Daniels Fund Ethics Initiative University of New Mexico http://danielsethics.mgt.unm.

edu

WorldComs Bankruptcy Crisis

INTRODUCTION The story of WorldCom began in 1983 when businessmen Murray Waldron and William Rector sketched out a plan to create a long-distance telephone service provider on a napkin in a coffee shop in Hattiesburg, Miss. Their new company, Long Distance Discount Service (LDDS), began operating as a long distance reseller in 1984. Early investor Bernard Ebbers was named CEO the following year. Through acquisitions and mergers, LDDS grew quickly over the next 15 years. The company changed its name to WorldCom, achieved a worldwide presence, acquired telecommunications giant MCI, and eventually expanded beyond long distance service to offer the whole range of telecommunications services. WorldCom became the second-largest long-distance telephone company in America, and the firm seemed poised to become one of the largest telecommunications corporations in the world. Instead, it became the largest bankruptcy filing in U.S. history at the time and another name on a long list of those disgraced by the accounting scandals of the early 21st century. ACCOUNTING FRAUD AND ITS CONSEQUENCES Unfortunately for thousands of employees and shareholders, WorldCom used questionable accounting practices and improperly recorded $3.8 billion in capital expenditures, which boosted cash flows and profit over all four quarters in 2001 as well as the first quarter of 2002. This disguised the firms actual net losses for the five quarters because capital expenditures can be deducted over a longer period of time, whereas expenses must be subtracted from revenue immediately. WorldCom also spread out expenses by reducing the book value of assets from acquired companies and simultaneously increasing the value of goodwill. The company also ignored or undervalued accounts receivable owed to the acquired companies. These accounting practices made it appear as if WorldComs financial situation was improving every quarter. As long as WorldCom continued to acquire new companies, accountants could adjust the values of assets and expenses. Internal investigations uncovered questionable accounting practices stretching as far back as 1999. Investors, unaware of the alleged fraud, continued to purchase the companys stock, which pushed the stocks price to $64 per share. Even before the improper accounting practices were disclosed, however, WorldCom was already in financial turmoil. Declining rates and revenues and an ambitious acquisition spree had pushed the company deeper in debt. The company also used the rising value of their stock to finance the purchase of other companies. However, it was the acquisition of these companies, especially MCI Communications, that made WorldCom stock so desirable to investors. In addition, WorldComs CEO Bernard Ebbers received a controversial $408 million loan from the companys board of directors to cover margin calls on loans that were secured by company stock.
This material was developed under the direction of O.C. Ferrell and Linda Ferrell and updated by Harper Baird. It is provided for the Daniels Fund Ethics Initiative at the University of New Mexico and is intended for classroom discussion rather than to illustrate effective or ineffective handling of administrative, ethical, or legal decisions by management. Users of this material are prohibited from claiming this material as their own, emailing it to others, or placing it on the Internet. Please call O.C. Ferrell at 505-277-3468 for more information. (2011)

