A federal appeals court today upheld the fraud conviction of WorldCom Inc. founder Bernard J. Ebbers, rejecting defense arguments that he was deprived of a fair trial and paving the way for the once-brash mogul to spend the rest of his life in prison.
The U.S. Court of Appeals for the Second Circuit issued its ruling this afternoon acknowledging that Ebbers's life contained "an element of tragedy." Ebbers, a former basketball coach and motel operator, powered his way into the booming telecommunications industry before his conviction last year on nine criminal charges, including conspiracy, securities fraud and false statements.
The three-judge panel in New York also upheld Ebbers's 25-year prison sentence, one of the stiffest penalties handed down in a white-collar crime case. The judges called the sentence "harsh but not unreasonable."
Ebbers, 64, has been free pending the results of his appeal.
"The securities fraud here was not puffery or cheerleading or even a misguided effort to protect the company, its employees, and its shareholders," Senior Judge Ralph K. Winter wrote. "The methods used were specifically intended to create a false picture of profitability even for professional analysts that, in Ebbers' case, was motivated by his personal financial circumstances."
The appeals court beat back defense claims that prosecutors overreached by refusing to grant immunity to insiders whose testimony might have exonerated him. WorldCom's 2002 filing for bankruptcy protection was the largest in U.S. history at the time. The company became MCI Inc. and eventually merged into Verizon Communications Inc.
In the decision, anticipated since a spirited oral argument January 30, the judges ruled that prosecutors have "no general obligation" to clear witnesses to help criminal defendants. Indeed, the appeals court panel said such a move could throw up roadblocks for the government if it later decided to prosecute the witnesses based on their own role in a fraud case.
Defense lawyers did not meet the high burden of showing that testimony by former chief operating officer Ronald Beaumont and onetime vice presidents Stephanie Scott and Ronald Lomenzo would have "affected the total mix of evidence before the jury," according to the ruling.
Ebbers's defense team also argued that the sentence was overly harsh, given that the star witness against their client, former finance chief Scott D. Sullivan, is serving a five-year term. The appeals court recognized that executives convicted of fraud sometimes faced harsher penalties than violent criminals, but said that advisory guidelines for judges reflect Congress's judgment about policy.
"It may well be that all but the most trivial frauds in publicly traded companies may trigger sentences amounting to life imprisonment," the ruling said.
Heather Tasker, a spokeswoman for Michael Garcia, the U.S. Attorney in the Southern District of New York, declined to comment on the decision.
Washington lawyer Reid H. Weingarten, who represented Ebbers at trial and on appeal, said he was "deeply disappointed" by the ruling.
"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 statement. "We are not giving up and won't stop fighting until Bernie Ebbers is completely vindicated."