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Why Bernie Ebbers Is in Jail

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Mondaq Business Briefing November 7, 2006

Canada: Why Bernie Ebbers is Serving a 25-Year Jail Sentence
BYLINE: By Garfield Emerson LENGTH: 6613 words

1. Background On September 26, 2006, Bernard J. Ebbers ("Ebbers"), the former Chief Executive Officer of WorldCom, Inc. ("WorldCom"), reported to a federal prison in Oakdale, Louisiana, to begin serving his 25-year jail sentence from his conviction by a jury on nine counts of conspiracy, securities fraud and related crimes related to the bankruptcy of WorldCom in July 2002. Ebbers' appeals from his conviction and 25-year jail sentence were dismissed by the United States Court of Appeals for the Second Circuit on July 28, 2006.1 In its decision upholding the jury conviction and the 25-year jail sentence imposed by the trial judge, the Court of Appeals for the Second Circuit commented that Ebbers' actions that were specifically intended to create a false picture of profitability for WorldCom were "motivated by his personal financial circumstances".2 Ebbers personal finances imposed significant pressures on him to ensure that the WorldCom stock price did not fall and that WorldCom's guidance of its future financial performance and investors' expectations were met. Ebbers was a wealthy man with a significant personal business empire outside WorldCom. He had also accumulated millions of shares of WorldCom stock. However, he had borrowed over $400US million from banks, using his stock in WorldCom as collateral. As WorldCom stock price began to drop in 2000, Ebbers received margin calls from the banks requiring him to either put up more stock as collateral or to pay back a portion of the money he owed. Because he had used much of the borrowed money to buy relatively illiquid assets, such as a ranch, timberlands and a yacht-building company, Ebbers could not use those assets to meet…...

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