Disconnected: Deceit and Betrayal at WorldCom

Disconnected: Deceit and Betrayal at WorldCom

by Lynne W. Jeter

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"Disconnected: Deceit and Betrayal at WorldCom provides you with a front row seat to the WorldCom disaster. Journalist Lynne Jeter uses her two decades of experience covering WorldCom, along with her inside connections as a longtime Mississippi business reporter, to examine how a company that created so much wealth was able to lose so much so quickly. Filled with…  See more details below


"Disconnected: Deceit and Betrayal at WorldCom provides you with a front row seat to the WorldCom disaster. Journalist Lynne Jeter uses her two decades of experience covering WorldCom, along with her inside connections as a longtime Mississippi business reporter, to examine how a company that created so much wealth was able to lose so much so quickly. Filled with financial details and anecdotes of the Runyonesque characters that created, and then all but destroyed, WorldCom, Disconnected takes you inside this telecom giant to explore: How CEO Bernie Ebbers parlayed ownership of a two-bit motel into stewardship of the nation's second-largest long-distance provider - and the world's largest Internet carrier; WorldCom's failed 2000 courtship of long-distance competitor Sprint, and how the details that emerged revealed the company's growing pains - and foreshadowed its eventual demise; and WorldCom's June 2002 revelation of overstated earnings, and the debacle of mistakes, missteps, and downright unethical management behavior that followed." Much more than a simple corporate biography, Disconnected is a compelling narrative on winning big - and losing everything - on the stages of American and global business. It provides fresh insights into WorldCom's inner workings and corporate culture, while describing the social setting, religious influences, political gamesmanship, and cultural climate that drove the company and its leaders. Stories of Bernie Ebbers's laid-back workplace attitude share space with firsthand accounts of being reassured of your position over lunch with "the boss" - only to return to find your office locks changed and your possessions waiting in a cardboard box!

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Editorial Reviews

During the summer of 2002, telecom pioneer WorldCom announced that it had a big mistake; a $7 billion accounting error. Investors reeled at the news of the behemoth's insolvency. Shareholders lost more than $140 billion in stock value as the Mississippi-based company buckled under its legal and financial problems. Nobody was less surprised about these developments than Lynne Jeter. As the primary WorldCom reporter for the Mississippi Business Journal, she had covered the Internet giant since its inception as LDDS in 1984. Her inside account of its historic rise and fall makes exciting -- and bracing -- reading.

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Deceit and Betrayal at WorldCom
By Lynne W. Jeter

John Wiley & Sons

ISBN: 0-471-42997-X

Chapter One

Migrating South

These checks addressed to Bernie started arriving at the house, so my wife and I put them in a box. People had sent money to help pay for his tuition, books and supplies. I thought, "Geez, this is pretty kind of fabulous." Brent Foster, former high school and college classmate of former WorldCom CEO Bernie Ebbers.

The WorldCom sales executive was crouched over his desk, fingering his forehead and sweating at the thought of CEO Bernie Ebbers finding out he had sold company stock earlier in the week. It was Friday and he was hopeful that Ebbers hadn't noticed. He knew that Ebbers, a telecom mogul who rarely used e-mail or a cell phone and responded primarily via handwritten faxes and landline phones, requested daily printouts of stock activity and spent hours scouring the names of shareholders who exercised options or sold shares. He had heard stories of Ebbers' wrath descending on disloyal employees, and everyone knew that selling company stock was a capital offense. Nobody wanted to be on "Bernie's List." But he and Ebbers were "best buds," as others described them, often dining out with their significant others, so he was hopeful that he would be spared.

Shortly before lunchtime on that crisp October day in 2000, Ebbers, a rugged-looking cowpoke with a neat, white beard and piercing blue eyes, dressed in aleather vest and faded Levis and chewing a cigar, knocked on the executive's door and invited him to lunch. Though startled, he readily agreed. He was relieved as he climbed into Ebbers' SUV, convinced he was still in the CEO's good graces. While they gnawed on barbequed ribs at one of Ebbers' favorite nearby haunts, not a word was mentioned about the stock transaction. They talked weather. They talked business. They talked sports, mostly discussing the Jackson Bandits, Ebbers' minor-league hockey team, and the Major League Baseball playoffs. They wondered, would the Atlanta Braves win the division title this year? (The executive recalled that the New York Yankees would later win their twenty-sixth world championship title after beating the crosstown rival Mets 4-2 in Game 5 of the World Series at Shea Stadium.)

