WorldCom's Ebbers a 'spectacularly unsuccessful' manager

NEWS Two reports yesterday found that Bernie Ebbers knew of the financial tricks used to inflate WorldCom's figures. But neither could find a direct link - or 'smoking gun' - which shows the telco's former CEO and guiding light ordered the now infamous $9bn fraud. Ebbers, through his lawyers, is claiming complete innocence. The two reports - one by WorldCom's bankruptcy examiner, the other by the WorldCom board - can only suggest that Ebbers may have breached insider trading rules in his controversial sale of 3 million shares for $70m in September 2000. The WorldCom management was found to have given its auditors a special set of financial reports that masked true operating results. And the board report said that during the industry downturn, Ebbers was "spectacularly unsuccessful" at managing all his ill-advised acquisitions. However, the reports do demonstrate astounding ineptitude on the part of the WorldCom board. The company's audit committee is said not to have understood "the company's internal financial workings or its culture, and they devoted strikingly little time to their role, meeting as little as three to five hours a year". Dick Thornburgh, bankruptcy examiner and former US Attorney General, found: "The board repeatedly approved acquisitions and other actions with little or no information and almost no inquiry." An example was the acquisition of Intermedia, the deal that brought WorldCom down. A WorldCom team went to Intermedia's lawyers after Ebbers had learned that its web hosting arm could be the target of a rival takeover. After a 60-90 minute discussion the team offered $6bn for Intermedia. The WorldCom board approved the deal in a teleconference lasting 35 minutes. No documents were provided to the board to back up or explain the management's decision. Thornburgh's report said: "Every level of 'gatekeeper' that had the responsibility to promote and ensure proper corporate governance was derelict in his duties to some degree."