16 July 2005

Ebbers' conviction good news for worldwide business community

With press reports stating that former WorldCom CEO, Bernard Ebbers, was sentenced earlier in July to 25 years in prison, it is clear that company executives are going to have to pay more attention to corporate governance and nibble-footed accounting ruses perpetrated by executives to shore up share prices are obviously not going to be tolerated - something that is good news for business at large, comments Org Geldenhuys, a director of Pretoria-based executive search and recruitment company, Abacus Recruitment.

Ebbers was held accountable for WorldCom's historic collapse into bankruptcy in the wake of an $11bn accounting scandal.

US District Court Judge, Barbara Jones, ordered Ebbers, 63, to report to prison in Mississippi by the middle of October to commence serving out his sentence, according to news reports.

Geldenhuys said the corporate world had been rocked in recent times by numerous accounting scandals, including Parlamat, Enron and WorldCom. "This is a good judgement and it shows the world that just because you are a highly paid executive - and a well-respected businessman - you cannot get away with what is effectively fraud. These scandals are not limited to big companies overseas - there have been a number of scandals locally relating to accounting delinquency. But," said Geldenhuys, "punishment should not just be meted out to the executives involved or masterminding these events - accounting firms should be held more accountable too. Not picking up fraud to an extent of billions and billions of dollars and pounds is tantamount to dereliction of duty - or the accountants are simply turning a blind eye. Whatever the case, if accounting firms pass the financial records - when they are so badly tainted and so erroneous - they should stand up in court and be held accountable too. They are, after all, to a certain extent, watchdogs."

In passing down the sentence, the court denied Ebbers' request for a new trial, ruling that none of the objections raised by his lawyers was significant enough to warrant retrying the case. Ebbers, however is doggedly working on an appeal against his conviction.

A jury convicted Ebbers in March on charges of conspiracy and fraud. Ebbers is the first of a number of former WorldCom executives to be sentenced. Those awaiting sentencing include former WorldCom Chief Financial Officer, Scott Sullivan. Sullivan pleaded guilty and co-operated with prosecutors. His testimony was instrumental in convincing the jury of Ebbers' pivotal role in the

Meanwhile, in a separate, civil settlement granted on the 11th of July, a judge stripped Ebbers of the bulk of his assets, including his Mississippi mansion. Ebbers, once a high-flying billionaire - in paper, that is - will be left with a few assets, but most of his cash and assets will be used to refund WorldCom shareholders for their losses.

Quoted in local IT on-line publication, ICT World, Norman Berle, a criminal lawyer who also teaches at the Fordham University Graduate School of Business, said: "I think that this is a fair sentence. It is unfortunate, but for the type of fraud that was committed, I think that the courts need to send a strong warning to the business community that this will not be tolerated."