Freed because of illness, convicted phone exec dies
Bernard Ebbers, who spent 12 years in prison after presiding over an $11 billion accounting fraud as chief executive of telephone company WorldCom, died Sunday. He was 78.
His death was announced by his lawyer, Graham Carner, in a statement that said his health had sharply deteriorated in recent months.
Ebbers was convicted in New York in 2005 on securities fraud and other charges and received a 25-year sentence. A federal appeals judge who upheld Ebbers’ conviction in 2006 wrote that WorldCom’s fraudulent accounting practices were “specifically intended to create a false picture of profitability even for professional analysts that, in Ebbers’ case, was motivated by his personal financial circumstances.”
Ebbers was released from a federal prison in Texas in December, having been granted compassionate release by a federal judge to spend his final months at home in Mississippi. His family said in the statement that he died “surrounded by his loving family and not chained to a hospital bed without anyone he knew in the room.”
In what was once considered a great entrepreneurial success story, the former executive from a modest upbringing turned a small phone company into a telecommunications juggernaut. At its peak, the company employed 80,000 people.
Ebbers, a onetime milkman and bar bouncer, led his fledgling company — originally named Long Distance Discount Service — through the telecommunications revolution triggered by the breakup of American Telephone & Telegraph’s monopoly. Renamed WorldCom Inc. in 1995, the Clinton, Miss., company became the No. 2 U.S. long-distance provider. By mid-1999 it had a market capitalization of about $185 billion when its shares hit a high of almost $62.
But the apparent growth, fueled by a series of acquisitions, turned out to be an illusion enabled by accounting trickery. A jury convicted Ebbers of securities fraud, conspiracy and filing false reports in 2005, despite his arguments that he had been misled by subordinates and was in the dark about the wrongdoing. The 25-year sentence was among the strongest penalties ever handed to a corporate executive.
WorldCom had $107 billion in assets when it applied for bankruptcy protection in July 2002, and its rapid fall reverberated throughout the industry.
Thousands of WorldCom employees lost their jobs, insurance and pensions, with their savings wiped out by the plummeting price of the company’s stock. AT&T laid off tens of thousands of people in the late 1990s as it tried to chase WorldCom’s phantom profits.
In 2005, Ebbers, who was once worth $1 billion on paper, surrendered nearly all of his remaining $40 million fortune to investors who lost billions in the bankruptcy.
Before the fall, he was widely hailed as a visionary, a rags-to-riches corporate outsider who stitched together a world-class company. Originally from Edmonton, Alberta, Ebbers, who was 6 feet 4 inches tall, moved to Clinton, Miss., in the 1960s to play basketball at Mississippi College, a Baptist university. He worked as a high school basketball coach and operated motels before, in 1983, founding the company that would become WorldCom.
“The only experience Bernie had before operating a long-distance company was he used the phone,” Carl Aycock, an early investor and WorldCom board member, said in 1997.