Bernard J. Ebbers, who as head of WorldCom Inc. was a leading figure in the 1990s telecom gold rush, was charged Wednesday with securities fraud in Oklahoma, marking the first criminal action to be brought against the former corporate titan.
Ebbers was named in a 15-count document alleging that he and five other employees engaged in an extensive accounting fraud that drove WorldCom into the biggest bankruptcy filing in U.S. history. The company also was named as a defendant.
The Oklahoma case brought cheers from some investors and corporate governance experts who have been aggravated that federal prosecutors haven’t charged Ebbers with wrongdoing, even as several of his underlings have admitted guilt, according to the Los Angeles Times.
But the case also reopened a battle between state and federal regulators over who should lead the crackdown on white-collar crime.
WorldCom collapsed in July 2002 after divulging it had understated expenses by an unprecedented $11 billion in an effort to keep its stock price inflated. The firm’s plunge came after Enron Corp.’s bankruptcy filing seven months earlier and helped spur Congress to pass a broad corporate reform law.
WorldCom’s bankruptcy case rippled across the economy, from some 20 million residential and business customers to pension funds that owned $30 billion of WorldCom bonds and to stockholders who lost every dime.