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. Last Updated: 07/27/2016

WorldCom Manager Told to Fix Numbers

NEW YORK -- Former WorldCom CEO Bernard Ebbers, informed that accountants would have to inflate revenue to meet profit expectations, brushed off the warning and demanded the company "hit our numbers," according to testimony from the fraud trial's star witness.

Scott Sullivan, the company's one-time finance chief, told jurors during his second day on the witness stand that he cautioned his boss in the fall of 2000 that revenue would have to be adjusted upward by more than $130 million to meet analysts' expectations.

"I told Bernie this isn't right. We're doing this, we're making this change, we're making this adjustment because this is the only way I can get the numbers up to the expectations of the marketplace."

Sullivan then testified that Ebbers looked at a piece of paper with the numbers, "studied it for a while and looked down and said, 'We have to hit our numbers.'"

During the same period, Sullivan testified, he approached Ebbers with financial statements showing that costs were also a problem, running much higher than expected.

"He looked at the information and he didn't say a lot. And he looked up from it and said, 'We've got to hit our numbers.'"

U.S. federal prosecutors charge that with business deteriorating in the telecommunications sector in 2000, Ebbers refused to admit that the company's earnings were falling short of expectations, and instead orchestrated a massive accounting fraud.

In their case, prosecutors say Ebbers directed Sullivan to have his accountants puff up revenue and hide expenses -- with the aim of keeping Wall Street happy and keeping the stock price from falling too sharply.

Investigators uncovered the accounting entries in 2002, however, a revelation that caused WorldCom's financial collapse. When the company filed the largest U.S. bankruptcy in history, calls sounded for the criminal prosecution of Ebbers.

But prosecutors did not bring charges against Ebbers until Sullivan agreed to cooperate last year after pleading guilty to fraud and conspiracy.

In testifying against his former boss, Sullivan is hoping to win leniency at his sentencing. Lawyers for Ebbers argued that Sullivan was behind the accounting fraud and that their client stayed away from complex financial decisions.

The first witness in the trial to directly link Ebbers to the fraud, Sullivan told jurors Tuesday that his accounting staff threatened to quit when they were ordered to cover up the higher-than-expected expenses by making adjustments to WorldCom's reserves.

In all, according to Sullivan, the revenue and expense adjustments for the quarter increased WorldCom's income by $1 billion.