WorldCom's Sullivan Gets Five Years

Scott Sullivan, the former CFO at WorldCom, was today sentenced to five years in prison and three years probation for his role in the $11 billion corporate fraud that brought the telecom giant to its knees.

"It is extremely fortunate that there was an opportunity for you to cooperate in this case," said U.S. District Court Judge Barbara Jones during the sentencing. "While you are not as culpable as Mr.Ebbers, you would have faced a substantial sentence had you not cooperated with the government."

Sullivan faced a maximum of 25 years in the slammer, but avoided that much time by pleading guilty to his part in the fraud last year, and turning on his former boss, WorldCom CEO Bernie Ebbers.

Last month Ebbers was sentenced to 25 years after being found guilty of securities fraud, conspiracy, and seven counts of false filing with the Securities and Exchange Commission (SEC). (See Ebbers Sentenced: See You in 2030, Readers Want Jail for Ebbers, and Learning From Bernie.)

Sullivan addressed the judge prior to his sentencing today, expressing remorse for his actions and begging for leniency. I stand before you today shamed and embarrassed,” he said. “I deeply regret my actions and apologize for the harm these actions have caused.”Irvin B.Nathan, Sullivan’s attorney, also urged Jones to consider a light sentence, noting his client’s role in Ebbers’s conviction, a string of charitable works within his Florida community, and his “extraordinary” family circumstances. Sullivan’s severely diabetic wife Carla is in and out of hospital, so the former WorldCom CFO needs to be at home to care for the couple’s four-year-old adopted daughter, he said. “She needs a good deal of help in raising this child."

Even David Anders, the U.S Attorney who relentlessly pursued Bernie Ebbers, described Sullivan as “tremendously helpful” in building the case against Ebbers.

Henry J.Bruin Jr., a former WorldCom employee and investor who testified against Ebbers, told NDCF that Sullivan’s fate will serve as a deterrent to other potential corporate fraudsters. “I think that they will be much more cautious before they manipulate the books or play very close to the line in future,” he said. “The consequences could land them in jail.”

The relationship between Sullivan and Ebbers was pivotal to the latter’s trial, with the former CEO’s defense team depicting Sullivan as a manipulative schemer who instigated the fraud (see Ebbers Trial: Sex, Drugs & Numbers).

During the trial Ebbers denied any knowledge that Sullivan was capitalizing line costs, the fees WorldCom paid to third-party network providers for the right to access their networks. This was one of the biggest portions of WorldCom's accounting fraud, in which line costs were moved out of regular expenses and considered a capitalized expense that could be amortized over many years (see Ebbers: Of Motels & Men).Prosecutors, however, countered this by painting the six-foot-plus Ebbers as a tyrant who terrorized his staff, including the shorter Sullivan. Ebbers, not Sullivan, they said, was the prime mover behind the largest corporate fraud in history (see Ebbers: Bumpkin or Bully?).

The jury clearly refused to believe that Sullivan was the fraud’s mastermind, and, after deliberating for more than a week, found Ebbers guilty on all charges (see Ebbers: GUILTY! and Ebbers Trial: The Jury Is Out).

But this was not the only case hanging over the former WorldCom CFO. Last week Sullivan reached a settlement with New York State Comptroller Alan G. Hevesi, who was leading a class action lawsuit on behalf of WorldCom investors. Under the terms of the deal Sullivan agreed to hand over a $5 million estate in Florida as well as the remains of his WorldCom 401k account. This is expected to raise an additional $200,000 for investors (see WorldCom Execs Settle).

Sullivan is the sixth person to be sentenced for their roles in the WorldCom fraud. Here is a list of the other former Worldcom executives sentences handed out:

WorldCom's $11 billion accounting scandal put the carrier into bankruptcy, but the company later cleaned house and re-emerged as MCI Inc. (Nasdaq: MCIP).— James Rogers, Site Editor, Next-Gen Data Center Forum