lawyer Reid Weingarten went on the offensive in his cross-examination of Sullivan, attacking the credibility of the government's star witness at Ebbers' criminal trial. Sullivan testified earlier about phony accounting maneuvers that drove the company into bankruptcy, claiming they were done under pressure from Ebbers to prop up WorldCom stock.

Yesterday, the defense sought to convince jurors that Sullivan, who has pleaded guilty to criminal charges, led the $11 billion fraud and implicated his former boss in a bid for leniency.

Sullivan said yesterday that he continued to lie or omit facts in discussions with auditors, outside accountants, WorldCom's new CEO and the company's 12-member audit committee, more than a month after Ebbers quit.

"If you believe something is in your interest, you are willing and able to lie to accomplish it?" Weingarten asked.

"I lied on that date," Sullivan said, referring to a June 2002 meeting with the audit committee.

Ebbers, 63, is on trial on charges of securities fraud, conspiracy and filing false statements with the Securities and Exchange Commission. He faces a maximum of 25 years in prison if convicted.

During direct testimony last week, Sullivan said Ebbers approved hiding short-term expenses, including the fees paid by WorldCom for using other carriers' phone lines, known as line costs. The fees were recorded as longer-term capital expenditures in an effort to boost the company's reported profit growth.

Sullivan said WorldCom hid $3.8 billion in short-term expenses to meet Wall Street expectations. He said he lied to WorldCom auditor Cynthia Cooper during a June 11, 2002, meeting about why the line fees were classified as long-term costs that didn't have to be reported as quarterly expenses.

"Isn't it true what you were trying to do was minimize your exposure to this whole thing?" Weingarten asked.

"I just wanted to get out of the meeting," Sullivan said.

The next day, Sullivan spoke with WorldCom's new chief executive, John Sidgmore, about line costs. He said he didn't tell Sidgmore about the reason for shifting expenses. Sidgmore died in December 2003.

Sullivan also depicted a WorldCom board that paid little attention to financial issues. He said he was rarely challenged by board members, some of whom slept through his presentations.

Audit committee members were more concerned about the stock price, he said. "They wouldn't ask accounting questions," he said. "They would ask what the [stock market]analysts think."

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