2 The board loaned Ebbers the money at rate below the national average and below their rate of return. In July 2001, WorldCom signed a credit agreement with multiple banks to borrow up to $2.65 billion and repay it within a year. According to the banks, WorldCom tapped the entire amount six weeks before the accounting irregularities were disclosed. The banks contend that if they had known WorldComs true financial picture, they would not have extended the financing without demanding additional collateral. On June 28, 2002, the Securities and Exchange Commission (SEC) directed WorldCom to disclose the facts underlying the events described in a June 25 press release regarding the companys intention to restate its 2001 and first quarter 2002 financial statements. The resulting document explained that CFO Scott Sullivan had prepared the financial statements for 2001 and the first quarter of 2002. WorldComs audit committee and Arthur Andersen, the firms outside auditor, had held a meeting on February 6, 2002, to discuss the audit for year ending in December 31, 2001. Arthur Andersen had assessed WorldCom's accounting practices to determine whether there were adequate controls to prevent material errors in the financial statements. Andersen attested that WorldCom's processes for line cost accruals and for capitalization of assets in property and equipment accounts were effective. In response to specific questions by the committee, Andersen had also indicated that its auditors had no disagreements with management and that it was comfortable with the accounting positions taken by WorldCom. WorldCom admitted to violating generally accepted accounting practices (GAAP), and adjusted their earnings by $11 billion dollars for 1999-2002. Looking at all of WorldComs financial activities for the period, experts estimate the total value of the accounting fraud at $79.5 billion. WORLDCOM FILES FOR BANKRUPTCY WorldCom did not have the cash needed to pay $7.7 billion in debt, and therefore, filed for Chapter 11 bankruptcy protection on July 21, 2002. In its bankruptcy filing, the firm listed $107 billion in assets and $41 billion in debt. WorldComs bankruptcy filing allowed it to pay current employees, continue service to customers, retain possession of assets, and gain a little breathing room to reorganize. However, the telecom giant lost credibility along with the business of many large corporate and government clients, organizations that typically do not do business with companies in Chapter 11 proceedings. In 2001 WorldCom created a separate tracking stock for its declining MCI consumer long-distance business in the hopes of isolating MCI from WorldComs Internet and international operations, which were seemingly stronger. WorldCom announced the elimination of the MCI tracking stock and suspended its dividend in May 2002 in the hopes of saving $284 million a year. The actual savings were just $71 million. The S&P 500 reduced WorldComs long-term and short-term corporate credit rating to junk status on May 10, 2002, and NASDAQ de-listed WorldComs stock on June 28, 2002, when the price dropped to $0.09. In March 2003, WorldCom announced that it would write down close to $80 billion in goodwill, write off $45 billion of goodwill as impaired, and adjust $39.2 billion of plant, property, and equipment accounts and $5.6 billion of other intangible assets to a value of about $10 billion. These

3 figures joined a growing list of similar write-offs and write-downs as companies in the telecommunications, Internet, and high-tech industries admitted they overpaid for acquisitions during the tech boom of the 1990s. A detailed timeline of the events surrounding WorldComs bankruptcy is contained in the appendix to this case. WHO IS TO BLAME? Naturally, no one stepped forward to shoulder the blame for WorldComs accounting scandal, not its auditors, executives, board of directors, or analysts. As the primary outside auditor, Arthur Andersen (also under fire for alleged mismanagement of many other large scandal-plagued audits) was accused of failing to uncover the accounting irregularities. In its defense, Andersen claimed it could not have known about the improper accounting because former CFO Scott Sullivan never informed Andersens auditors about the firms questionable accounting practices. However, in WorldComs statement to the SEC, the company claimed that Andersen did know about the accounting practices, had no disagreement with management, and that WorldCom had taken no accounting positions with which Andersen was not comfortable. Most people, including John Sidgmore, who replaced Bernard Ebbers as CEO for a time, blamed WorldComs management for the companys woes. An initial observation by the independent investigator appointed by the bankruptcy court raised a cause for substantial concern regarding the board of directors and the independent auditors of WorldCom. The board has been accused of lax oversight. In particular, the boards compensation committee has been attacked for approving Bernard Ebbers generous compensation package. Several former finance and accounting executives pleaded guilty to securities-fraud charges, claiming they were directed by top managers to cover up WorldComs worsening financial situation. In 2004, former WorldCom CEO Scott Sullivan, who worked above many of these employees, pleaded guilty to criminal charges. Because of a plea bargain, Sullivan was sentenced to only five years in prison in exchanged for testifying against Bernard Ebbers. Bernard Ebbers stated that he did nothing fraudulent and had nothing to hide. WorldComs lawyers have indicated that Ebbers did not know of the money shifted into the capital expenditure accounts. However, the Wall Street Journal reported that an internal WorldCom report identified an email and a voice mail that suggested otherwise. In 2004, Ebbers was charged with one count of conspiracy to commit securities fraud, one count of securities fraud, and seven counts of fraud related to false filings with the SEC. Ebbers was found guilty of all charges and sentenced to 25 years in prison. He is currently serving his sentence in Louisiana and cannot be considered for parole until 2028 (when he will be 85 years old). Additionally, Jack Grubman, a Wall Street analyst specializing in the telecommunications industry and who rated WorldCom stock highly, admitted he did so for too long. Grubman knew WorldCom CEO Bernard Ebbers socially and even provided WorldCom executives with special opportunities on investments. However, he insisted that he was unaware of the companys true financial

