The man who came to personify the Wild West-style excesses of the last stock market boom, Bernie Ebbers, returned to Oklahoma on Wednesday to face state fraud charges.
CEO was arraigned in Oklahoma City this afternoon on charges that he and the bankrupt telco he built defrauded investors. The event brought Ebbers back to the state where he gained the leverage in the mid-1990s to catapult his company briefly into the telecommunications industry firmament. But this time, the executive arrived in drastically different circumstances.
Ebbers, who resigned in disgrace just months ahead of WorldCom's record-setting July 21, 2002, bankruptcy filing, pleaded innocent to 15 counts of securities fraud.
"It will be evidence and only evidence that will count," said Ebbers' lawyer, Reid Weingarten. He said Ebbers believes he will get a fair hearing in the great state of Oklahoma.
Ebbers is returning to Oklahoma eight years after his original long-distance telephone company, LDDS, waltzed in to snatch up Tulsa's Williams Telecommunications network and become the fourth major player in the industry. If he's found guilty, he faces a maximum fine of $10,000 and a 10-year prison sentence for each of the 15 charges.
The charges, the first to name Ebbers as a criminal defendant, were filed last week by Oklahoma Attorney General Drew Edmondson and notably rankled federal authorities pursuing their own investigations.
The state's complaint also targets five other WorldCom executives, four of whom have already pleaded guilty and are cooperating in federal probes. The fifth, ousted CFO Scott Sullivan, pleaded innocent in April to securities and bank fraud charges and is now headed for trial.
Besides Ebbers and Sullivan, four other former WorldCom executives -- accounting experts David Myers, Buford Yates, Betty Vinson and Troy Normand -- are named in the state's complaint.
Weingarten, a lawyer for Ebbers, has previously said the Oklahoma complaint contained no specific evidence and that he expects Ebbers to be fully exonerated.
The Oklahoma case comes just as WorldCom prepares to seek approval next week of a reorganization plan that would allow the company to emerge from bankruptcy -- free of its massive debt load -- as early as this fall. Edmondson moved ahead with the charges after formally voicing his opposition to WorldCom's reorganization plan in letters to the bankruptcy court in May.
"It is rare that we name a company in a criminal complaint, but in this case it is justified," Edmondson said. "The company lied. These employees lied. The law was broken. It's just that simple."
But critics have offered another reason for Edmondson's surprising actions. These people point out that Edmondson has close ties to a lawyer for one of WorldCom's biggest competitors. Mike Turpen, outside counsel for
, is among Edmondson's closest friends and biggest political supporters. Over the years, Turpen's law firm has raised tens of thousands of dollars for campaigns that have kept Edmondson in office for a record-breaking three consecutive terms.
And Edmondson has been known to take actions that benefit his most generous supporters before. He has, in fact, already stepped in on behalf of another company with strong ties to Turpen.
Turpen's law firm -- Riggs, Abney, Neal, Turpen, Orbison & Lewis -- generates much of its revenue by acting as the "provider law firm" servicing customers of Oklahoma-based
Pre-Paid Legal Services
. In recent years, Pre-Paid has come under heavy fire for allegedly overselling its legal coverage and the Amway-like "opportunity" it uses to market its program. Currently, Pre-Paid faces dozens of lawsuits -- filed by hundreds of unhappy clients -- and multiple government investigations.
But in its home state of Oklahoma, where Pre-Paid raises large sums for powerful officials like Edmondson, the company has remained virtually untouched. Rather, state officials -- and Edmondson in particular -- have actually rallied to the company's defense.
In a bold move early this year, Edmondson sent a letter to the
Securities and Exchange Commission
calling for an investigation into the "short sellers" who regard Pre-Paid as a scam and have been betting against its stock for years. Instead, the SEC initiated a probe of Pre-Paid itself -- suspected of insider trading violations -- just a few weeks later. That investigation, along with another launched simultaneously by the U.S. attorney's office in New York, appears to be ongoing.
Seven months later, Edmondson has found himself once again at odds with federal and New York authorities. Both the SEC and the Justice Department have expressed irritation with Edmondson's unexpected moves against WorldCom. Even New York Attorney General Eliot Spitzer -- who has beaten the feds to the punch as well -- has taken the rare step of criticizing his peer in Oklahoma.
But consumer groups, who've waited angrily for charges against top brass at companies like
and WorldCom, have rushed to applaud Edmondson. And Edmondson himself has staunchly defended his actions. He says he filed the charges so that Oklahoma wouldn't watch the statute of limitations run out, as it has in other cases, while federal investigators plod along. He also denies that he's doing any favors for political supporters, although he shares the view of some WorldCom competitors -- including SBC -- that WorldCom deserves harsh punishment, rather than a clean slate and a competitive edge, for its past transgressions.
Edmondson has accused WorldCom and its top executives of scamming Oklahoma investors who lost millions by investing in the company's over-inflated stock.
"The decision to commit this fraud was a company decision," Edmondson stated. "This is not some rogue employee trying to line his own pockets. This was a conscious decision made for the benefit of the company."