Arriving at the executive's office door following lunch, Ebbers slapped him on the back with his turquoise-jewelry clad hand before swaggering down the hall. For a split second, the executive fixated on the Cuban heels of Ebbers' trademark alligator boots. Without going in, he knew. Inside, his computer had been removed, his personal belongings had been stuffed in boxes, and a security guard was waiting to escort him to his car. He had been fired.

Ebbers was an unlikely choice to run a company that many people say never should have happened. But oddities defined the sinewy CEO who had been a milkman, bartender, bar bouncer, car salesman, truck driver, motel manager, garment factory foreman, and high school basketball coach before heading what would become the most feared telecom company in the world.

Born Bernard J. Ebbers on August 27, 1941, he was the second of five children in a working-class, devotedly religious family in Edmonton, Alberta. He grew up in relative poverty, where assuming debt often was the only way to acquire creature comforts. His dad, John Ebbers, a traveling salesman, mostly peddled hardware and tires. "Our work ethic came from our father," said his brother, Jim Ebbers. "Dad was always a hard worker. Dad always provided for us very well ... and gave us what we needed, like a million other people out there. We were an ordinary family." Brent Foster, a former classmate of Ebbers, described the family as "a class act." "Bernie's mom and dad are just kind, thoughtful people," said Foster. "They bank a lot on their religion. They're the kind of people you like to hang around."

After Ebbers completed the first grade, the family moved to California. Four years later, the family set up camp at a mission post on a Navajo Indian reservation just outside Gallup, New Mexico, where the elder Ebbers was a business manager and the Ebbers siblings amused themselves by playing cards. "We didn't have much," Ebbers told Thomas J. Neff and James M. Citrin in Lessons from the Top. "If my dad had a few dollars left in his pocket at the end of the month, we would go out and eat hamburgers as a family. I remember the most exciting Christmas for me was the year my sister received a deck of 'Old Maid' cards and I received a deck of 'Animal Rummy' cards. I don't know if that fueled a passion. My father and my brothers and I are fairly competitive, driven people. Maybe it's genetics."

Five years later, the Ebbers family returned to Edmonton, Alberta, an oil and gas town situated in the North Saskatchewan Valley and framed by the picture-perfect Canadian Rockies. Originally, the community had been populated by several Indian tribes-Blackfoot, Peigan, Blood, Sarcee, Slavey, Cree, Chipewyan, and Beaver. In the 1880s, Europeans migrated to the region, and French and English-speaking pioneers from Eastern Canada began to outnumber the Indians. Until settlers farmed wheat, the primary industry revolved around Hudson's Bay Company and North West Company trading posts, which competed for beaver pelts until the companies merged in 1821. By 1890, the railway defined Alberta.

A boomtown with plentiful opportunities, Edmonton evolved into a clean and cosmopolitan, yet unglamorous and cold, metropolis of about a million people. Known as the City of Champions, it was home to four-time Stanley Cup winner Wayne Gretzky's Oilers in the 1980s. Alberta's centerpiece and top tourist attraction is the West Edmonton Mall, the world's largest entertainment and shopping center-it spans the equivalent of 48 city blocks.

With a strong religious right-wing element permeating the free enterprise system, the work ethic in Edmonton was based on the oil patch creed: People who worked hard without complaint did not need higher education. In time, they could become wealthy. Ironically, Ebbers' home province became the first in Canada to convert to digital switching and to provide individual telephone line service to every resident. Alberta was also the first region in North America to integrate high-speed cable modem technology. David Staples, a business reporter for Edmonton Journal said, "To leave here at a time of such opportunity, Bernie must have really loved Mississippi, the religious feel down there."

