Bernie Ebbers is dead.
Bernie Ebbers, who has died at the age of 78, was a big man in every sense of the word.
The bearded former nightclub bouncer officially stood at 6 foot 4 inches but, typically dressed in a Stetson and cowboy boots, looked even bigger.
The company he built, WorldCom, briefly became one of the world’s biggest telecoms businesses and Mr Ebbers one of America’s richest people.
However, unfortunately for Mr Ebbers, he is more likely to be remembered for his role in what remains one of the world’s biggest accounting frauds.
His rise was one of the great rags-to-riches stories that America loves
Born in 1941 in Edmonton, Canada, Mr Ebbers was the son of a travelling salesman who relocated his family first to California and then to New Mexico, where he attended school on a Navajo reservation.
After college, Mr Ebbers returned to Canada, where he worked initially as a nightclub bouncer and as a milkman.
He later recalled: “Delivering milk day to day in 30-below-zero weather isn’t a real interesting thing to do for the rest of your life.”
He went on to work as a basketball coach, before working in a clothing warehouse and then buying a motel in Mississippi, which he went on to build into a small chain.
In 1984, the opportunity to do something bigger came along.
The Reagan administration, as with the Thatcher government in Britain at that time, was opening up America’s telecoms sector to competition.
AT&T’s effective monopoly was taken away from it as the government sought to encourage others to enter the sector. The deeply religious Mr Ebbers was invited by David Singleton, one of the partners at his local prayer group, to meet two entrepreneurs, Murray Waldron and Bill Fields, who were keen on setting up such a business.
The four met at a diner in Hattiesburg, Mississippi, to thrash out a plan that involved reselling long-distance lines to small and medium-sized businesses. The enterprise was, at the suggestion of a waitress, named Long Distance Discount Service. The company was to trade under that moniker until, in 1995, it changed its name to WorldCom.
By then, it was one of America’s biggest telecoms players, having acquired dozens of smaller players worth billions of dollars in total.
The company first burst onto the City’s consciousness in a big way when, in late 1997, it gate-crashed what would have been the biggest deal in British corporate history.
BT had announced plans in November 1996 to buy MCI, a US telecoms rival, in a cash-and-shares deal valuing the latter at a then-massive £15bn. The combined business would have been second only to AT&T, the US giant, in the global telecoms market.
Over subsequent months, as MCI’s financial performance worsened, BT sought to reduce the price it was paying. Then, to its dismay, WorldCom emerged with a higher offer.
With typical bravado, Mr Ebbers told reporters: “We are able to make a superior offer for MCI because we can realise far greater synergies and savings than BT can. They just don’t live here.”
The enlarged MCI-WorldCom was, by then, a major force in what was then the emerging internet market. Mr Ebbers had realised, early on, that there was more money to be made by owning fibre-optic lines down which data could be sent than there could from re-selling space on long-distance phone lines.
All the while, despite resembling a swaggering cowboy, he was carefully cultivating the image of a simple ‘aw shucks’ Southern Baptist who had little understanding of the products his company sold. For many years he did not use a mobile phone and claimed he only sent his first email in 1999.
That was the year in which WorldCom’s stock price peaked and it achieved a stock market valuation of $160bn.
It was also the year in which the company embarked on what Mr Ebbers hoped would be its biggest deal yet – a $116bn cash-and-share offer for rival Sprint in what would have been a combination of America’s second and third-largest telecoms companies.
But the deal was blocked by competition regulators in both the United States and the EU and, as the dot-com bubble burst in 2000, WorldCom’s shares started to fall and worries about its debts began to rise.
Mr Ebbers quit in April 2002 amid revelations that he had borrowed nearly $400m from the company.
By then, its stock market value had shrivelled to $7bn and the Securities & Exchange Commission, America’s top financial regulator, was sniffing around.
Three months later, WorldCom was forced to file for bankruptcy protection, while by the end of the year it emerged that the company had fraudulently exaggerated its earnings by $11bn. Investors in the company lost billions.
Despite all this, Mr Ebbers remained popular in Mississippi, where he had given hundreds of millions of dollars to local charities.
On the Sunday after he was ousted, in 2002, Mr Ebbers walked to the front of his church at the end of the service to tell the congregation: “I just want you to know you aren’t going to church with a crook.”
The SEC begged to differ and, in 2005, a federal jury in Manhattan found him guilty of fraud, conspiracy and giving securities regulators false documents.
His argument that he had been too high up the corporate food chain in WorldCom to know about the accounting fraud was undermined when the company’s former chief financial officer, Scott Sullivan, testified against him.
Me Ebbers was sentenced to 25 years in prison and was among a number of 1990s US corporate chieftains, including Dennis Kozlowski of Tyco, Jeffrey Skilling of Enron, John Rigas of Adelphia Communications and Martha Stewart of Martha Stewart Living, who were jailed in the 2000s for various misdemeanours.
He was released just before Christmas on account of his failing health and died on Sunday evening.
His passing marks the end of a remarkable story which came to be a byword for corporate fraud. WorldCom’s collapse remained the biggest on record until Lehman Brothers failed in 2008.