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Myers Expected To Plead Guilty

Sep 26, 2002 | The Clarion-Ledger Former WorldCom controller David Myers is expected to plead guilty today to conspiracy and fraud charges as part of a deal with federal prosecutors.

Several New York newspapers and USA Today reported Thursday that Myers will plead in federal court in New York and will testify against Scott Sullivan, WorldCom's former chief financial officer and the man the government has accused of being the ringleader of WorldCom's $7.2 billion accounting scandal.

A Myers' plea agreement had been expected since early this month when prosecutors asked a grand jury in New York for more time to forge a deal with him. That same grand jury indicted Sullivan on fraud and conspiracy charges.

Legal experts say Myers' testimony will be crucial if the government wants to make a case against Sullivan or provide Sullivan with enough pressure to plead guilty and testify against former WorldCom Chief Executive Officer Bernie Ebbers.

Ebbers has not been charged with any wrongdoing related to WorldCom's accounting fraud, but prosecutors have made no secret of the fact that they want to prosecute him.

Jacob Frenkel, a former SEC enforcement division senior counsel and former federal prosecutor now with the Atlanta law firm of Smith, Gambrell & Russell, said unravelling the chain of command is the hardest part in prosecuting any white-collar crime.

Although Sullivan has been accused of directing a fraudulent accounting scheme, documents released by Congressional committees and court filings show he gave few of the orders. Most of the orders to change financial statements actually came from Myers.

In addition, Myers has said he did not believe the accounting changes he made were justifiable. Sullivan, on the other hand, said they were legal and proper. Legal experts say that distinction can be the difference between a criminal mistake and criminal intent.

For those reasons, many believed that while Myers was farther down the food chain than Sullivan or Ebbers, he faced a much larger legal dilemma.

"The heaviest hammer has a way of creating the largest incentive to cooperate with prosecutors," Frenkel said.

With Myers' testimony and the testimony of a handful of other WorldCom accounting officials who have agreed to cooperate with prosecutors, the case against Sullivan is likely taking shape, something that could encourage the former CFO to plead guilty himself and offer testimony against Ebbers.

"The criminal investigative process in high-profile white collar crime cases is all about pressure," Frenkel said. The pressure had been on Myers, but if he pleads, it will be on Sullivan.

But Sullivan will have a harder time escaping the pressure, again because of the corporate structure.

Sullivan and Ebbers had a close working relationship that included adjoining offices and lunches together at the company's cafeteria in Clinton. While Sullivan may be able to claim he and Ebbers discussed accounting issues during those meetings, he may have little proof.

"If it comes down to Scott Sullivan versus Bernie Ebbers, the case gets very difficult," Frenkel said. "As credible as a cooperator may be, the facts of the guilty plea and cooperation become great fodder for cross examination at trial."

To avoid vigorous prosecution, Frenkel said Sullivan would have to provide tangible proof that Ebbers knew of the accounting problems or a corroborating witness. To date, no current or former WorldCom employees have said Ebbers had any knowledge of the accounting, so finding that corroboration would be a challenge.

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