NEW YORK - Here's the big lesson from the five-year prison sentence Scott Sullivan was handed Thursday in the U.S. District Court in Manhattan: If you do something very bad in your company and you know you're gonna get whacked, find someone above you to rat out.
At least that seems to be the message from U.S. District Judge Barbara Jones. She identified Sullivan as the real architect of the WorldCom fraud that impoverished thousands of employees and investors. But then she sentenced him to one-fifth of the 25-year sentence she meted out last month to his boss, Bernie Ebbers.
Before she pronounced sentence, Sullivan delivered of himself a major mea culpa, telling a packed courtroom, telling family and whatever friends he may still have left that he was in fact "ashamed and embarrassed" by what he had done while as WorldCom's chief financial officer, sitting in the office next to Ebbers and crafting what turned out to be the largest corporate fraud in U.S. history.
He might have been hoping for a lesser sentence—along the lines of his controller David Myers and accounting chief David Yates, who each pulled down just a year and a day, or accounting managers Betty Vinson who'll spend just five months in prison and Troy Normand who got no prison time, just three years probation.
Moreover Sullivan was certainly different, in so many ways.
"Mr. Sullivan's offenses were of the highest magnitude" the judge said, describing him as "the architect" of the entire WorldCom fraud.
He was also the king rat. Prosecutors praised his testimony against Ebbers, admitting they would have been unable to bring the kinds of charges that sent the 63-year-old CEO, who suffers from heart disease, to prison for what is likely to be the rest of his life.
A fact that Judge Jones also acknowledged noting that "his cooperation was the key factor in the case of Mr. Ebbers, without which Mr. Ebbers likely would not have been indicted much less convicted."
His testimony that Ebbers was the one who ordered him to "hit the numbers" of revenue and profit meant he knew full well that the only way that could happen would be by cooking the books in a monumental fashion.
Indeed, everything about Sullivan, Ebbers and WorldCom was larger than life when the company was flying high as the nation's second-largest long-distance telecom. There was, for instance, Ebbers' sprawling ranch in western Canada that was larger than some states. And there was Sullivan's Croetian $15 million estate in Boca Raton, Fla., still unfinished but including five buildings with an 18-seat movie theater, two-story boathouse, domed exercise room, art gallery and wine cellar, all on four acres.
All this is gone—to satisfy the innumerable creditors and shareholders, many of whom lost their life savings when the company they believed as solid an investment as was possible in the Internet bubble years cratered. Where once he rode to his trial in limos, yesterday he headed down to the subway.
Still, Sullivan, who's 43 years old, with a 4-year-old daughter, will see his child again when she's just nine. And, though as a convicted felon he will no longer be able to hold an officer or director role in any publicly held corporation, he will have the rest of his life ahead of him.
source: http://www.forbes.com/home/columnists/2005/08/12/worldcom-fraud-sullivan_cx_daa_0812worldcom.html 12aug2005
The verdict is in.
Lacking access to "the chair," investors in bankrupt telecom WorldCom had hoped they could at least seat ex-CFO Scott Sullivan next to ex-CEO Bernie Ebbers in the klink for 25 years. Yet when the sentence came down yesterday, the architect of the fraud that ended in America's biggest bankruptcy got off with a five-year slap on the wrist.
The $15 million Boca Raton estate Scott Sullivan is swapping for a prison cell. |
In handing down her ruling, U.S. District Judge Barbara Jones deferred in part to prosecutors who begged for leniency; she called Sullivan "a model cooperator" and "the key factor" in convicting his ex-boss, Ebbers, of the greatest financial fraud ever to plague the country. And as far as that goes, this Fool has no problem with the verdict. It's a well-established rule of the legal game that you often have to let the minnows slip through the net if you're to catch the real sharks. Although the WorldCom (since renamed MCI(Nasdaq: MCIP) and soon to be re-re-named Verizon(NYSE: VZ)) trial was more a case of turning one shark against another, the principle remains the same.
What shocks my conscience is not Sullivan's break but Jones' offhand comment about one reason she was going easy on Sullivan. She noted that Sullivan's wife has diabetes and could not care for the couple's child when undergoing treatment at the hospital.
Now, I don't mean to sound heartless — my sympathies go out to Mrs. Sullivan and her child, of course. But this ex-prosecutor can't recall ever participating in a trial in which a drunk driver, petty thief, or simple thug got off lightly because "his family needed him."
Seriously, folks. Sullivan wasn't just a good guy in a tight spot. He actively plotted to defraud people. Not just once, but for years on end. Yes, once caught, he helped the government catch a bigger fish — and for that he got his deal. But in requesting that the court not put him in prison at all because this would be an "extreme burden" on his wife and daughter, he went too far.
I have to ask: What about the "burden" borne by the 20,000 WorldCom employees who lost their jobs when this company imploded? What about the "burden" that Sullivan imposed upon countless investors — mothers and children among them — who lost their life's savings when $180 billion worth of WorldCom equity went "poof"?
Sadly, those questions have to remain rhetorical. The verdict is in, and five years from now, Sullivan can put his legal difficulties behind him and begin rebuilding his fortune on the public-speaking circuit. His victims, however, will be dealing with the consequences of his crime for the rest of their financial lives.
For related articles:
Big Bummer for Bernie Ebbers: I Don't Know Nothin' Are Corporate Directors Next Against the Wall? Philip Durell ofMotley Fool Inside Valueselected MCI back in September 2004 and earned a return of 47.15% before issuing a sell recommendation in February 2005. Click here to see Philip's more recent selections.
Fool contributor Rich Smith , a former county prosecutor, has noticed that whatever crime someone's charged with, pretty much all defendants wear collared shirts on trial day. He does not own shares in any company named above.
source: 12aug2005
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