July 13, 2005
Ebbers sentenced to 25 years in prison
Posted by Darren Roulstone

The Wall St. Journal online just reported  Bernard J. Ebbers "was sentenced to 25 years in federal prison today for spearheading the largest accounting fraud in U.S. history." 

According to the Journal, "Judge [Barbara ]Jones said she believed federal sentencing guidelines called for a sentence of between 30 years to life, but cited Mr. Ebbers's health condition and charitable work in sentencing him to a term of 25 years."  Ebbers is 63 years old.

In today's print edition there is a fascinating article mentioning "former executives who once competed with the company now called MCI Inc. and say their companies suffered because of the fraud."

"Former AT&T Corp. Chief Executive C. Michael Armstrong, for example, remembers gathering his executives for quarterly meetings in 2000 to discuss the huge profit margins WorldCom was reporting.  He was baffled that his company couldn't match those results...At the time, analysts called AT&T sluggish compared with WorldCom, and AT&T's stock plummeted.  The company laid off employees and made other strategic decisions--all based on what turned out to be WorldCom's phony numbers, Mr. Armstrong says."

Gil Sadka, a Chicago Ph.D. student currently transitioning to a faculty position at Columbia, has a paper on this issue ("The Economic Consequences of Accounting Fraud in Product Markets: Theory and Evidence from the US Telecommunications Industry")  I can't find it online but will try to locate a link.

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