At six-foot-four, Ebbers played basketball at Victoria Composite High School in downtown Edmonton, where he was a forward on a basketball team coached by John Baker. "If it wasn't for Bernie, I probably would've started," said Foster, a second-string forward who first met Ebbers during a snowstorm, when he stopped to give Ebbers and his sister a ride to school. "The reality is, his talent was far superior to mine. We had a pretty big team, including a six-foot-eight center, Doug Krentz, and we won a city championship during the late 1950s. No egos, good coaching. We were a tight-knit bunch of guys who had a good time."

After high school, Ebbers struggled for a while. He juggled part-time jobs during two brief college stints. Stringent science courses doomed him at the University of Alberta, where physical education was his chosen course of study. He had no better luck at Calvin College in Grand Rapids, Michigan, where some professors viewed him as a slacker. "Bernie was a bright light," said Foster. "There's no question about that. It's just that we weren't applying ourselves. Let's face it. He got into the University of Alberta, so he obviously had the marks ... probably in the top 20 percent of his class." After the Calvin College debacle, Ebbers returned to Edmonton briefly, where he delivered bread and milk and worked as a bouncer.

Baker and Foster unwittingly played pivotal roles in Ebbers' next move. On a trip to Seattle, Foster tagged along with Baker, who was finishing up graduate work at the University of Washington. "Coach Baker told me I should be going to university ... and that I should look around the campus, so I did," said Foster. To pass the time while waiting for Baker to exchange Canadian currency in a local bank, Foster picked up a brochure that had been left behind in the lobby. It featured Mississippi College, a small, private liberal arts college on a picturesque campus located about 2,700 miles away in the Deep South.

"It looked like the perfect place," said Foster. "If I could go someplace far away, I could concentrate on studying. If I stayed close to home and let my friends continue to influence me, I'd party all the time. The tuition was a lot less there than in northern states, with no out-of-state fees, and from a money point of view, it fit my budget. So away I went."

Foster took the train to Jackson, Mississippi, a sprawling metropolis that served as the state capital. "The train ride was an adventure in itself, seeing the different terrains and different ways people dressed and lived," he said. "When we crossed the Mississippi state line, I was overwhelmed by the huge black population. We hardly saw any in Edmonton."

From Jackson, Foster took a cab to Clinton, a lovely, historic bedroom community located about 10 miles west, and home of Mississippi College. He was immediately impressed. The oldest institute of higher learning in the state and the second oldest Baptist college in the nation, Mississippi College was the first university in the United States to graduate a woman. The landscape featured a unique blend of antebellum structures, Victorian-era homes, and historic red brick buildings perched on verdant rolling hills. Brick streets in downtown Clinton were lined with aged oaks and grand magnolia trees. An area steeped in history, city hall was located on the site of Union General William Tecumseh Sherman's headquarters during the siege of Jackson, and the grounds of China Hill, circa 1841, were used as a campsite for Union soldiers following the Battle of Champion Hill. The college was deeply traditional. No alcohol. No black students on campus. And mandatory chapel services three times a week. Foster enrolled for the fall semester.

Despite an affinity for his new home, living in the Deep South was "a huge adjustment," said Foster. "The heat was oppressive, but the cockroaches were worse. Up here, we have teeny little things. Down there, they're so big, they fly. That really caught me off guard. I remember one guy took me for a swim in a pond, and a head popped out of the water, and I said, 'What the heck is that?' He laughed and told me it was a water moccasin. He said, 'Ah, don't worry, they won't bite you in the water.' I found later that they would. By Christmas, I thought, 'I'm going home.' It was too much for me. Then I thought ... 'I'll stick it out another semester' ... and bingo, it all clicked. So that summer, Bernie asked me about it. I think he was kinda like me, wanting to get away. I was obviously pretty high on the college."

Ebbers and a mutual buddy, Dave Prins, enrolled that fall. Ebbers once told an acquaintance that one reason he decided to move to the subtropical climate was because "delivering milk in 30 degrees below zero isn't a real interesting thing to do with the rest of your life." Together with Foster and Foster's new bride, Peggy, the foursome headed south for the three-day trip in Foster's mother's white convertible Ford Galaxy. "It was going to be a honeymoon trip, but I kinda destroyed (that) by allowing those two idiots to get on board," said Foster, with a laugh. "Anyway, it worked out fine. It covered a bunch of expenses and we took turns driving." Over the years, they took many routes between Mississippi and Alberta, but the Canadians usually traveled through Saskatchewan, Montana, Colorado, Texas, Tennessee, and Louisiana.

