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WorldCom 'architect' gets 5-year sentence

The man at the heart of the accounting fraud is given a break after he cooperates with prosecutors.

NEW YORK - Former WorldCom finance chief Scott Sullivan, who carried out the largest accounting fraud in U.S. history but insisted he did it under pressure from his boss, was sentenced to five years in prison Thursday by a judge who called him "the architect" of the scheme.

U.S. District Judge Barbara Jones praised Sullivan for pleading guilty last year and helping the government build its case against ex-CEO Bernard Ebbers, who was sentenced to 25 years in prison.

The judge said she was giving Sullivan a break because his wife has diabetes and during her frequent hospitalizations has been unable to care for the couple's daughter.

Still, "Mr. Sullivan's offenses were of the highest magnitude," Jones said. "Mr. Sullivan, I believe, was the architect of the fraud. Mr. Sullivan was the day-to-day manager, if you will, of the scheme."

Five former WorldCom executives have been sentenced to prison, their terms totaling more than 32 years, for orchestrating the $11-billion fraud that sank the telecommunications company three summers ago.

Sullivan, 43, has agreed to sell his $11-million mansion in Boca Raton - a lavish Mediterranean-style estate with 10 bedrooms and seven fireplaces - and turn the money over to former WorldCom investors.

Under the settlement, he forfeited his decimated WorldCom retirement account. His lawyer said Thursday Sullivan had been left without any assets.

Sullivan's wife will set up a trust fund to care for their daughter.

Sullivan, pleading for leniency before the judge issued her sentence, said he accepted responsibility for his crimes and would "carry the burden of my failing always."

"I am sorry for the hurt that has been caused by my cowardly actions. I truly am," he said. "I stand before you today ashamed and embarrassed."

Sullivan said his wife has been hospitalized in emergencies nine times this year, suggesting a prison sentence would be an "extreme burden" on his wife and daughter.

As WorldCom grew from a small Mississippi long-distance reseller into a global communications titan, Sullivan came to be seen by Wall Street as an exceptional chief financial officer and something of a whiz-kid.

He was indicted in 2002 shortly after the company went bankrupt, and initially denied wrongdoing.

But he pleaded guilty to fraud and conspiracy in 2004 just before he was to go to trial, turning on his former boss.

At Ebbers' trial this year, Sullivan was the star witness, telling jurors Ebbers repeatedly urged him to "hit the numbers" - a kind of mantra that Sullivan said he interpreted as a command to commit fraud in order to meet Wall Street expectations.

"I told Bernie, "This isn't right,' " Sullivan said from the witness stand, describing an October 2000 meeting in which he said he showed Ebbers a plan to improperly create $133-million in revenue. "He just stared at it, and he looked up at me and he said, "We have to hit our numbers.' "

Sullivan admitted he examined WorldCom's financial performance each quarter, compared it to what analysts were expecting, then ordered subordinates to make up the difference.

Three of those subordinates - controller David Myers, accounting director Buford Yates and accounting manager Betty Vinson - were sentenced to one year and one day in prison this week.

The judge made clear Thursday that Sullivan would have faced much longer than five years in prison had he not agreed to cooperate with federal prosecutors.

The lead WorldCom prosecutor, David Anders, praised the time and effort Sullivan put into the Ebbers case, and noted he was in plea discussions as early as August 2002.

"Mr. Sullivan was not the cause of the fraud," the prosecutor said in court. "Mr. Ebbers was. Yet without Mr. Sullivan's cooperation, it's likely that Mr. Ebbers never would have been brought to justice."

The bulk of the fraud scheme, which prosecutors said took place from 2000 to 2002, was an illegal decision by WorldCom executives to record regular operating expenses as long-term capital expenditures.

When the fraud came to light in the summer of 2002, the company went bankrupt, costing investors billions of dollars and tens of thousands of employees their jobs. The company emerged from bankruptcy last year under the name MCI.

Ebbers, 63, is scheduled to report to a federal prison Oct. 12. The same judge is considering whether he should be allowed to remain free while he appeals his conviction on nine criminal counts.

[Last modified August 12, 2005, 00:46:18]