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Monday, August 15, 2005

Scott Sullivan WorldCom CFO, Gets Light Sentence

Former WorldCom Chief Financial Officer Scott Sullivan, whom prosecutors labeled as the "architect" of WorldCom's massive securities and investment fraud, was sentenced to five years in prison last week for his role in the scandal.

I believe that the sentence was on the low end of what the judge could have given Sullivan but the contribution of his knowledge and testimony helped convict WorldCom's CEO Bernie Ebbers. Ebbers will receive virtually a life sentence or 25 years in prison for securities fraud.

Although Sullivan was the mastermind of the fraud, his cooperation was essential to convict Ebbers. I believe, however, that Sullivan should have received a higher sentence, perhaps ten years in prison. By contrast, Enron's CFO Andy Fastow received a ten year sentence in a plea deal for his role in the securities fraud and investment fraud at Enron.

The real victims here are the shareholders and employees of WorldCom who lost their retirement and life savings as a result of WorldCom's securities fraud. Most of these investors will receive merely a pittance from the class action distribution. Other shareholders and employees who filed securities arbitration claims can expect to receive a higher payout if they prevail in their cases.


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