4 condition. Grubman was later fired by Salomon Smith Barney because of accusations that he hyped telecommunications stocks, including Global Crossing and WorldCom, even after it became public that the stocks were poor investments. He was also fined $15 million by the SEC and banned from participating in securities exchanges in the future because of his conflicts of interest. Investors also won several class action lawsuits against the financial industry for activities related to the fall of WorldCom. These settlements included $1.64 billion from Citigroup for purchasers of WorldCom securities and $2 billion from JPMorgan Chase to for selling $5 billion in WorldCom bonds. Arthur Andersen paid $65 million to investors to cover its liability in the collapse of WorldCom. Several executives including Sullivan and Ebbers also agreed to turn over substantial portions of their personal funds to employees and investors. REORGANIZATION AND ACQUISTION WorldCom took many steps toward reorganization, including securing $1.1 billion in loans and appointing Michael Capellas as chairman and CEO. WorldCom also tried to restore confidence in the company, including replacing the board members who failed to prevent the accounting scandal, firing many managers, reorganizing its finance and accounting functions, and making other changes designed to help correct past problems and prevent them from reoccurring. Additionally, the audit department staff is was increased and reported directly to the audit committee of the companys new board. We are working to create a new WorldCom, John Sidgmore said. We have developed and implemented new systems, policies, and procedures. In 2003, the company renamed itself MCI and emerged from bankruptcy proceedings in 2004. However, this reorganization was not enough to restore consumer and investor confidence, and Verizon Communications acquired MCI in December 2005. The WorldCom accounting fraud changed the entire telecommunications industry. As part of their overvaluing strategy, WorldCom had also overestimated the rate of growth in Internet usage, and these estimates became the basis for many decisions made throughout the industry. AT&T, WorldCom/MCIs largest competitor, was also acquired. Over 300,000 telecommunications workers lost their jobs as the telecommunications struggled to stabilize. Many people have blamed the rising number of telecommunication company failures and scandals on neophytes who had no experience in the telecommunication industry. They tried to transform their startups into gigantic full-service providers like AT&T, but in an increasingly competitive industry, it was difficult for so many large companies could survive. QUESTIONS 1. 2. 3. What are some things that could have been done by WorldCom executives to prevent the accounting scandal? How could corporate ethics have played a part in this failure? What penalties have WorldCom executives paid for their part in the fiasco? Do you think these penalties are sufficient?

