Bernard Ebbers, the ousted CEO at WorldCom whose corporate malfeasance led to imprisonment, has died, the Associated Press reported. He was 78.
The former telecommunications executive died on Sunday, the AP said, citing a report on WAPT-TV in Mississippi.
A federal judge ordered Ebbers released in December 2019 for medical reasons after he had served more than 13 years of a 25-year sentence. His health problems included macular degeneration that left him legally blind and a heart condition that made him vulnerable to cardiac arrest, according to his attorneys.
Ebbers, a onetime milkman and bar bouncer, led a fledgling company — originally named Long Distance Discount Service — through the telecommunications revolution triggered by the breakup of AT&T’s monopoly. Renamed WorldCom in 1995, the Clinton, Mississippi-based company became the number-two US long-distance provider. By mid-1999 it had a market capitalisation of about US$185-billion when its shares hit a high of almost $62.
Pushing WorldCom’s share price upward was a strategy of aggressive growth through acquisitions, as the company gobbled up dozens of telecoms firms. Dubbed the “Telecom Cowboy” for favouring jeans and cowboy boots, Ebbers guided the purchase of firms making fibre-optic cable and other key components of the Internet.
His 1998 purchase of MCI Communications for $47-billion put WorldCom right behind industry leader AT&T in size. His expansion plan hit a wall in 2000 when US and European regulators opposed his attempt to acquire Sprint, the then-number-three US long-distance carrier.
Shares plunged
WorldCom’s first-quarter profit tumbled 78% in 2002 as rising competition from local phone companies led to cuts in call prices. By that time shares had plunged more than 90% since June 1999. Ebbers, who had saddled the company with $30-billion in debt from 75 acquisitions, resigned that April.
The CEO who swiftly assembled a behemoth lacked the skills to operate it.
Two months after Ebbers left, WorldCom disclosed it had misreported $3.9-billion in expenses, forcing the company to restate its earnings for all of 2001 and the first quarter of 2002. The Securities and Exchange Commission called the misstatements “unprecedented” and in July 2002 WorldCom filed the then-largest bankruptcy in US history.
The company emerged from bankruptcy protection renamed as MCI and was acquired by Verizon Communications in 2005.
After Ebbers was forced out as CEO, it was disclosed that he owed the company $408-million, money he had borrowed against his WorldCom stock when it was valued much higher. Ebbers, who had become a billionaire during his stint as CEO, used the funds to acquire the largest ranch in Canada, timber property in Mississippi, a yacht repair firm and mansions.
In March 2005 he was convicted of multiple charges, including securities fraud. Ebbers claimed he didn’t know that subordinates had cooked the books.
“I know what I don’t know,” Ebbers said during his trial, blaming accounting irregularities on others. “To this day, I don’t know technology, and I don’t know finance or accounting.”
Ebbers, at age 63, was sentenced to 25 years in prison. It was the stiffest penalty imposed on any executive convicted in a spate of accounting frauds at the beginning of the 21st century, including crimes committed by executives at Enron, Adelphia Communications and Tyco International. His sentence and the size of his fraud were surpassed in 2009 when Bernard Madoff pleaded guilty to a $17-billion Ponzi scheme and was handed a prison term of 150 years.
Bernard John Ebbers was born on 27 August 1941, in Edmonton, Alberta. His father, John, was a travelling salesman who dealt in hardware and tyres. He and his wife Kathleen moved the family to California when Ebbers was very young, and they lived for a while on a mission post on a Navajo reservation in New Mexico before moving back to Canada when Ebbers was a teenager.
Securities fraud
The 1.93m-tall Ebbers won a basketball scholarship to Mississippi College. He graduated with a bachelor’s degree in physical education, having taken no classes in business or accounting — as his defence lawyer reminded the jury that convicted him of securities fraud.
He was a poor student in college and didn’t succeed at much before landing a job as a high school basketball coach. That leadership post led him to become the owner of a string of motels in Mississippi. He used those assets to finance his initial stake in WorldCom.
Ebbers was married twice, first to Linda Pigott with whom he had four daughters, two of them adopted: Joy, Faith, Ave and Treasure. After the couple divorced, he married Kristie Web, who had a daughter, Carlie, from a first marriage. She divorced Ebbers two years after he went to prison. — Reported by Patrick Oster, (c) 2020 Bloomberg LP
