U.S. CHARGES EX-WORLDCOM CEO BERNARD EBBERS; JOHN ASHCROFT, the Attorney General
of the United States, DAVID N. KELLEY, the United States Attorney for the
Southern District of New York, and PASQUALE
D'AMURO, the Assistant Director in Charge of the FBI New York Field Office,
announced today the unsealing in Manhattan federal court of a Superseding Indictment
charging BERNARD J. EBBERS, the former Chief Executive Officer and President
of WorldCom, Inc. ("WorldCom"). The Superseding Indictment charges
EBBERS with conspiracy and securities fraud in connection with his participation
from September 2000 through June 2002 in a scheme to inflate artificially the
price of WorldCom common stock by hiding from investors the truth about WorldCom's
declining The Superseding Indictment also alleges new charges against former WorldCom
Chief Financial Officer SCOTT D. SULLIVAN, who was first charged with participating
in the WorldCom fraud in July 2002. Today, following the unsealing of The Superseding Indictment The Superseding Indictment alleges that by September 2000, EBBERS, SULLIVAN, and others knew that WorldCom's true operating performance and financial results had fallen materially below the expectations of Wall Street securities analysts. Rather than reveal WorldCom's true condition, which would likely have resulted in a decline in the price of WorldCom's stock, EBBERS insisted that WorldCom publicly report financial results that met analysts' expectations, according to the Superseding Indictment. To accomplish this goal, EBBERS and SULLIVAN agreed that false and fraudulent adjustments would be made to WorldCom's books and records, it is alleged. According to the Superseding Indictment, from September 2000 through June 2002, to disguise WorldCom's true operating performance and financial results, EBBERS, SULLIVAN, and their co-conspirators manipulated artificially the following items in WorldCom's publicly filed financial statements: reported revenue; Selling, General, and Administrative expenses ("SG&A"); line cost expenses; Earnings Before Income, Depreciation, Taxes, and Amortization ("EBITDA"); depreciation expenses; net income; and earnings per share ("EPS"). The Superseding Indictment charges that EBBERS and SULLIVAN knew that the aggregate effect of these adjustments - which were made in large, round-dollar amounts and consistently totaled hundreds of millions of dollars per quarter - was to present a materially false and misleading picture of WorldCom's true operating performance and financial results. According to the Superseding Indictment, to further the scheme, EBBERS, SULLIVAN, and their co-conspirators caused WorldCom to file financial statements with the United States Securities & Exchange Commission (the "SEC") that presented a materially false and misleading picture of WorldCom's operating performance and financial results, including Quarterly and Annual Reports that misrepresented WorldCom's revenue, expenses, EBITDA, and EPS. The Superseding Indictment also alleges that EBBERS and SULLIVAN made repeated statements to members of the investing public - including in periodic conference calls with securities analysts - that contained material false statements and misleading omissions concerning WorldCom's operating performance and financial results. For example, in an April 26, 2001, conference call with analysts, EBBERS falsely stated that he saw no "storms on the horizon" for WorldCom. In a February 7, 2002 CNBC interview, according to the Superseding Indictment, EBBERS falsely claimed that WorldCom was a "sound financial company" that had "been very conservative" in its accounting practices. When the truth about WorldCom's operations and finances began to be revealed in June 2002, its stock price plummeted, falling more than 90 percent and erasing more than $2 billion in shareholder value, according to the charges. The Superseding Indictment charges EBBERS and SULLIVAN each with one count of conspiracy to commit securities fraud, to make false filings with the SEC, and to falsify books and records of WorldCom, and two counts of securities fraud. The conspiracy charge carries a maximum sentence of 5 years in prison and a fine of the greatest of $250,000 or twice the gross gain or loss resulting from the offense. Each of the securities fraud counts carries a maximum sentence of 10 years in prison and a fine of the greatest of $1 million or twice the gross gain or loss resulting from the offense. Sullivan's Guilty Plea In his guilty plea entered today before United States District Judge BARBARA S. JONES, SULLIVAN stated that, as the Superseding Indictment charged, from September 2000 through June 2002, he participated with other former WorldCom officers and employees in the illegal scheme described above. Sullivan's plea was entered pursuant to an agreement in which he agreed to cooperate with the Government in connection with ongoing investigations and prosecutions. SULLIVAN is also expected shortly to enter a guilty plea to related charges in Mississippi state court. *** EBBERS, 62, resides in Jackson, Mississippi. He is expected to be arraigned
on the Superseding Indictment before
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