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Sources for 2011 Update: The 10 largest U.S. bankruptcies: WorldCom, Fortune, http://money.cnn.com/galleries/2009/fortune/0905/gallery.largest_bankruptcies.fortune/3.html (accessed January 11, 2011). Dennis Moberg and Edward Romar, WorldCom, Markkula Center for Applied Ethics, 2003, http://www.scu.edu/ethics/dialogue/candc/cases/worldcom.html (accessed January 11, 2011). Edward J. Romar and Martin Calkins, WorldCom Case Study Update 2006, Markkula Center for Applied Ethics, 2006, http://www.scu.edu/ethics/dialogue/candc/cases/worldcom-update.html (accessed January 11, 2011). WorldCom Company Timeline, Washington Post, March 15, 2005, http://www.washingtonpost.com/wp-dyn/articles/A491562002Jun26.html (accessed January 13, 2011). Worldcom's Ebbers enters prison, BBC News, September 26, 2006, http://news.bbc.co.uk/2/hi/business/5380458.stm (accessed January 11, 2011). Sources for Previous Editions: 02 CV 8083 (JSR) Complaint (Securities Fraud), Securities and Exchange Commission, Oct. 31, 2002, www.sec.gov/litigation/complaints/comp17783.ht.m Accounting Fraud, WorldCom News, http://Worldcomnews.com/accountingfra ud.html (accessed Apr. 3, 2003). Andrew Backover, Overseer Confident WorldCom Will Come Back, USA Today, Dec. 31, 2002, p. 8A. Bankruptcy, WorldCom News, http://WorldComnews.com/bankruptcy.html (accessed Apr. 3, 2003) . Rebecca Blumenstein and Ken Brown. Scrapped WorldCom Merger Sparked Sprint Tax Shelter, Yahoo! News, Feb. 27, 2003, http://story.news.yahoo.com/news?tmpl=story&u=/dowjones/20030207/bs_dowjones/200302070218000057. Capellas Close to Leading WorldCom, CNN/Money, Nov. 13, 2002, http://cnnmoney.printthis.clickability.com/pt/cpt?action=cpt&expire=&urlID=4597701&fb. Corporate Scandals: WorldCom, MSNBC, http://www.msnbc.com/news/corpscandal_front.asp?odm=C2ORB (accessed Apr. 4, 2003). Nora Devine, WorldCom to Write Off $45B Goodwill, Adjust Intangibles, Dow Jones Newswires, Mar. 13, 2003, http://story.news.yahoo.com/news?tmpl=story&u=/dowjones/20030313/bs_dowjones/200303131736001097. Ebbers Reportedly Knew of Fraud, MSNBC, Mar. 12, 2003, http://www.msnbc.com/news/884175.asp. Effect on Consumer, WorldCom News, http://Worldcomnews.com/effectonconsumer.html (accessed Apr. 3, 2003) . Effect on Investors, WorldCom News, http://Worldcomnews.com/effectoninvestors.html (accessed Apr. 3, 2003) . Janet Elliott, AG Would Have More Investigative Power -- Bill Focuses on Integrity in Business, Houston Chronicle, Mar. 11, 2003, http://www.chron.com/cs/CDA/story.hts/metropolitan/1812842. Enron & WorldCom Scandals Inspire Movie and National Ethics Scholarship For Students, Yahoo! News, Mar. 12, 2003, http://biz.yahoo.com/prnews/030312/daw022_1.html. Former WorldCom CEO, CFO Take the Fifth, eWeek, Jul. 8, 2002, http://www.eweek.com/article2/0,3959,362703,00.asp. Charles Gasparino, Grubman Informed Weill of AT&T Meetings, Wall Street Journal, Nov. 15, 2002, pp. C1, C13. Investment and Litigation, WorldCom News, http://Worldcomnews.com/investmentandlitigation.html (accessed Apr. 3, 2003) . Carrie Johnson, More Guilty Pleas from WorldCom Managers, Washington Post, Oct. 11, 2002, http://nl12.newsbank.com/nlsearch/we/Archives?p_action=list&p_topdoc=126. Judge Outlines Budget Plan for WorldCom, Yahoo! News, Mar. 6, 2003, http://story.news.yahoo.com/news?tmpl=story2&cid=509&ncid=509&e=41&u=/ap/20030306/ap_on_bi_ge/worldcom_budget_1. Gina Keating, U. of Calif. Files $353 Million WorldCom Lawsuit, Yahoo! News, Feb. 13, 2003, http://story.news.yahoo.com/news?tmpl=story&u=/nm/20030213/tc_nm/telecoms_worldcom_lawsuit_dc_1. Peter Kennedy, WorldCom puts Ebbers' B.C. Ranch up for Sale, Globe and Mail, Jan. 28, 2003, p. B5, http://www.globeandmail.com/servlet/ArticleNews/PEstory/TGAM/20030128/RANCH/Headlines/headdex/headdexBusiness_te mp/52/52/58. Stephanie Kirchgaessner, WorldCom Mulls Further $16Bn Write-off, Yahoo! News, Jan. 30, 2003, http://story.news.yahoo.com/news?tmpl=story2&cid=1106&ncid=1106&e=5&u=/ft/20030130/bs_ft/1042491347715. Matt Krantz, Capitalizing on the Oldest Trick in Book: How WorldCom, and Others, Fudged Results, USA Today, Jun. 27, 2002, http://www.usatoday.com/tech/techinvestor/2002/06/27/worldcom-whatdo.htm. Adam Lahinsky, WorldCom: Picking Up the Pieces, Business 2.0, May 2, 2002, http://www.business2.com/articles/web/print/0,1650,40140,FF.html. Joseph McCafferty, Scott Sullivan, CFO Magazine, Sep. 1998, http://www.findarticles.com/cf_0/m3870/n9_v14/21119225/print.jhtml. Jack McCarthy, WorldCom Woes, InfoWorld, Aug. 2, 2002, http://www.infoworld.com/article/02/08/02/020805cttelco_1.html. Stephanie Mehata, Birds of a Feather, Fortune, Oct., 2002, http://www.business2.com/articles/mag/print/0,1643,43957,00.html. Adrian Michaels, SEC Extends Charges against WorldCom, Financial Times, Nov. 6, 2002, http://news.ft.com/servlet/ContentServer?pagename=Synd/StoryFT/FTFull&artid=10358730. Amanda Ripley, The Night Detective, Time, Dec. 22, 2002, http://www.time.com/time/personoftheyear/2002/poycooper.html. Simon Romero, WorldCom to Write Down $79.8 Billion of Good Will, NYTimes, Mar. 14, 2003, http://www.nytimes.com/2003/03/14/technology/14TELE.html. Mathew Secker, WorldCom. (Company Operations), Telecommunications, Mar. 2001, http://www.mobilepaymentforum.org/pdfs/TelecommunicationsIntlEd.pdf. Ben Silverman, Worldcom Waits for Blame Game, New York Post, Mar. 10, 2003, http://www.nypost.com/business/70283.htm. Christopher Stern, 6 Resign From WorldCom Board, Washington Post, Dec. 18, 2002, p. E04, http://www.washingtonpost.com/ac2/wpdyn?pagename=article&node=&contentId=A3966-2002Dec17&notFound=true. Christopher Stern, Cost-Cutting WorldCom Considers More Layoffs, Washington Post, Feb. 2, 2003, p. A02, http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&node=&contentId=A16324-2003Feb2&notFound=true. David Teather, Former WorldCom Controller Admits Fraudulent Entries, The Guardian, Sep. 27, 2002. David Teather, To Ebbers Wedding, on Expenses, The Guardian, Aug. 30, 2002.

