WorldCom Inc. founder and former Chief Executive Officer Bernard Ebbers, along with former Chief Financial Officer Scott Sullivan, invoked the Fifth Amendment and refused to testify before a congressional panel Monday.
The House Financial Services Committee, led by Rep. Michael Oxley, R-Ohio, is investigating the company’s earnings misstatement of over $3.8 billion.
“I served as CEO of WorldCom for 17 years,” Ebbers told the committee. “I am proud of the work I did for WorldCom.
“Although I would like to testify more than you know, I have decided after careful consideration to take the advice of my counsel” in refusing to testify.
Ebbers cited the range of investigations, which includes investigations by the U.S. Securities and Exchange Commission, the Justice Department, and so far at least two congressional panels, as the reason for not testifying.
Ebbers added that when the various investigations were concluded, I “believe that no one will conclude that I engaged in any criminal or fraudulent conduct during my tenure at WorldCom.”
Oxley said in an opening statement that the “consequences to this sort of criminal activity, should it be proved, should be severe, and that may mean time in federal prison.”
Rep. Bernie Sanders, I-Vt, said that as Ebbers had made a “positive statement” prior to invoking his Fifth Amendment rights, the former CEO should submit to questioning, or be “held in contempt” of Congress.
Throughout the hours-long hearing, both Ebbers and Sullivan repeatedly invoked the Fifth Amendment in response to increasingly contentious and heated questions from members of the House Financial Services Committee.
The hearing comes as the Clinton, Miss.-based telecom company is battling bankruptcy and federal investigations.
Oxley, noting that the hearings closely follow the recent Enron accounting scandal, said, “The latest company to abuse the public trust is WorldCom. The announcement of this fraud turned WorldCom from a world-beater into a penny stock and forced it to lay off thousands of blameless employees.
“If these charges are proven, WorldCom executives who participated in the fraud should have to return any profits from stock sales made during the five quarters of misreported earnings.”
Two witnesses who had been subpoenaed to testify at the House hearing Monday into WorldCom are no longer expected to appear, a committee spokeswoman told United Press International.
Cynthia Cooper, WorldCom’s vice president for internal audit, and Audit Committee Chairman Max Bobbitt have been dropped from the witness list. House Financial Services Committee spokeswoman Peggy Peterson said they were dropped “because their testimony could potentially damage ongoing investigations.”
Peterson said Oxley has issued a subpoena for David F. Meyers, a former WorldCom senior vice president and controller, to appear before the committee next week.
Testimony was still expected Monday from WorldCom CEO John Sidgmore, Chairman Bert Roberts, Salomon Smith Barney telecommunications analysts Jack Grubman and Melvin Dick, a former senior partner at one time for WorldCom auditor Arthur Andersen LLP.
In a statement released Monday, Sidgmore separated himself from earlier management and noted that there has been “an understandable outpouring of anger from every quarter of American society” over WorldCom’s earnings misstatement.
“While the misdeeds we uncovered occurred before I became CEO, I want to apologize on behalf of everyone at WorldCom and I want to underscore that WorldCom’s new management team and our more than 60,000 employees share the public’s outrage over these events,” the statement said.
Sidgmore added, “One of the most important steps we can take is to make sure that past transgressions are fully investigated and that wrong-doers are punished, then we can move forward in an open and honest manner. We are therefore cooperating fully with the various official investigations … to ensure that those who are responsible are brought to justice.”
On June 25, WorldCom disclosed that it had improperly accounted for operating expenses as capital expenditures, thus overstating profits by over $3.8 billion in the past five quarters.
With news of the accounting scandal, the company’s stock now trades around 25 cents a share and the telecom giant is now fighting to avoid bankruptcy.