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. Last Updated: 07/27/2016

The Whiz Kid Behind the Calamity

NEW YORK -- Scott Sullivan was the "whiz kid" Bernard Ebbers relied on to put together the many mergers that lifted WorldCom from obscurity as a small long-distance phone company to prominence as a global telecommunications giant. And even after WorldCom's deteriorating prospects forced Ebbers to resign as chief executive last month, Sullivan, 40, appeared to retain the confidence of both Wall Street and senior WorldCom executives.

All that changed Tuesday when WorldCom reported it had fired Sullivan and suggested that he had been the architect of one of the largest cases of questionable accounting in corporate history.

Now Sullivan, who kept a low profile in the best of times has dropped from public view, leaving a deepening mystery about his actions and motivations.

As outlined by WorldCom, the accounting scandal dates back to the first quarter of 2001. While two board members made stock sales during the period, Sullivan and most other senior WorldCom officers held on to all of their shares as they were plummeting during that period, according to filings with the SEC.

Sullivan's last sale, which brought him $18.1 million, took place on Aug. 1, 2000, shortly after the company announced both its second-quarter earnings and the collapse of a planned merger with Sprint. Ebbers warned in issuing the earnings that WorldCom's growth would slow. At the time of Sullivan's transaction, WorldCom shares had declined to about $37, down 42 percent from their peak of $64.50 in June 1999.

Sullivan owned 3.3 million shares as of this April, according to WorldCom's most recent proxy. They are now worth barely $300,000, based on trades yesterday of 9 cents a share on the Instinet trading system.

Sidgmore, who took over as chief executive when Ebbers resigned, said that the company had been "shocked" when the accounting transgressions it reported this week were uncovered during a review of previous financial statements. Analysts who have followed the company for years said they were astonished.

Sullivan "was the most credible CFO in the entire industry," said Richard Klugman, an analyst at Jeffries & Company, who has followed WorldCom since 1993. "He knew the minutiae of the numbers and he could go all the way up to the big picture."

Ebbers did not like to talk to investors without Sullivan at his side. Whenever he was asked a tough question, Ebbers would immediately pass it on to Sullivan, Klugman said.

"Success glued them together but neither had much good to say about the other in private," one former WorldCom executive said.

Sullivan's skills were honed before he entered the telecommunications industry at KPMG, the accounting firm credited this week with uncovering the scandal after WorldCom hired it to replace Arthur Andersen.

Sullivan was recruited into the telecommunications industry in 1989 by Norman Klugman, then chief executive of Telus Communications, a small long-distance company and` KPMG client.

When Telus, which was controlled by Francesco Galesi, was sold to Advanced Telecommunications of Atlanta the following year, Sullivan stayed on.

Soon after Advanced Telecommunications was taken over by WorldCom in 1992, Sullivan caught Ebbers's attention; by 1994, he had become WorldCom's chief financial officer.