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Steven Titch, Deconstructing WorldCom: A Revealing Autopsy of the 1998 Mega -Merger, Americas Network, May 1, 2001, http://www.findarticles.com/cf_0/m0DUJ/6_105/74651470/print.jhtml. Lingling Wei, More WorldCom Restatements? Wall Street Journal, Nov. 4, 2002, http://www.msnbc.com/news/83048.asp. WorldCom Announces Its Post-Restructuring Management Plan, WorldCom, press release, Sep. 10, 2002, http://www1.worldcom.com/infodesk/news/news2.xml?newsid=4392&mode=long&lang=e. Who Is to Blame? WorldCom News, http://Worldcomnews.com/whoistoblame.html (accessed Apr. 3, 2003) . WorldCom Finances, WorldCom News, http://Worldcomnews.com/worldcomfinances.html (accessed Apr. 3, 2003). WorldCom Issues July and August 2002 Operating Results, WorldCom, press release, Oct. 22, 2002, http://www.worldcom.com/global/about/news/news2.xml?newsid=4870&mode=long&lang=en&width=530&root=global/about. WorldComs Latest Development, CNN/Money, Nov. 11, 2002, http://www.cnnmoney.printthis.clickability.com/pt/cpt?action=cpt&expire=urlID=4580252&fb. WorldCom Milestones, Washington Post, Aug. 9, 2002, www.washingtonpost.com/ac2/wp-dyn/A49156-2002Jun26?language=printer. WorldCom Report Suggests Ebbers Knew of Accounting Fraud, Quicken Brokerage, Mar. 12, 2003, http://www.quicken.com/investments/news_center/story/?story=NewsStory/dowJones/20030312/ON200303120406000594.va r&column=P0DFP. WorldCom Report Suggests Ebbers Knew of Fraud, Forbes, Mar. 12, 2003, http://www.forbes.com/technology/newswire/2003/03/12/rtr904375.html. WorldCom Revised Statement Pursuant to Section 21 (a)(1) of the Securities Exchange Act of 1934, Securities and Exchange Commission, Jul. 8, 2002, http://www.sec.gov/news/extra/wcresponserv.htm. WorldCom, SEC to Settle Charges, CNN, Nov. 5, 2002, http://www.cnn.com/2002/BUSINESS/11/05/worldcom.reut/index.html. WorldCom to Cut 2,000 Jobs, CNN, Sep. 16, 2002, http://www.cnn.com/2002/BUSINESS/09/16/worldcom/index.html.

7 APPENDIX: WORLDCOM BANKRUPTCY TIMELINE Early 2001 July 2001 Feb. 6, 2002 WorldCom shows signs of financial troubles: rates and revenues decline and debt rises. WorldCom receives $2.65 billion in loans from 26 banks to be repaid by the end of 2001. Arthur Andersen, LLP, and WorldComs audit team meet to discuss the 2001 audit. Everything is deemed correct and Andersen gives its approval.

