Bernard Ebbers

• Born: August 27, 1941
• Birthplace: Edmonton, Alberta, Canada
• Died: February 2, 2020
• Place of death: Brookhaven, MS

Cofounder of WorldCom, Incorporated

Also known as: Bernard John Ebbers (full name); Bernie Ebbers; Telecom Cowboy

Major offenses: Business accounting fraud and securities fraud

Active: Late 1990s–2002

Locale: Clinton, Mississippi

Sentence: Twenty-five years in federal prison

Early Life

Bernard Ebbers was born in Edmonton, Alberta, and was the second of five children. Because his father was a traveling salesman, the family moved quite frequently between Canada and the United States. After graduating from high school, Ebbers attempted college but failed out of both the University of Alberta and Calvin College. Finally, after moving back to Edmonton and working as a bouncer and a milkman, Ebbers decided to give college one more try. He tried out for a basketball scholarship at Mississippi College in Clinton, Mississippi, and ultimately made the team. He received his degree in physical education in 1966 and a year later married the young woman he had been dating throughout his senior year, Linda Piggott.

After a few years of teaching and coaching basketball in rural Mississippi, Ebbers decided to open his own business, a motel. As the popularity of his motel grew, he sought and received monies from his friends to allow him to open a chain of hotels. His hotels grew in popularity, and throughout the 1970s Ebbers generated a healthy profit from his first business venture.

In September 1983, Ebbers partnered with several associates to form the Long Distance Discount Service (LDDS) corporation. As its founders realized, the telephone company, American Telephone & Telegraph (AT&T), was forced by the federal government to rent long-distance phone lines at discounted rates to small regional companies, which would then resell the lines’ bandwidth capacity to small businesses. LDDS sought to capitalize on the financial opportunity presented by this situation. Ebbers, who within two years was named chief executive officer of LDDS, turned the company into a multimillion-dollar success. Over the following fifteen years, LDDS acquired other long-distance resellers and additional businesses, purchasing more than seventy-five companies in all. In 1989, LDDS issued a public stock offering, which gave Ebbers the ability to buy still more companies. In 1995, Ebbers changed the name of the LDDS corporation to WorldCom. WorldCom went on to purchase two major telecommunication giants, MFS Communications and MCI Communications. These multibillion-dollar acquisitions made Ebbers as well as investors and employees throughout WorldCom extremely wealthy, very quickly.

At the peak of his career in 1999, Ebbers’s net worth was estimated to exceed 1.4 billion dollars. He was ranked as number 174 on the Forbes magazine list of the four hundred richest people in the world. His assets included Canada’s largest cattle ranch, a minor-league hockey team, a lumber yard, a trucking company, a yacht company, and multiple lavish homes throughout Canada and the United States. The Telecom Cowboy, as he was referred to in the late 1990s, was a financial paragon. Then a fateful error in 1999 caused Ebbers and members of his executive staff to become known as some of the most sinister corporate criminals of modern times.

Criminal Career

In 1999, Ebbers announced that WorldCom would attempt to buy its largest competitor, Sprint Communications. This acquisition was halted by both US and European antitrust regulators, who noted that such a purchase would turn WorldCom into a monopoly. To appease regulators, whose concerns included WorldCom’s gaining too much of a stronghold in the fiber-optic internet market, Ebbers opted to purchase only Sprint’s traditional telephone services. This choice proved to be a major mistake, as copper telephone lines were a thing of the past. As a result, the price of WorldCom stock plummeted. Furthermore, the internet market was slowly losing its economic viability, causing WorldCom stock to plunge further, from a record sixty-four dollars a share down to nine dollars.

During this downturn, Ebbers started to sell his millions of shares of WorldCom stock, some of which he had purchased with monies borrowed from banks and other financial institutions. The WorldCom board of directors offered Ebbers an unprecedented $400 million in loans so that he would not continue to forfeit his major position of power in the company—and also so that other investors would not panic and attempt to liquidate their stock. Ebbers accepted the loans. When the story was made known, those in the business and financial worlds were outraged by the actions of Ebbers and the attempted financial cover-up that took place under his watch as CEO of WorldCom. In 2002, Ebbers resigned from WorldCom and was given a generous pension.

That same year, an internal auditor alerted federal investigators to suspicious financial records she had uncovered at WorldCom. In summary, WorldCom executives, including Ebbers, had been misleading investors and regulators about their financial statements, mainly listing expenses as assets in order to protect the company throughout its financial turmoil in 2000–2. By 2003, state and federal investigators had uncovered what was called the largest accounting fraud in US history.

Legal Action and Outcome

Ebbers, along with his chief executive cabinet, faced both federal and state criminal charges for their parts in the WorldCom debacle. A federal judge found Ebbers guilty of nine felony counts, ranging from securities fraud to filing false financial statements. On July 13, 2005, Ebbers was sentenced to twenty-five years in prison, a sentence he appealed.

Due to reported declining health, Ebbers was released from prison in December 2019, after having served around thirteen years of his sentence. According to sources, he was suffering from dementia and had experienced a large amount of weight loss. He died at his home in Brookhaven, Mississippi, on February 2, 2020, at the age of seventy-eight.

Impact

The name Bernard Ebbers became equated with the term “corporate criminal.” Ebbers’s fraudulent activities led to the largest accounting fraud ever recorded in US history. The economic impact of WorldCom’s fall not only caused twenty thousand employees to lose their jobs but also caused millions of investors to lose their life savings—a total of $180 billion. Ebbers was largely responsible for these losses, and he received the toughest sentence at the time handed to the chief executive officer of a Fortune 500 company.

Bibliography

Brody, Keith, and Sancha Dunstan. The Great Telecoms Swindle: How the Collapse of WorldCom Finally Exposed the Technology Myth. Oxford, England: Capstone, 2003. This analysis of the telecom boom of the late 1990s and 2000 highlights the role that Ebbers and WorldCom played.

Jeter, Lynne. Disconnected: Deceit and Betrayal at WorldCom. New York: Wiley, 2003. Provides an in-depth look at the greatest accounting fraud in American history and the man who was deemed responsible for it, Bernard Ebbers.

Malik, Om. Broadbandits: Inside the $750 Billion Telecom Heist. New York: Wiley, 2003. Offers a unique overview of the many players involved in the fraudulent activities surrounding the telecom industry, with special emphasis given to Ebbers and WorldCom.

Seelye, Katharine Q., and Daniel Victor. "Bernard J. Ebbers, WorldCom Chief Jailed in Fraud, Dies at 78." The New York Times, 3 Feb. 2020, www.nytimes.com/2020/02/03/business/bernard-ebbers-dead.html. Accessed 5 Nov. 2020.