Initially, my personal values distracted from my ability to sympathize with Bernard Ebbers conviction. His defense team argued that the trial judge wrongly instructed the jury that it could convict Mr. Ebbers on the basis that he engaged in “conscious avoidance” of the fraud at WorldCom. It is evident that Ebbers took a blind eye to any consideration to analyze the good stuff from the bad stuff in this situation. He failed to calculate the considerations of utility and as a result he is paying the consequences through a substantial decrease in his quality of life.
Currently he is serving a 25 year sentence as inmate #56022-054 for 25 years in the Oakdale Federal Correctional Complex in Louisiana. His earliest date to be considered for good conduct is 2028 when he will be over 85 years old. The inherent obligation to duty and responsibility placed upon the leaders of any organization, although in some instances is implied, should be understood. Ones inability to accept a position without this understanding, from my frame of reference, is ludicrous.
While analyzing this case using normative ethics as a general approach to moral decision making process, I found that Ebbers failed to consider the implications of his actions for this employees, stakeholders, and shareholders. He also failed to consider the deontological issues concerning his duty to do what was right according to the law. At the time of its collapse, WorldCom had over 830,000 individuals and institutions that had held stocks and bonds. In September 2005, as a result of a civil suit, Ebbers has forced to forfeit cash and assets worth as much as $45 million, to settle lawsuits filed by WorldCom shareholders.
I believe Ebbers should be incarcerated for his crime, but I am sympathetic to the argument presented by his defense team that perhaps his term is harsh in comparison to other officers closely associated with this case. He is not the lone villain; the chief executives and board of WorldCom also had a hand in the deception. In the Santa Clara WorldCom Case Study it states, that during his appeal, Ebbers’s defense team argued that the sentence was overly harsh. The star witness against their client, former chief finance officer, Scott D.
Sullivan, now serving a five-year term in a Georgia prison had the Securities and Exchange Commission ask another judge to waive Sullivan’s $13. 6 million fine because he was unable to pay. In comparison his sentence, fines and penalties are the equivalent to a slap on the hand. It is difficult for me to conceive that a man such as Bernard Ebbers, who was living the “American Dream”, could throw his fortune away so frivolously. During his appeal, a three-judge panel for a U. S. Appeal Court upheld Ebbers’s 25-year prison sentence.
In a note to the court, Judge Ralph Winter acknowledges the 25-year sentence is “longer than the sentences routinely imposed by many states for violent crimes, including murder,” but not unreasonable given the losses to investors. It is evident that the greater good was certainly considered in this case. Bernard J. “Bernie” Ebbers, a former basketball coach from, Edmonton Alberta, Canada who bought a small long-distance resale service in 1983 would in just less than ten years be cited by Forbes magazine with a fortune totaling $1. billion dollars. And then, as quickly as he rose to become one of the richest men in the world, was so incognizant as to fall from grace, if you will, and become a convicted felon for conspiracy. The former WorldCom chief executive officer, who transformed his organization into a telecommunications powerhouse through a string of takeovers, allowed himself to be found guilty of orchestrating an $11 billion dollar accounting fraud that led to the largest United States bankruptcy to date.
According to Dennis Moberg (Santa Clara University) and Edward Romar (University of Massachusetts-Boston), “when the WorldCom board learned Ebbers had financial difficulty paying his debt, it refused to let him sell his shares on the grounds that it would depress the stock price and signal a lack of confidence about WorldCom’s future. Deception, whether intentional or not, did occur. The shareholders had a right to know the financial state of WorldCom. In Ebber’s defense, he had unscrupulous bed fellows on this board. Their intentions are also at question especially regarding their eagerness to grant Mr.
Ebbers a breathtaking loan for $341 million dollar at an interest rate of 2% to shield the instability of the company’s financial situation from shareholders. There were also some concerns whether such loans were ethical from the Security Exchange Commission Enforcement official Seth Taube. He stated that large loans to senior executives are commonly sweetheart deals involving interest rates that constitute a poor return on company assets. Federal prosecutors in New York cited Ebbers’s expensive lifestyle, and his overspending, as a motive to hide WorldCom’s ounting financial troubles. The impropriety associated with the largest loan any publicly traded company has lent to one of its officers in recent memory is evident. Unfortunately, if Ebbers had pressed the matter and sold his stock, he would have escaped the bankruptcy financially whole, but Ebbers honestly thought WorldCom would recover. ” The series of clever manipulations to bury almost $4 billion in misallocated expenses and phony account entries discovered by Cynthia Copper’s team threw open Pandora’s box. Ms.
Cooper, a senior line manger, who worked for the WorldCom, CFO, Scott Sullivan, approached her boss, the board’s audit committee, and WorldCom’s accounting firm with her findings and concerns. Her persistence and integrity ultimately caused her boss and two others to be terminated. Her concern for the reputation of the company, potential layoffs, etc. all contributed to her decision to report the accounting fraud. I am sure she had to weight the consequences before she went forward with her accusations. Apparently the greater good of the largest number was a driving factor in her decision to come forward.
The expression of selfless courage displayed by Ms. Cooper is evident. In this case her behavior is a text book example of how ethical decision making processes are necessary to maintain sound business practices. Based upon my research Ebbers may be guilty, but he is also a scapegoat. According to a article in Reuters, March 2007, Ebbers defense attorney stated, “We didn’t expect the Second Circuit to bless the prosecution’s cynical manipulation of witnesses that prevented the jury from hearing important, persuasive and exculpatory evidence,” Weingarten said in a prepared statement. We are not giving up and won’t stop fighting until Bernie Ebbers is completely vindicated. Conversely in the Jurist, a popular publication in the legal community, one of the guest columnist, Douglas Branson of the University of Pittsburgh School of Law says, ‘that defense lawyers in recent corporate fraud cases are not seeking to introduce reasonable doubts that might lead a jury to acquit their clients, but in the absence of much direct evidence are rather offering competing versions of events that threaten to reduce verdicts to a flip of the coin… “Evers to Tinker to Chance” is the paradigmatic baseball double play combination.
In similar fashion, “Ebbers (WorldCom) to Scrushy (HealthSouth) to Skilling and Lay (Enron)” has become the mantra of prosecutors seeking conviction of corporate CEOs for business crimes. Ebbers failed to see the long term impact of his decisions, and additionally he allowed the WorldCom board to deceive their constituents into believing the company and their stocks were viable. There appeared to be bad management overall. Very aggressive acquisitions and tremendous growth without a growth strategy to manage assets, debt, merging systems, and integration of personnel, etc. was a disaster ready too happen. “The hear-no-evil, see-no evil defense just isn’t believable. It takes a stretch of the imagination to say that a CEO didn’t know about their company’s accounting practices. ” Oh yes, the WorldCom verdict shows ignorance is no defense, organization leaders must ensure they show a concerted effort to take into account all aspects and analyze the impact their actions. Unless of course, you just happen to have close friends in the Securities Exchange Commission.