Mar. 11, 2002 The U.S. Securities Exchange Commission (SEC) requests more information concerning accounting procedures and loans to officers. Apr. 30, 2002 Bernard Ebbers resigns as CEO of WorldCom and is replaced by vice chairman John Sidgmore. Jun. 25, 2002 CFO Scott Sullivan is fired after improper accounting of $3.8 billion in expenses covering up a net loss for 2001 and the first quarter of 2002 is discovered. Jun. 28, 2002 WorldCom fires 17,000 employees to cut costs. Jul. 8, 2002 Jul. 21, 2002 Aug. 9, 2002 John Sidgmore testifies before a Congressional Committee to explain how internal investigations uncovered the accounting problems. WorldCom files for reorganization under Chapter 11 Bankruptcy, an action that affects only the firms U.S. operations, not its overseas subsidiaries. Continued internal investigations uncover an additional $3.8 billion in improperly reported earnings for 1999, 2000, 2001, and the first quarter of 2002, bringing the total amount of accounting errors to more than $7.6 billion.

Aug. 13, 2002 WorldCom names Greg Rayburn as chief restructuring officer and John Dubel as chief financial officer to lead the company through the reorganization process. Sep. 10, 2002 WorldCom formally announces it is seeking a permanent chief executive officer. Oct. 1, 2002 The U.S. Bankruptcy Court approves WorldComs request to pay full severance and benefits to former employees, which had been limited under the companys Chapter 11 filing.

Oct. 15, 2002 The U.S. Bankruptcy Court approves up to $1.1 billion in debtor-in-possession (DIP) financing for WorldCom while it undergoes reorganization. Nov. 8, 2002 WorldCom files additional bankruptcy petitions for 43 of its subsidiaries.

Nov. 15, 2002 Michael D. Capellas, former president of Hewlett-Packard Company, is named chairman and CEO.

8 Mar. 14, 2003 WorldCom announces that it will take one-time $79.8 billion write-off. Apr. 15, 2003 WorldCom unveils reorganization plan that would eliminate most of its debt, rename the company MCI, and relocate its headquarters from Clinton, Miss., to Ashburn, Va. Apr. 22, 2003 Former CFO, Scott D. Sullivan, pleads not guilty today to securities and bank fraud. May 19, 2003 WorldCom agrees to pay investors $500 million to settle civil fraud charges. Jul. 7, 2003 Jul. 31, 2003 Aug. 6, 2003 A federal judge approves a $750 million settlement between WorldCom and federal regulators. The General Services Administration notifies WorldCom that it is ineligible to win new federal contracts until it improves accounting controls. A bankruptcy judge approves a $750 million settlement of civil fraud charges made by the Securities and Exchange Commission on WorldCom investors' behalf.

Aug. 12, 2003 WorldCom appoints former AT&T Corp. executive Richard R. Roscitt as its new president and chief operating officer. Aug. 27, 2003 Oklahoma Attorney General W.A. Drew Edmondson files criminal charges against WorldCom Inc. and six former executives, including Ebbers. Sep. 3, 2003 Sep. 9, 2003 Ebbers pleads not guilty. Two groups of creditors abandon their legal challenge to the WorldComs reorganization plan in return for a combined payout of more than $400 million.

Sep. 15, 2003 WorldComs auditors testify in U.S. Bankruptcy Court that the company's books remain a tangled mess. Oct. 31, 2003 U.S. Bankruptcy Judge Arthur J. Gonzalez approves WorldComs reorganization plan. Dec. 22, 2003 Federal prosecutors say they intend to show that former CFO Scott Sullivan was involved in 13 kinds of accounting fraud in addition to financial wrongdoing Jan. 7, 2004 The government lifts the suspension that prevented WorldCom from receiving new federal contracts.

Apr. 20, 2004 MCI officially emerges from bankruptcy, 21 months after filing the largest Chapter 11 case in history. May 10, 2004 MCI says it will eliminate 7,500 jobs (15 percent of its workforce). Jan. 8, 2005 The lead plaintiff in the WorldCom class-action suit announces a $54 million settlement covering 10 former WorldCom directors (part of the settlement is later rejected by a federal judge).

9 Jan. 25, 2005 Bernard Ebbers trial begins. Feb. 14, 2005 Verizon Communications Inc. announces a $6.75 billion deal to buy MCI Inc. Mar. 15, 2005 Former WorldCom CEO Bernard J. Ebbers is found guilty of conspiracy, securities fraud, and making false filings with regulators. He is sentenced to 25 years in prison. Aug. 11, 2005 Former CFO Scott Sullivan is sentenced to five years in prison.