WorldCom takes the Fifth

WorldCom's former CEO, Bernard Ebbers, and former CFO, Scott Sullivan, sat like a pair of sock puppets in front of the House Committee on Financial Services, repeatedly chirping a single rehearsed answer to each question during a hearing on the company's dirty dealings in Washington Monday.

Sullivan had the sense to keep his mouth shut from the start, so his refusal to entertain questions on Fifth Amendment grounds was a bit easier to take. Ebbers, on the other hand, had delivered a prepared speech about how none of it was his fault and what a great guy he really is.

Ebbers predicted that he would found completely innocent in the $4 billion conspiracy to defraud investors by disguising operating expenses as capital expenditures. "I am proud of the work that I did at WorldCom," he insisted.

The little speech may have been good PR, but tactically speaking, it was a bad move. Several Members noted that by voluntarily addressing the Committee, Ebbers had relinquished his right to remain silent under questioning. Fifth-Amendment protection is usually an all-or-nothing matter in court. One doesn't get to pick and choose from a menu of topics one will address.

This led US Representative Max Sandlin (Democrat, Texas) to demand that Ebbers be held in contempt of Congress. "Are you a US citizen?" Sandlin asked him. "On advice of counsel I respectfully decline to answer according to my Constitutional rights," Ebbers repeated for the hundredth time. Sandlin blew a fuse over this refusal to speak to a matter of public record, and began grumbling about chucking Ebbers in the slammer to prevent him fleeing to his home country, wherever it might be.

Committee Chairman Michael Oxley (Republican, Ohio) agreed to entertain Sandlin's demand to hold Ebbers in contempt, though not to imprison him. He also agreed to consider requiring Ebbers to answer questions about his prepared statement, which seems the most likely outcome.

Meanwhile, Arthur Andersen auditor Melvin Dick tried to persuade the Committee that there was nothing he or his firm could have done to prevent, or even detect, the scam. "The fundamental premise of financial reporting is that the financial statements of a company, in this case WorldCom, are the responsibility of the company's management, not its outside auditors," he insisted.

A number of Members came close to laughing in his face over that one. How could Dick possibly have failed to observe inconsistencies in a normal sampling of transactions unless he was in collusion, they wondered.

Later in the day WorldCom's new CEO, John Sidgmore, insisted that there's nothing wrong with the company that can't be attributed to Ebbers and his management team. He congratulated the company for finding the 'irregularities' on its own, and implied that if Andersen had been doing their job properly a lot of the current wretchedness could have been avoided. He did, however, stop short of proposing a schedule for the 17,000 sacked workers to reclaim their jobs, or for company shares to climb from their current half-dollar level back up to their $60.00 heights.

He ended with a warning, which he's delivered before, of the consequences of letting WorldCom slide down the tubes.

"Millions of people have a real stake in WorldCom's survival, our customers, our employees, our lenders, our shareholders and our suppliers. But it goes beyond that:the United States itself has a major stake in our survival. We play a vital role in America's telecommunications infrastructure," he said ominously.

And so the hearings went on -- and on, well into Monday evening. Like most such affairs, it gave Members adequate opportunity to appear shocked, scandalized and outraged by the sorts of corporate shenanigans on which their political campaigns depend. On Tuesday, Dubya is scheduled to do the same in a speech. ®