The former finance chief of WorldCom Inc. testified on Tuesday that Bernard Ebbers, as CEO, had pressured him every quarter to meet Wall Street earnings estimates, repeatedly telling him “to hit the numbers.”
In his second day of testifying as the prosecution’s star witness against Ebbers, Scott Sullivan recounted a series of conversations with his boss about the importance of meeting analysts’ profit expectations.
“I would discuss them every time an analyst changed a model and it changed our consensus,” Sullivan said, referring to earnings and revenue estimates issued by analysts who followed the company.
Sullivan said that WorldCom’s stock would fall if the company’s results failed to meet Wall Street guidance — and he felt under the gun from Ebbers to keep that from occurring.
“The source of that pressure was Bernie and the source of the pressure was the marketplace,” Sullivan said.
Sullivan later told jurors that in each meeting to review preliminary quarterly results between the fall of 2000 and spring of 2002, Ebbers told him: “We have to hit our numbers.”
Federal prosecutors charge that with business deteriorating in the telecommunications business in 2000, Ebbers orchestrated a massive accounting fraud, directing Sullivan to have his accountants puff up revenue and hide expenses.
Two years later, in 2002, WorldCom filed for bankruptcy protection, sparking public outrage and giving rise to calls for the criminal prosecution of Ebbers.
But prosecutors did not bring charges against Ebbers until Sullivan agreed to cooperate last year after pleading guilty. In testifying against his former boss, Sullivan is hoping to win leniency at his sentencing.
Lawyers for Ebbers have argued that Sullivan was behind the accounting fraud and that their client stayed away from complex financial decisions.