Peggy landed a job in the registrar's office at Mississippi College working with assistant registrar Clarice Mooney, who became a key contact for enrolling Foster's Canadian pals. About half a dozen Edmontonians attended Mississippi College for at least a semester or two. "I'd give her a dingle and she'd set these guys up," said Foster. "She didn't do it for Bernie because Peggy wasn't in the office yet. I think Bernie and Dave just came down on a wing and prayer and got in." Looking back on that day in the Seattle bank, Foster remarked, "The odds of finding this pamphlet and ending up down there with Bernie, well, I guess it's just fate."

Ebbers arrived at Mississippi College with only two pairs of blue jeans, two short-sleeve shirts, one long-sleeve shirt, and a jacket. He roomed with fellow basketball player William Lewis, now president of Pearl River Community College in Poplarville, Mississippi, and as juniors, they plunged into a weight-training program to beef up. "[Bernie] almost played with reckless abandonment," said teammate Larry Hill, describing Ebbers' efforts on the basketball court. "He was full force."

Ebbers curried favor with James Allen, his coach and mentor, who arranged a basketball scholarship for him. A fun-loving and kind family man with two sons, Allen always looked after "all his boys." One day, Ebbers, who already had a strong religious background, expressed doubt about a sermon at the nearby First Baptist Church. "Allen told him, 'Boy, shut that door,'" said alumni dean Van D. Quick. "Coach Allen pulled out an old Bible and led him to a salvation experience."

Allen once told Ebbers, who could be painfully shy, that he needed to find a nice, good-looking girl to settle down with and even joked that he would pay for the marriage license. "Bernie was painfully shy, especially around girls," said Foster. "In high school, he would certainly not have been classified as a Casanova. He was probably like a lot of his compatriots. We were all painfully shy. Maybe because of the people you hang around, you reap those characteristics. Besides, we were more interested in playing sports. That was basically what our life was all about, to the detriment of all other things, including our social life." When Ebbers wed Linda Pigott, a devout Christian woman from Magnolia, Mississippi, in 1968, with Lewis acting as his best man, Allen paid the $5 license fee as promised.

A freak accident interrupted Ebbers' basketball career before his senior year at Mississippi College. While driving back to school from Canada, Ebbers was dropping off a pal near Grand Rapids, Michigan, when he had car trouble. "They ran out of gas in a tough part of town and walked up to a bar to ask where the nearest gas station was and things turned ugly. These guys chased them down the street and one guy threw a bottle at Bernie. It hit him on the Achilles heel and severed it completely, ending his basketball career, for that year anyway."


Excerpted from Disconnected by Lynne W. Jeter Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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What People are saying about this

Thomas T. Ivy
Disconnected is a must-read for all students majoring in business. It clearly and factually illustrates what happens when executives of an innovative, successful company lack moral and personal integrity, and accountants fail to exercise due diligence in discharging their professional responsibilities. Only the future will provide the conclusion to this story.
Starr Smith
Lynne Jeter is the premier southern business writer. She knows the territory. In this book, she writes with knowledge, understanding, clarity, and above all, with courage.
Heath Hall
Lynne Jeter's positive and responsible approach to journalism is refreshing. Her keen interest and research abilities make her a top-drawer professional.
Robert Ingram
Disconnected is the story of the American dream at its best and worst: brilliant entrepreneurship, small-town businessmen with unrivaled vision and foresight, fortunes made, corporate vision distorted, fortunes lost, and lives shattered. Lynne Jeter paints a picture of the birth, growth, and collapse of WorldCom that puts you inside the minds of key players and leaves you wishing that this book were a work of fiction instead of stark reality.
Jim Laird
Lynne Jeter tackled the daunting task of making sense of the WorldCom accounting scandal with clear thinking and crisp writing. Disconnected sets a new standard for business writing.

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